Protecting Your Cannabis Business: Why You Need Insurance

By Chelsea Fox
Published: January 3, 2017 | Last updated: April 20, 2022 06:39:45
Key Takeaways

​You have a great product and scouted out the perfect storefront location, but before you finally open the door to your new cannabis business, you need to take one last important thing into consideration: insurance.

Congratulations! You’ve made the jump to becoming a business owner. To get here, you probably spent endless hours researching everything you needed to get your operation up off the ground and running. You looked at parking, a noticeable location with ease of access, and so much more. Now there’s one last thing: insurance.


In the states that have legalized marijuana, insurance coverage is one of many regulations business owners encounter. As Ed Kuhn, president of Wellness Medical Protection Group, stated in the September 2014 issue of Insurance Journal, “Whether they are a grower, dispensary owner, supplier or processor, marijuana entities looking to sell to the public are now businesses that need insurance.”

There are few select companies who have stepped up to the plate to insure this new market in line with their state laws. Most insurance carriers are choosing to watch from the sidelines due to the ever-changing risks and hurdles presented in the process of legalizing marijuana for medical and/or recreational use. They are also assessing data collected from those who are insuring cannabis business, and it is safe to say that as knowledge of how the industry works increases, so will the limits of coverage.


Whether they are a grower, dispensary owner, supplier or processor, marijuana entities looking to sell to the public are now businesses that need insurance.”

Kuhn’s agency is one that evaluated the risks and started helping business owners in Colorado navigate their new ventures. Select insurance companies in Michigan, where I work, have also assessed the risks and developed eligibility requirements correlating with Michigan State laws.

Marijuana businesses must meet those requirements in order to qualify for coverage. The number one of these is that businesses must be housed in a commercially zoned building. Residential properties, such as homes, vacant lots with a pole barn on the outskirts of town, or a garage, will not qualify for insurance.


Those of you who already bought a residential lot for your business, don’t panic. While it’s a bit of a process, you may consider applying to rezone your lot from residential to commercial. Before you do, however, learn about your community and find out if they will be accepting of your business venture. Also, attend zoning meetings before you file the application to rezone your property for commercial use.

Although procedures vary from municipality to municipality, the rezoning process then typically involves public notice, meetings with planning commission officers, and neighborhood meetings. As you might imagine, this process could take several months.


With so many investment dollars going into your grand opening, don’t chance anything. Find an insurance carrier willing to insure the cannabis market in your state; not only is it more convenient than working with an out-of-state carrier, but an in-state company can better help you meet the proper zoning requirements for your county or city.

Also, be sure to work with a qualified representative who knows the limits of coverage and how to properly use them so you can grow your business in the right direction.


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Written by Chelsea Fox

Profile Picture of Chelsea Fox

Chelsea Fox is a licensed insurance advisor who has lived in Holland, Michigan, with her husband since graduating from Olivet College in 2012. Chelsea’s passions not only include insurance, but also hiking, bird watching, hunting, and fishing. Basically, if she is outside and active, she is happy.

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