Every cannabis operator knows they need insurance. Most don’t fully understand what they actually need until something goes wrong.
General liability and workers comp are table stakes. But what about product liability? Equipment breakdown? Cyber insurance? And how do you avoid getting your claim denied when you need it most?
I sat down with Corey Lake from Lake Group Insurance to break down exactly what cannabis operators need to know about insurance coverage. From dispensaries to cultivation to manufacturing, Corey works with operators across the entire vertical — and he’s seen firsthand where operators are properly covered and where they’re dangerously exposed.
Here’s what every cannabis operator needs to know about insurance.
The Cannabis Tax on Insurance (And Why It’s Dropping)
Let’s start with the question every operator asks: Why does cannabis insurance cost so much?
The answer comes down to data.
Insurance companies use historical data to price risk. Think about auto insurance for a Honda Civic. Carriers know exactly how many accidents happen per year, what the average claim costs, and how to price that risk accurately. They have decades of data.
Cannabis? Fifteen to twenty years ago, carriers had zero data. They didn’t know what claims would look like, how often they’d happen, or how much they’d cost. No data equals Wild West pricing.
Corey compares it to cyber insurance when it first launched: carriers priced high because they had no idea what they were getting into.
But here’s the good news: We now have 15 to almost 20 years of cannabis industry experience. Carriers finally understand where the actual risks are, what losses look like, and how to price accordingly.
The result? Prices are starting to come down.
The “cannabis tax” on insurance is ending. It’s still more expensive than traditional business insurance, but the gap is narrowing as carriers gain confidence in predictive pricing.
What Cannabis Operators Actually Need: Coverage by Vertical
The Foundation (Every Vertical Needs This)
Workers Compensation
Workers comp is mandatory in most states. In Minnesota, for example, if you have a single part-time employee, you must carry workers comp insurance.
Here’s a nuance most operators miss: If you own 25% or less of the business, you’re required to have workers comp on yourself. If you own 25% or more, you can opt out.
Corey’s recommendation? Don’t opt out. Even as an owner, carry workers comp on yourself. If you get injured on the job, it pays for medical expenses and more. It’s the least expensive, most robust insurance you can buy.
General Liability
If you’re leasing or renting property, your landlord will require general liability coverage. It’s not a state mandate in most cases, but it’s part of your lease contract. This protects both you and the property owner.
Property Coverage
If you’re leasing, your landlord may require property coverage, equipment breakdown insurance, and other protections as a condition of occupying the space.
If you own your building, you’ll need building coverage plus property insurance on the contents, equipment, and inventory.
Retail (Dispensaries)
Dispensaries need everything above, plus:
Budtender Liability
This covers situations where a budtender makes a claim about a product (“This will help with your knee pain”) and the customer comes back saying it didn’t work. It’s a niche coverage, but it matters.
Property Coverage for Finished Product
Inventory on hand, cash on premises, and merchandise all need to be covered. Dispensaries hold significant value in finished goods, and that needs protection.
Cultivation (Indoor and Outdoor)
Cultivation operations need standard coverage plus:
Product Liability
This is critical. Product liability should follow the product from farm to sale. If someone claims they were injured using your product, the lawsuit goes all the way back to the grower. Every entity in the supply chain needs product liability coverage.
Equipment Breakdown
HVAC systems, dehumidifiers, lighting systems — if critical equipment fails and destroys a crop, equipment breakdown coverage can save your operation. This is especially important for well-financed operations that can’t afford to lose an entire cycle.
Crop Insurance
Crop insurance has historically been expensive, hard to get, and limited in what it covers. Corey’s take: If you’re a new business leveraging everything you have, crop insurance is worth considering. If you’re well-financed and can absorb the loss of your first or second crop while working out the wrinkles, it’s a nice-to-have but not critical.
Manufacturing and Processing
Manufacturing operations need:
Product Liability (again)
If you’re extracting, processing, or packaging product, you need product liability coverage. The lawsuit chain doesn’t stop at retail — it goes all the way back to manufacturing.
Equipment Breakdown
Processing equipment is expensive and mission-critical. Extraction equipment, packaging lines, and processing machinery all need coverage.
The #1 Reason Cannabis Insurance Claims Get Denied
Here’s a story every cannabis operator needs to hear.
A cultivation facility had a fire. LED grow lights bent down, broke, sparked, and started the fire. The insurance company reviewed security camera footage (which cannabis facilities are required to have everywhere).
What they discovered: The lights weren’t installed correctly. The installer didn’t follow manufacturer guidelines.
The claim was denied.
Had there been no cameras, it probably would have been covered. Fires are covered events. But because the security footage showed improper installation, the insurance company denied the claim. Total loss.
The lesson? Use licensed contractors for everything.
Don’t install your own HVAC. Don’t install your own grow lights. Don’t install your own electrical systems. Even if you think you’re following the instructions, if you’re not a licensed contractor and something goes wrong, your claim can be denied.
Corey sees this constantly: An operator climbs a ladder and twists something on the HVAC unit because the fan is blowing the wrong direction. Something catastrophic happens. The insurance company reviews footage. Claim denied.
You need to be able to point to a licensed contractor and say, “They did it.” That way, if there’s a claim, you have someone to subrogate against. If your company won’t pay, that contractor’s insurance will.
The DIY mentality can save money in the short term. But one shortcut can cost you everything.
How Security Cameras Help (And Hurt) Your Insurance Claims
One claims adjuster told Corey: “The greatest thing about the cannabis industry is that there’s cameras everywhere. The worst thing is that there’s cameras everywhere.”
Cameras are required by regulation in most states. They provide accountability, security, and documentation. But they also provide evidence — and that evidence can work against you.
If your security footage shows:
- Improper installations
- Unlicensed work
- Employees not following procedures
- Equipment being modified without authorization
Your claim can be denied, even if the event itself (fire, theft, equipment failure) would normally be covered.
The fix? Follow procedures exactly. Use licensed contractors. Document everything. Your cameras should show compliance, not shortcuts.
Balancing Cost vs. Coverage: How to Think About Risk
Insurance is expensive. It’s typically in the top five expenses for a cannabis operation, right alongside employees, rent, and equipment.
Yet operators often overlook it entirely. Corey has had clients come to him after they’re ready to launch and say, “Yeah, we didn’t even think about insurance.”
So how should operators balance cost versus coverage?
Self-Insured Retention (Deductibles)
The bigger your deductible, the lower your premium. If you can risk $5,000, $10,000, or even more, you can reduce costs significantly. Some operators carry massive deductibles and only insure for catastrophic loss — the entire farm burns down, for example.
Others need comprehensive coverage with low deductibles because they can’t absorb any loss.
Limping In Over Time
For underfunded startups, Corey works with clients to build coverage incrementally. Start with general liability. Add property coverage as inventory grows. Build the policy over time as revenue comes in.
This carries risk, but it allows operators to get off the ground without front-loading massive insurance costs.
Well-Financed Operations
If you’re well-funded, buy the full package. Workers comp, general liability, property, equipment breakdown, product liability, cyber insurance — everything. The cost is manageable relative to your total capital, and the protection is worth it.
The key question: What can you afford to lose?
If losing one crop shuts you down, you need crop insurance. If you can absorb it and keep going, maybe you don’t.
What Operators Often Overlook About Insurance
Corey sees two types of insurance buyers:
- Those who’ve been through a terrible claim experience and think insurance is a scam
- Those who’ve been through a great claim experience and understand the value
- (Bonus third category) Those who’ve paid the bill for years and never filed a claim
The difference? Working with a specialist.
If your insurance agent is just turning and burning policies — not walking you through coverage, not explaining how insurance will protect you, not understanding the cannabis regulatory framework — you’re with the wrong person.
Generic insurance agents think cannabis is like selling shoes. It’s not. The regulatory complexity, the federal/state conflict, the specialized carrier market — it’s a completely different world.
Corey’s advice: Work with specialists across the board.
Cannabis insurance specialist. Cannabis attorney. Cannabis CPA. Yes, it costs more upfront. But over the course of years, it saves money and prevents catastrophic mistakes.
One denied claim because your agent didn’t understand product liability requirements can cost you more than a decade of specialist fees.
First Steps: Getting Properly Insured
If you’re opening a new cannabis business or reevaluating your current coverage, here’s where to start:
Step 1: Call a Cannabis Insurance Specialist
Don’t use your buddy who “dabbles” in cannabis insurance. Don’t use your regular business insurance agent who thinks they can figure it out. Call someone who does this full-time.
A specialist understands:
- Which carriers actually write cannabis policies
- State-specific regulatory requirements
- Coverage gaps that generic agents miss
- How to structure policies across the supply chain
Step 2: Get a Quote from Someone Who Knows What They’re Doing
Even if you end up going with someone else, get a quote from a specialist to understand what proper coverage looks like and what it costs.
Step 3: Walk Through Your Operation
A good cannabis insurance specialist will do a risk assessment of your operation. They’ll look at your equipment, your processes, your regulatory compliance, and your supply chain. Then they’ll structure a policy that actually covers your risks.
Step 4: Review Annually
As your operation grows, your insurance needs change. What worked for a single-location startup doesn’t work for a multi-state operator. Review coverage annually and adjust as needed.
The Bottom Line
Insurance isn’t sexy. It’s not fun to talk about. But it’s the difference between surviving a setback and shutting down permanently.
Most cannabis operators are building for the long term. They want sustainable businesses they can grow, scale, and eventually exit. Cutting corners on insurance undermines all of that.
Use licensed contractors. Follow manufacturer specs exactly. Work with specialists. Carry proper coverage.
One denied claim can cost you everything.
Need help building your cannabis business infrastructure? GreenGrowth CPAs specializes in cannabis financial operations, tax strategy, and audit preparation for operators across CA, NY, NJ, MN, DE, and beyond. Schedule a consultation: https://meetings.hubspot.com/daniel833/blogs
About the Author
Daniel Sabet is CFO Senior Manager at GreenGrowth CPAs, serving cannabis operators across multiple states. He specializes in cannabis tax strategy, CFO infrastructure, and financial operations for dispensaries, cultivators, and multi-state operators.
Disclaimer
This article is for educational purposes only and does not constitute insurance, legal, accounting, or financial advice. Consult qualified professionals before making business decisions.
