From 2023 to 2024, 15% of Americans reported they smoke marijuana, according to a Gallup poll. Despite this, cannabis operators within the lucrative market are facing some significant roadblocks, particularly when it comes to increasing operational costs and liability risks.

As a result, many operators are looking to cut costs wherever they can—and that includes insurance coverage. “Cannabis businesses operate on razor-thin margins and commonly resort to price-first purchasing decisions, while terms and conditions receive far less attention," says John Deneen, cannabis program manager, Amwins.

If cannabis operators are prepared to let their coverage go up in smoke, here are four common coverage gaps that agents should highlight:

1) Cyber. Just like in every industry, cyber threats, including phishing attacks, ransomware and data breaches, are ever-present in the cannabis industry. Protecting people's data is not only essential, it is also necessary to ensure compliance with federal and state regulations, thereby avoiding penalties.

"Cybersecurity is a major risk, especially for retail dispensaries that handle sensitive customer data," says Lee Woodruff, vice president of the cannabis practice at Jencap Insurance Services. "Yet despite the exposure, cyber coverage remains a common gap in their insurance protection."

2) Property valuation. Maintaining proper property valuation enables cannabis businesses to secure adequate insurance coverage that will not leave them vulnerable to out-of-pocket costs in the event of damage or loss. Agents can play a key role in helping cannabis operators navigate the detailed steps involved in procuring and maintaining the appropriate insurance coverage.

“Property values have risen like crazy," says Jason Scheurle, national product manager, cannabis, Burns & Wilcox. “The building that I could have bought for $300,000 is now valued at $750,000—a lot of these policies haven't amended any of those building limits, which may include finished stock limits and theft, as well as product contamination."

Further considerations for property coverage that agents should highlight include any protective safeguards required by the carrier. For cannabis operators in particular, policy language often includes many requirements for protecting the property.

“It's basically a warranty that says if you don't have this in place and there's a claim, we can deny the claim," Woodruff says. “For cultivation operators, you might see a safeguard regarding the use of LED lighting only in grow rooms. If not followed, the carrier could potentially deny a claim." 

“Protective safeguards warranted for theft of cannabis inventory have been a persistent issue, with each carrier imposing different requirements," Deneen says. “Agents should clearly disclose all conditions and requirements to their clients before binding coverage to avoid ugly scenarios where coverage is unexpectedly denied."

3) Product recall. Dozens of cannabis products in the U.S. were recalled in May 2024 after a dangerous mold that causes lung infections was found by California's Department of Cannabis Control (DCC). More recently, in early 2025, Michigan cannabis regulators announced a major product recall for the second time in less than a month, this time for over 23,000 vape cartridges produced by Exhale Systems.

“The most significant change that's taking place is the uptick in product recall activity, both from the state regulators and self-imposed by the cannabis operators when they get refreshed testing results from the independent labs they use for product quality," says Jim McErlean, business development manager, Cannasure. 

 “Every operator, no matter where they are in the chain, has recall exposure," Woodruff says. “Recall exposures are massive, with one massive recall having the potential to put an operator out of business."

Product recalls can have significant financial and reputational impacts on cannabis operators and the industry at large. Independent agents can assist clients by communicating the risks and benefits of protecting their business with this coverage.

4) Employment practices liability insurance (EPLI). EPLI coverage may not be considered a core coverage for cannabis operators. However, agents should highlight the unique nature of the cannabis industry and the industry-specific risks their clients are facing.

“A lot of operators are starting to buy EPLI coverage, but there's still many more that are not buying this coverage," Woodruff says. “That's a huge coverage gap—especially in an industry that can be likened to hospitality, where you are crazy to go without EPLI coverage."

Olivia Overman is IA content editor.