Last Updated: 12/19/2025

Issue: Demand for cannabis is increasing dramatically. As of February 2024, 47 states, the District of Columbia, and three territories (Guam, Puerto Rico, U.S. Virgin Islands) allow the use of cannabis for medical purposes. Nonmedical adult use of cannabis is legal in 24 states, the District of Columbia, and 2 territories (Guam and North Mariana Islands). The division between state and federal status makes it difficult for businesses to receive inclusive, affordable coverage and often leaves policyholders with restrictive plans.

Background on federal law and marijuana: Conflicting state and federal laws, emerging standardization of business practices, and rapidly evolving regulations have largely discouraged insurers from participating in this market. In December 2025, President Trump signed an executive order directing federal agencies to reclassify marijuana from Schedule I to Schedule III. This is the most significant federal policy change in decades. The process is expected to be finalized in 2026, but as of now, cannabis is in transition to Schedule III. This change will allow for tax relief (removal of 280E restrictions), expanded research, and potentially Medicare pilot programs for CBD, but does not legalize cannabis federally or allow interstate commerce. A provision in the 2018 Farm Bill removed hemp from the list of Schedule I controlled substances. As such, the U.S. Drug Enforcement Administration (DEA) will not consider hemp-derived cannabinoid (CBD) a controlled substance subject to the CSA.

However, cannabis and CBD (regardless of whether its sourced from cannabis or hemp) is subject to Federal Drug Administration (FDA) approval under the Federal Food, Drug, and Cosmetic Act (FD&C Act). The FDA has not approved a cannabis drug. It has, however, approved CBD medicines for the treatment of epilepsy. Federal law currently prohibits CBD from being added to any food or drink product. On July 22, 2019, the FDA issued formal letters determining that certain CBD products were sold in violation of the FD&C Act.

Cannabis insurance and businesses: Cannabis-related businesses (CRBs) face significant risks and operational challenges, including workplace accidents, property damage, crop failure, and heightened fire vulnerability. They also contend with theft, general liability, and product liability.

Despite state legality, federal restrictions severely limit banking access. As of late 2025, about 70% of CRBs operate primarily in cash, increasing theft risk and complicating insurance and daily operations.

Legislative efforts remain stalled. The SAFER Banking Act, which would grant CRBs access to financial services, and the CLAIM Act, which would allow insurers to cover cannabis businesses without federal repercussions, have both gained support but await Senate approval. Until enacted, CRBs continue to navigate major financial and insurance barriers.

The popularity of cannabis-infused products, such as edibles, increases the risk of product liability and safety recalls. The psychoactive effects of cannabis raise the risk products may be deemed mislabeled, misrepresented or harmful. Standard general liability plans account for these claims in non-CRB businesses, but most insurers hesitate to provide such coverage for CRBs due to the legal uncertainties. Policy language specifically tailored to the cannabis industry is crucial in providing adequate coverage.

Individuals using cannabis also face insurance challenges ranging from legality issues to coverage deficiencies. Users may be faulted in workers’ compensation claims or subject to employment-disqualifying drug screening. In addition, insurers offering medical treatment options may have policies preventing the use of cannabis in treating a patient’s condition.

Auto insurance rates may be influenced by elevated risks associated with drivers under the influence. Complicating the situation is the lack of standardized methods for roadside detection of drug-impaired driving. Additionally, the variability of side effects and physiological reactions in each user increase the risk of misidentifying a driver’s status at the time of the incident.

Finding and securing adequate insurance coverage for CRBs can be challenging, but insurer growth in this space has occurred.  The NAICs 2023 white paper “Regulatory Guide Understanding the Market for Cannabis Insurance” notes that most commercial insurance for cannabis-related businesses is still found in the non-admitted market. Gaps remain, especially for smaller businesses and in emerging areas like ancillary services, cannabis-infused products, and social consumption lounges. State-based programs, captives, and risk retention groups are being explored to address these gaps.

When CRBs do find and obtain coverage, most need to pay their premiums in cash, which presents another unique obstacle most other businesses do not face.  Yet another issue the New Dawn Risk report addresses is inadequate policy limits on coverage.  Currently, most insurers are offering $1 million per occurrence/$2 million aggregate policies in commercial and general liability, property damage, and product liability coverage. However, insureds may need limits up to $5 and $10 million, or more.

Status: There are many legal uncertainties, unique hazards and emerging risks involved in legal cannabis-related activities. The CIPR’s May 16, 2018 Weeding through the Unique Insurance Needs of the Cannabis Industry examined many of these issues. Additionally, the NAIC Cannabis Insurance (C) Working Group was formed in 2018 to better understand the cannabis industry’s insurance coverage gaps and regulatory issues. Members will develop best practices for state insurance regulators to help them address these insurance needs.

On June 2, 2021, the Working Group chair presented a memorandum from the Working Group recommending that the Government Relations (EX) Leadership Council membership issue letters in support of, and advocate for, the passage of the Secure and Fair Enforcement (SAFE) Banking Act and Clarifying Law Around Insurance of Marijuana (CLAIM) Act. The proposed bills would expand insurance coverage options for businesses and remove federal barriers for insurers to conduct business with cannabis-related businesses that are legal in their respective states.

The NAIC Cannabis Insurance (C) Working Group continues to monitor federal legislation, support insurance market development, and report on coverage gaps. Their 2025 charges include ongoing assessment of federal law, market capacity, and emerging insurance issues.