How Much Does Cannabis Business Insurance Cost?

At this point, marijuana in at least some form is legal in 47 states and D.C. If you have a cannabis business like a dispensary or work as a cannabis cultivator, your business faces standard legal issues plus industry-specific concerns like lawsuits, theft or fire. Cannabis business insurance can help to protect your small business from issues as wide-ranging as natural disasters to injured customers or employees. 

Below, you'll find an overview of the types of cannabis businesses if you're considering launching a business and the types of insurance you could get to protect your company. Find cannabis business insurance costs below. 

Types of Cannabis Business

Cannabis business insurance costs may vary depending on the nature of the business. You might have a cannabis business with a single offering or businesses that combine one or more of the following cannabis businesses. Here are the most common cannabis businesses. 

Medical Marijuana 

Medical marijuana, also called medical cannabis, is cannabis and cannabinoids that physicians prescribe for patients, usually to manage epilepsy, multiple sclerosis or symptoms associated with cancer treatment, such as nausea, pain and loss of appetite.

Medical marijuana businesses need traditional business insurance such as commercial general liability, property coverage, product liability and other optional plans. The prescribing physician needs malpractice and professional negligence insurance. See average prices for these in the next section. 

Hemp Companies 

Hemp companies grow, produce, package, process or sell hemp products. Cannabis in this form is used for food and clothing. They might sell products such as hemp protein powder, hemp seeds or clothing made from hemp cloth. These products do not have a psychoactive effect and are not considered drugs. They are legal in all 50 states.

Hemp companies need insurance similar to any other small business, including general liability insurance, workers compensation insurance, product liability insurance and other optional plans such as crop insurance, depending on the business. In the case of a small business, under $100 a month for general liability insurance plus workers' compensation may be sufficient. 

Dispensaries

A cannabis dispensary is a retail outlet, also sometimes called a cannabis shop, cannabis store or cannabis cooperative. Cannabis for recreational use is sold or dispensed at these locations. Sometimes, they sell cannabis for medical use.

A business owner's policy (BOP) that bundles three key coverage types is a good starting point for a dispensary. It includes business liability, commercial property and business interruption insurance. This is usually cheaper than buying each coverage type separately. Dispensaries may pay $700 to $3,000 annually for general liability insurance.

Cultivators or Growers 

Cannabis cultivators or growers are essentially farmers. While you can grow cannabis for the production of hemp without restriction, there are restrictions in place for growers of marijuana. Most commonly, when someone calls themselves a grower, they're referring to cannabis production for medical or recreational use. 

Cultivation includes planting, growing, tending, nurturing, harvesting, grafting, dividing or transplanting a cannabis plant. Production means the separation of cannabis and cannabis resin from the plants from which they are obtained. In addition to commercial liability insurance, workers compensation and professional liability insurance, cultivators or growers will need crop insurance. 

The cost of insurance for growers can range from $4,000 to $10,000 a year for general liability and commercial property insurance plus crop insurance for another $5,000 to $8,000 total. 

Testing Labs

Cannabis testing labs are used to test cannabis goods to ensure they're free of contaminants. Testing labs label products for medical or recreational use with accurate amounts of cannabinoids and terpenes.

Testing labs will need general liability insurance, professional liability insurance, workers compensation insurance and equipment insurance.  If the lab is also the manufacturer, it will need insurance against liability, lawsuits, cannabis stock and equipment damage, which could cost between $5,000 and $12,000 annually.

Distributors

A cannabis distributor is a company or individual in the cannabis industry that distributes products from growers or extractors to dispensaries, cannabis stores and other suppliers.

Distributors will need general liability insurance, professional liability insurance and workers compensation insurance and may need crop or equipment insurance. Insurance needs vary based on the value of the stock, the size of the business and coverage needs.

If the distributor is also a manufacturer, insurance could cost $10,000 to $20,000 annually to cover general liability, commercial property, crop insurance, equipment insurance and workers compensation.

Types of Cannabis Business Coverage

The types of insurance coverage you choose for your cannabis business will determine the total cost. Here is an overview of the types of coverage you can get, with average costs.

Commercial General Liability Insurance

Commercial general liability (CGL) insurance protects a business's products and property liabilities. It is designed to cover your cannabis business for issues arising from bodily injury, personal injury and property damage. 

This includes product and property liabilities. General liability insurance covers damage by the business’s operations, products or injuries that happen on the business’s premises. The cost is an average of $42 a month for small businesses. 

Crop Insurance

Crop insurance is insurance purchased by agricultural producers and subsidized by a country's government to protect against the loss of crops from natural disasters, such as hail, drought, floods or other natural disasters. Some policies limit coverage to crops grown in a greenhouse, so it's important to review the terms carefully. 

Crop insurance costs vary by the size and value of the crop and the size of the farm. Average costs range from $680 to $8,000 annually. 

Commercial Property Insurance

Commercial property insurance covers the building or premises where you operate your cannabis company. This offers security in case of damage or theft. Small businesses pay an average premium of $67 per month.

Equipment Insurance

Equipment insurance protects your business from the costs related to damaged or destroyed equipment essential to the business. If you rely heavily on equipment, such as in a cannabis testing lab, equipment insurance will pay out the cost to repair or replace insured equipment if they are accidentally damaged or lost.

Workers Compensation

Workers compensation insurance provides cash benefits or medical care for workers injured or who become ill due to their jobs. Texas is the only state out of the 50 states that doesn't mandate businesses to purchase workers compensation insurance. Workers compensation insurance costs an average of $45 per month.

Professional Liability 

Professional liability insurance, or errors and omissions insurance, protects you from liability in case of professional mistakes. Physicians prescribing cannabis, as well as dispensaries, distributors, testing labs and growers, can all benefit from professional liability insurance. The average cost is $61 per month, but that varies by profession, coverage limit and terms. 

Commercial Auto Insurance

Commercial auto insurance covers your business vehicles, including any heavy vehicles or farm equipment owned or operated by your cannabis company. It will protect your company in case of potential loss from vehicle damage, theft, or liability while employees drive the vehicles. Commercial auto insurance averages $147 per month, varying based on the number of vehicles insured, their make and model, age and condition. 

Other Cost Factors to Consider

Other factors that could impact the cost of cannabis business insurance on top of the business type and coverage include business size, location, asset value and policy limits. Here's how these factors play a role in your insurance needs. 

Business Size

Generally, the larger the business, the higher the insurance premiums. That's because you'll need a larger coverage amount for general liability insurance or other insurance plans. A larger business will also typically have a larger payroll or more employees, leading to additional costs for workers compensation insurance. 

Physical Location 

Insurance costs vary by area and specific risks. This is not only state-based but also related to industry statistics on the likelihood of payouts by the insurance companies. You can check average insurance costs for your area to understand how it compares to the national average. 

Value of the Assets

If you have a large stock, valuable equipment or other assets, you generally need a higher policy limit. These, of course, come with a higher monthly premium. For that reason, small businesses should start with a smaller limit and increase policies as their business grows. In addition, insurance companies may charge higher premiums for businesses with very high asset values. 

Policy Limits

You can usually choose a higher or lower policy limit. The higher the limit, the greater your monthly premium. You could lower the premium somewhat by taking a larger deductible, but policy limits still affect overall costs. 

Level of Risk

Insurance is a business of probability. Insurers make money by rating the likelihood of you making a claim or requiring coverage. The higher the calculated risk according to insurance, the higher the premiums. 

Compare the Best Cannabis Business Insurance from Benzinga's Top Providers 

Find the best business insurance providers to protect your cannabis business with Benzinga's trusted providers here:

How Much Will Cannabis Business Insurance Cost?

Depending on the size and nature of your business, you could expect to pay as little as $500 to $20,000-plus for comprehensive coverage. Your business size, location, assets, policy limits and level of risk affect the final coverage you pay. Find the best cannabis insurers of 2024. If you want to invest in the cannabis industry in another way, find the best cannabis penny stocks right now.

Frequently Asked Questions