Cannabis-related businesses can’t just get by with a basic business liability policy, whether you’re a farmer, a dispensary, a distributor or somewhere else along the seed-to-sale journey.

When shopping for insurance policies, cannabis-related businesses often find that policies offered by major insurance providers almost always exclude cannabis operations. Unfortunately, some of these businesses only discover their coverage gap after a disaster, theft or other incident has already happened.

Producing and selling cannabis and the value-added products that it can create may be legal in several U.S. states, but it’s still illegal on a federal level. That means corporations that operate across multiple states, like insurance providers, are especially wary of working with the cannabis market because they are all about managing risk. While cannabis-related businesses have a strong desire for proper insurance coverage, as do the state governments who license them, these businesses are often running at higher risks then they realize when gaps in property and auto insurance can spell disaster. Those who do get policies that meet their needs have seen promising rates of insurance claims paying out.

Business interruption insurance — coverage that helps a business survive when it has been forced to close or stop for a period of time — is a crucial component to a business in dire straits but may leave cannabis-related businesses to fend for themselves after paying months or even years of premiums for a policy full of holes. And don’t think your landlord is going to pitch in — one of the common cannabis insurance myths is that your landlord will cover your losses, but their policy will likely only cover the landlord’s own losses, not yours.

Even with policies geared specifically to the cannabis industry, there are some common exclusions you should look out for.

  • Crop insurance is the same as property insurance. Cannabis crops can be difficult to insure, and often requires their own unique policy that looks at the lifecycle of the plant and its various stages, since there are different levels of risk and value with each stage. Indoor cannabis is much easier to find a policy for because the conditions are controlled, while outdoor cannabis is trickier to find coverage for. Where you won’t find coverage is in your business’s property policy. Crops are excluded from property coverage, so you’ll need to find a policy that specifically covers the kind of cultivation you are doing.
  • When the equipment that is crucial to your business breaks down or is otherwise damaged, you would naturally turn to your insurance policy to see how it can help. As a cannabis business, however, you may find that your equipment is not covered by your property policy. It is crucial to assess the level of risk at your site and review your property policy to see if you have coverage for the potential failures or breakdowns that could stop your business in its tracks.

What has your experience been with getting the right property or crop insurance? Have you reviewed your policies to make sure they are working for you? Let us know in the comments below.