Why Traditional Insurance Doesn't Work in the Cannabis Industry
- Budrisk
- Sep 1
- 3 min read
If you run a cannabis business, you already know: risk isn’t just part of the job, it defines the job. You're navigating unpredictable regulations, high operational costs, limited financial support, and unique compliance requirements. It’s a fast-paced, high-stakes industry where even one small oversight could cost you everything.
But here’s the hard truth: traditional insurance models weren’t built for your reality.
At Budrisk, we’ve worked with cultivators, dispensaries, manufacturers, and delivery services across the cannabis supply chain. And what we’ve learned is this, your business needs more than a basic commercial policy. You need an insurance strategy that understands the risks you face and evolves as you grow.
Why Traditional Insurance Falls Short
1. Federal Illegality = Limited Coverage Options
Even though cannabis is legal in many states, it remains a Schedule I drug under federal law. That creates serious friction in the insurance world:
Most major carriers won’t touch cannabis clients.
Policies must come from non-admitted or surplus lines carriers.
Claims handling and legal recourse may be more limited.
This lack of access reduces competition, drives up premiums, and increases the risk of purchasing incomplete or outdated coverage.
2. You're Operating in a High-Risk Category
Underwriters classify cannabis as high-risk due to:
Cash-heavy operations that attract theft
Electrical and fire hazards at indoor grow sites
Hazardous chemical exposure in extraction labs
Complex compliance requirements for labeling, storage, and security
Each of these factors adds risk. Combined, they create an operational environment that requires precise, well-designed coverage to protect your property, team, and future.
3. Compliance Isn’t Optional
In many states, insurance isn’t just smart — it’s mandatory to keep your license. Required coverages often include:
General liability with specific state-mandated endorsements
Product liability for all consumables (including vapes, topicals, edibles)
Workers' compensation for all employees
Auto liability for delivery fleets
And yet, many generic policies contain exclusions for anything deemed "illegal activity" or "contraband." That includes cannabis, meaning your claim could be denied on a technicality.
4. Banking and Cash Handling Risks
Due to federal banking restrictions, most cannabis businesses operate largely in cash. That creates a range of exposures:
On-site theft and armed robbery
Employee fraud or internal theft
Transportation risks when moving money to secure vaults or financial institutions
Without crime-specific coverage, your losses may never be recovered.
What Smart Cannabis Insurance Should Include
Instead of squeezing your cannabis business into a commercial mold, you need tailored protections, like:
Crop coverage: Protects living plants during every growth stage
Product liability: Covers infused products, claims of harm, or mislabeling
Equipment breakdown: Covers failures of HVAC, extraction machinery, or lighting systems
Business interruption: Pays for lost income during shutdowns or disasters
Cyber liability: Covers data breaches, POS hacks, and customer data theft
When done right, insurance becomes a strategic tool, not just a safety net.
A Final Word:
We’ve seen too many cannabis operators trust the wrong policy, only to be left unprotected when it mattered most. Don’t let that be your story. The cannabis industry is unlike any other, and your coverage should reflect that.
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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