Top 5 Questions to Ask Before Signing a Cannabis Insurance Policy

The cannabis industry is booming, with the U.S. market alone expected to approach $40 billion in 2024, and adult-use cannabis legalized in 24 states. However, this rapid growth comes with unique challenges, especially when it comes to securing insurance coverage. Many cannabis businesses face soaring premiums and limited insurer options due to regulatory complexities and perceived risks. In fact, approximately 75% of cannabis industry respondents report lacking adequate insurance to protect their profits, according to Hub International’s 2025 Cannabis Outlook Executive Survey.

Before committing to any cannabis insurance policy, it’s crucial to ask the right questions to ensure your coverage truly meets your business needs. This article explores the top five questions every cannabis business owner should ask before signing an insurance agreement, helping you navigate this complex and evolving market with confidence.

1. What Risks Does This Policy Actually Cover?

Understanding the scope of coverage is the foundation of any insurance policy. Cannabis businesses operate in a high-risk environment, with unique exposures ranging from product liability to regulatory compliance and property damage. However, not all policies are created equal, and many insurers limit their participation due to the industry's perceived risks and legal ambiguities.

John Crist, founder of Prestizia Insurance, highlights that "the current state of cannabis business insurance is quite restricted, with limited insurers willing to participate due to the high-risk perception and regulatory complexities." This means some policies might exclude critical risks or offer limited protection in key areas.

For example, property insurance for indoor cultivation has seen premium increases between 25–40% in 2025, reflecting the heightened risk insurers associate with these operations. Additionally, commercial auto premiums for cannabis fleets have tripled compared to the previous year, underscoring the importance of verifying whether your vehicles are adequately covered.

When reviewing your policy, ask specifically about coverage for:

• Product liability and contamination risks
• Crop loss or damage
• Regulatory fines and legal defense costs
• Employee injuries and workers’ compensation
• Commercial vehicle and fleet insurance

Knowing exactly what is and isn’t covered will help you avoid costly surprises down the road. For a deeper look at these challenges, see Hub International’s 2025 Cannabis Outlook Executive Survey.

Moreover, the evolving legal landscape surrounding cannabis can introduce additional complexities. As states continue to refine their regulations, businesses must stay informed about changes that could impact their insurance needs. For instance, new laws may alter the liability landscape, requiring businesses to reassess their coverage to ensure compliance and protection against emerging risks. It’s crucial for cannabis entrepreneurs to engage with insurance professionals who specialize in this niche market, as they can provide insights into the latest trends and help tailor policies that fit the specific needs of the business.

In addition to the traditional risks, cannabis businesses also face reputational risks that can arise from negative publicity or social stigma. A product recall, for example, can not only lead to financial losses but also damage consumer trust. Insurers may offer coverage options that address these reputational risks, such as crisis management services or public relations support, which can be invaluable in mitigating the fallout from adverse events. Understanding these additional layers of risk can empower cannabis businesses to make informed decisions about their insurance strategies and enhance their overall resilience in a challenging industry.

2. How Are Premiums Determined and What Factors Could Cause Increases?

Insurance premiums for cannabis businesses have been rising sharply in recent years. The market has experienced a "hardening" trend, characterized by increased premiums and stricter underwriting requirements. This is largely due to heightened regulatory scrutiny and a surge in product liability claims.

Understanding how your premiums are calculated and what might influence future increases is essential for budgeting and long-term planning. Factors that commonly affect premiums include:

• Type of cannabis operation (cultivation, retail, processing)
• Location and regulatory environment
• Claims history and risk management practices
• Size and value of insured assets

For instance, property renewals for indoor cultivation have increased by 25–40% in 2025, while commercial auto premiums have tripled, reflecting insurer concerns about exposure and risk management. These trends are expected to continue as the industry grows and regulations evolve.

As Morgan Moore, a cannabis and life science specialist with Amwins, explains, "underwriters and carriers just don’t have a long history of placing cannabis-related risks," which contributes to pricing volatility and cautious underwriting. This uncertainty is compounded by the rapid pace of change in legislation surrounding cannabis, which can vary dramatically from state to state. Insurers must constantly adapt their models to account for these shifts, leading to further fluctuations in premium costs.

Moreover, the increasing sophistication of cannabis operations, including advanced cultivation techniques and technology-driven retail solutions, can also impact premiums. Businesses that invest in robust security measures, comprehensive employee training, and proactive risk management strategies may find themselves in a better position to negotiate lower premiums. Insurers often reward businesses that demonstrate a commitment to minimizing risk with more favorable terms, which can be a crucial factor in an industry where margins are often tight.

Asking your insurer to explain their pricing methodology and what steps you can take to mitigate premium hikes can help you maintain affordable coverage. More insights on market trends are available in CoverCannabis’s 2025 Cannabis Insurance Outlook report.

3. Are There Any Exclusions or Limitations Specific to Cannabis Businesses?

Insurance policies often contain exclusions or limitations that can significantly affect coverage. In the cannabis industry, these exclusions may be more common or stringent due to the regulatory environment and the high-risk nature of the business.

Some common exclusions to watch for include:

• Claims related to illegal activities or non-compliance with state laws
• Damage caused by product recalls or contamination
• Losses due to crop failure from pests or environmental factors
• Claims arising from the use of cannabis products in medical treatments without FDA approval

Given that over half of online resources on medical cannabis downplay potential side effects, raising unrealistic expectations, it’s important to ensure your insurance policy does not leave you vulnerable to product liability claims stemming from misinformation or adverse effects.

Additionally, cannabis businesses must navigate a complex web of state and federal regulations that can further complicate insurance coverage. For instance, some insurers may impose restrictions based on the specific type of cannabis product being sold, such as edibles versus oils, or may require additional certifications to be in place before coverage is granted. This can create a challenging landscape for new entrants in the market, who may find themselves facing higher premiums or limited options due to the perceived risks associated with their operations.

Furthermore, the evolving nature of cannabis legislation means that what is compliant today may not be compliant tomorrow. As states continue to change their laws regarding cannabis use and distribution, businesses must remain vigilant and proactive in updating their insurance policies to reflect these changes. Regular consultations with insurance professionals who specialize in the cannabis sector can help ensure that businesses are adequately protected against emerging risks and that they understand the nuances of their coverage.

Clarifying these exclusions with your insurer can prevent costly gaps in coverage. For more on the challenges cannabis businesses face with insurance exclusions, visit this study on medical cannabis information.

4. How Experienced Is the Insurer with Cannabis Industry Risks?

Choosing an insurer familiar with the cannabis industry can make a significant difference in the quality and reliability of your coverage. Because the cannabis market is relatively new and complex, many insurers lack the expertise or willingness to underwrite cannabis-related risks effectively.       

Industry experts emphasize that this lack of experience contributes to limited options and higher costs. Morgan Moore notes, "The cannabis industry is burgeoning, and underwriters and carriers just don’t have a long history of placing cannabis-related risks."

When evaluating potential insurers, ask about their track record with cannabis clients, their understanding of relevant regulations, and their approach to risk assessment. An insurer with specialized knowledge is more likely to offer tailored policies that address your specific needs and provide better claims support.

Moreover, the evolving landscape of cannabis regulations adds another layer of complexity. Insurers who are well-versed in the nuances of state and federal laws can better navigate the potential pitfalls that cannabis businesses face. This includes understanding the differences in regulations across states, which can vary significantly in terms of licensing, distribution, and product testing requirements. A knowledgeable insurer can help you stay compliant and mitigate risks associated with regulatory changes.

Additionally, the cannabis industry is subject to unique risks such as crop loss due to pests or disease, theft, and product liability claims. Insurers experienced in this field can provide insights into best practices for risk management, helping businesses implement strategies that not only protect their assets but also enhance their operational resilience. By leveraging their expertise, you can position your business to thrive in a competitive market while ensuring you have the right coverage in place.

To explore market intelligence and expert insights, check out Amwins’ analysis of cannabis insurance challenges.

5. What Is the Claims Process Like and How Responsive Is the Insurer?

In the event of a claim, how your insurer handles the process can be just as important as the coverage itself. Cannabis businesses face unique risks that can lead to complex claims, including regulatory investigations, product liability suits, and property damage.

Ask your insurer about their claims handling procedures, average response times, and whether they have dedicated teams for cannabis-related claims. Prompt and knowledgeable claims service can minimize disruptions to your operations and help you recover faster.

Given the evolving nature of the cannabis insurance market, having an insurer who understands the nuances of your business and maintains strong communication is invaluable.

With the global cannabis insurance market projected to grow at a compound annual growth rate (CAGR) of 8%, driven by legalization efforts, insurers are gradually improving their services and offerings. Staying informed about these developments can help you choose a partner committed to supporting your business through growth and challenges. For more on market growth, see HTF Market Intelligence’s Global Cannabis Insurance Market Study.

Additionally, understanding the specific types of claims that cannabis businesses typically face can provide valuable insight into what to expect from your insurer. For instance, claims related to crop loss due to natural disasters or pest infestations can be particularly challenging, requiring a quick response to mitigate financial losses. Furthermore, as regulations continue to evolve, claims involving compliance issues may arise, necessitating an insurer that is not only responsive but also well-versed in the legal landscape surrounding cannabis.

Moreover, the claims process can vary significantly between insurers, so it’s essential to review customer testimonials and industry ratings. Engaging with other cannabis business owners can provide first-hand accounts of their experiences, helping you gauge the reliability and efficiency of potential insurers. A proactive approach to understanding your insurer's claims process can empower you to make informed decisions that safeguard your business's future.

Conclusion

Securing the right insurance policy is a critical step for any cannabis business aiming to protect its assets and ensure long-term success. Given the complexities and rapid changes in the industry, asking these five key questions before signing a policy can help you avoid coverage gaps, manage costs, and partner with an insurer that truly understands your business.

From clarifying coverage details and premium factors to understanding exclusions, insurer expertise, and claims handling, thorough due diligence will empower you to make informed decisions in a challenging insurance landscape.

As the cannabis market continues to expand and mature, staying proactive about your insurance needs will be essential to navigating risks and capitalizing on growth opportunities.