With the federal government considering the end of prohibition as we know it, the insurance market is quickly getting ready for a major increase in services and sales to the already-booming, nearly $18-billion-per-year cannabis industry.

Three dozen U.S. states have already legalized cannabis, plus Washington D.C., for either medical use or adult use. That means each state has its own unique insurance market to serve the needs of cannabis businesses like farmers, laboratories, dispensaries, and transporters. But even with this huge surge, there is an artificial cap on what is possible due to the threat of federal intervention. Cannabis is still considered as illegal at the federal level as heroin and meth.

The insurance market just currently isn’t able to meet the demands of the cannabis industry. In the U.S. alone, regulated cannabis sales increased nearly 50%, and revenues are projected to hit $41 billion by 2026. Even with this major industry, only $250 million of policies were written last year for cannabis-related businesses, and the policies were often limited to property and liability coverage.

The infrastructure behind the cannabis industry needs more protection than that. Farmers need crop coverage for their cannabis (it is a plant after all and crops do fail), and not just for indoor-grown cannabis.

Congress is currently reviewing bills like the Secure and Fair Enforcement (SAFE) Banking Act, which also incorporates elements of another bill, the CLAIM Act, that clarifies rules for insurers working with cannabis clients. While Congress decides what to do with these bills, insurers are working to fill the gaps in coverage with new policies. States regulate insurers and so they can offer coverage in states where cannabis is regulated, and when federal decriminalization becomes a reality, the market will expand even more greatly.

Even though some are making these coverages available, cannabis business owners still balk at the higher costs they face. Premiums can be 30% higher than what another business would pay for similar coverage, and vehicle coverage can be 5 times more expensive.

Another essential insurance product that cannabis businesses often miss out on is directors and operators (D&O) insurance. The people who will potentially invest or serve on the board are going to want to be protected, especially against federal retaliation. While there are options available for cannabis-related businesses, the premiums are, again, higher on average and the coverage is more limited.

This and other gaps in insurance coverage can up the cost of doing business and make day-to-day operations more challenging. Low coverage limits are common with cannabis policies, and that may mean companies need to split up shipments or production lines into smaller batches in order to stay within the coverage limits.

While more coverage options are not yet available to all cannabis businesses, the insurance industry is gearing up to prepare what seems like the inevitable end of prohibition at the federal level.

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Will the federal government pass meaningful legislation this year on cannabis? What have been your greatest insurance challenges? Let us know in the comments below.