The Top 3 Cannabis Insurance Gaps That Could Cost You Everything

Cannabis businesses face enormous risks, and having insurance isn’t always enough. What matters most is what your insurance actually covers — and what it doesn’t. In this part of our series, we explore the three most dangerous insurance gaps that cannabis businesses often overlook and how each one can jeopardize the survival of your operation.

1. No Coverage for Living Plants or Crops

One of the most expensive gaps we see is the lack of crop insurance. Cannabis plants are the core of your business, but most property insurance policies only cover physical structures like your grow house, greenhouse, or dispensary — not the value of the plants inside. That’s a huge oversight.

Without dedicated crop insurance, you’re exposed to catastrophic losses from:

• Pests or fungal outbreaks that wipe out entire rooms

• Mold or mildew triggered by failed HVAC systems

• Fire and smoke damage from electrical malfunctions or wildfires

• Vandalism or theft — including by employees

  
  

Indoor operations are particularly vulnerable, since climate control systems are mission-critical and power loss can ruin a harvest in hours. And outdoor growers are exposed to severe weather, hail, and flooding — often excluded from standard policies.

The solution: Request a cannabis-specific policy that includes Living Plant Coverage, ideally with language that covers:

• Seedlings, vegetative plants, and flowering crops

• Harvested but undried product

• Finished product in storage or transit

  
  

2. Insufficient Product Liability Protection

Cannabis products are consumed, inhaled, and absorbed — which opens your business up to liability claims. If a customer has an adverse reaction to one of your products, or alleges it was mislabeled, your company can face lawsuits, regulatory investigations, and even product recalls.

Common triggers include:

• Incorrect THC/CBD concentrations

• Contaminants like mold or pesticides

• Misleading health claims on packaging

• Vape device malfunctions

  
  

Without dedicated product liability coverage, these incidents could cost you:

• Legal defense fees

• Court-ordered damages

• Regulatory fines

• Brand damage and PR fallout

  
  

Don’t rely on general liability to fill this gap. Work with a cannabis-specialized broker to tailor your coverage based on:

• Whether you manufacture, white-label, or retail products

• Which product categories you offer (e.g., inhalables, topicals, edibles)

• Testing and quality control procedures

  
  

3. No Employment Practices Liability Insurance (EPLI)

EPLI is one of the most overlooked — and most essential — protections for cannabis businesses. Why? Because this industry moves fast, grows fast, and often hires rapidly to keep up. That creates a perfect storm for HR-related lawsuits.

EPLI protects you from claims such as:

• Discrimination based on gender, race, religion, or disability

• Wrongful termination or constructive dismissal

• Sexual harassment allegations

• Wage and hour violations (especially common in tip-based or hourly roles)

  
  

Even if claims are false, the legal defense alone can cost tens of thousands of dollars. EPLI policies typically include:

• Access to legal support from day one

• Coverage for settlements and court judgments

• Optional HR training and risk consultation

  
  

If you have employees — especially in multiple states — EPLI isn’t optional. It’s foundational.

The Bigger Picture: What’s at Risk Without These Coverages?

Cannabis operators who lack these three critical protections are gambling with their license, their reputation, and their livelihood. The fallout from uncovered claims can include:

• Regulatory action or license revocation

• Massive out-of-pocket legal and compliance costs

• Brand damage that drives away investors and customers

• Permanent loss of inventory or production capacity

  
  

How can we help?

Budrisk strives to meet our clients' evolving business needs beyond insurance. If there is any way we can further promote your business, please don't hesitate to let us know. 

It is our goal that Budrisk clients feel satisfied with their service and supported at every step of their business journey. 

As we are always on the lookout for new business, do you know anyone else in the cannabis industry who would benefit from our services? 

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