The Challenges of Insuring a Cannabis-Related Business

weed ross Insurance Marijuana Dispensary

The commercial cannabis industry is booming, no matter how you look at it. But while the marijuana market continues to grow at unprecedented rates, the regulations and lawmakers are playing catch-up, and insuring cannabis-related businesses remains challenging. Cannabis businesses are legal under many state laws, but marijuana itself is still a Schedule I substance under the Controlled Substances Act of 1970. This means that marijuana is federally illegal to manufacture, sell, and distribute. Obviously, this makes cannabis-related insurance protocol somewhat unclear.

Weed Ross knows the insurance industry like the backs of our very own hands. And we don’t plan on allowing the uncertainty of the marijuana industry to change that fact. Companies need insurance, as the inability to obtain business insurance for marijuana dispensaries or other ancillary businesses would make it next to impossible to operate in good faith. Either way, cannabis businesses face particularly unique challenges when it comes to insurance, and so we’ve put together a few of the most pressing challenges of insuring a marijuana organization.

In this article, we will cover:

The Complex Structure of Marijuana Businesses

Marijuana businesses often have complex infrastructures and procedural setups, due to their unique tax treatment, federal legalities and other areas of uncertainty. These structures make it difficult for insurance brokers to adequately develop the proper insurance policies. For instance, marijuana businesses may be set up with multiple named insureds and several business entities, and the average insurance broker might find them challenging to decipher. These types of business structures also expose the company to high-risk levels, which can often make insurance rather costly. It’s important to talk with a knowledgeable insurance agent to make sure your marijuana business is fully covered.

The Marijuana Industry is Still Relatively “Green”

The cannabis and marijuana industry is still relatively new, despite years of progress. As a result, there is a significant lack of available data and industry knowledge, a gap that leaves most insurance brokers a bit befuddled when it comes to underwriting and pricing protocol. There are very few precedents to go by in such a new market. From an insurance standpoint, many agencies might struggle to understand best practices, as there are little to no guidelines for what a cannabis insurance package should look like.

The Regulations of the Cannabis Industry Remain in Flux

Many cannabis-related businesses find it difficult to procure insurance for their operation because insurers often view marijuana as illegal and, therefore, high-risk. Some insurance carriers are hesitant to insure operations because marijuana laws and restrictions are still somewhat complicated, and it can be easy for a novice marijuana business to infringe on these regulations. This has resulted in a limited amount of available cannabis business insurance providers, which causes insurance prices to become less and less affordable for business owners. Thus, it’s important to work with an insurance agency that is confident in the marijuana business insurance industry. 

Cannabis Operations Still Face the Potential of Limited Banking Access

Many marijuana and cannabis operations face the unique challenge of limited banking access, as banks are often hesitant to endorse marijuana-related partnerships. Though marijuana is legal in a majority of the states, the fact that it is still federally illegal causes financial institutions to balk. Lack of access to banks makes it extremely difficult for marijuana dispensaries and other businesses, as it renders them more susceptible to criminal activity and also makes it harder to engage in standard business practices in general. As of writing, the SAFE Banking Act of 2021, which would help the industry overcome this obstacle, has yet to pass the Senate.

Looking into marijuana insurance for your dispensary or ancillary operation? Talk with the expert, local agents at Weed Ross–we’re here to help.

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