Cannabis Insurance
in Alabama
In Alabama, medical cannabis is available but at minimal topical use. Consumption currently banned includes smokable flowers, vaping products, baked goods, and candies. Being insured is a great idea to keep your business safe when the regulations are stricter than in other states.
Understanding the Alabama Cannabis Industry
For many years, cannabis was illegal in the state except for a few limited medical uses. However, in May 2021, the governor of Alabama signed Senate Bill 46, making medical marijuana legal for individuals with qualifying medical conditions.
Under the law, patients with approximately 20 qualifying medical conditions can obtain cannabis with a physician’s recommendation. While previous attempts to legalize medical marijuana in Alabama had failed, this law marks a significant step forward for cannabis in the state. However, recreational use is still illegal.
A 14-member regulatory commission is responsible for overseeing the medical marijuana program and creating rules and licensing requirements. The program for accepting applications for medical cannabis businesses is expected to roll out by the Spring of 2023. As the industry in Alabama continues to evolve, we anticipate many exciting developments ahead.
Overview of Alabama's Cannabis Market
The legalization of medical cannabis has led to growing demand. According to a recent poll by the Alabama Medical Cannabis Association, there is significant support for medical marijuana across party lines, with 79% of respondents in favor of its legalization.
This demand has led to 64 municipalities and local governments authorizing the operation of medical cannabis dispensaries within their jurisdictions.
The industry is projected to retail around $48 million in its first year, $163 million in the second year, and approximately $387 million in the third year of legal and medical sales.
The state began accepting license applications for medical cannabis businesses on September 1, 2022. With a projected launch in spring 2023, the medical cannabis market in Alabama is expected to generate significant revenue for businesses and the state while providing much-needed relief to those suffering from qualifying conditions.
Alabama Cannabis Laws and Regulations
Alabama currently prohibits recreational cannabis, with possession of even small amounts considered a misdemeanor offense. This can lead to a fine of up to $6000 or one year in jail.
However, the state has legalized medical marijuana, available to patients who have failed to respond to traditional medications. Nonetheless, the current medical cannabis regulations have certain restrictions, such as the requirement for patients to try opioids first and a ban on raw flowers, vaporizer devices, and edibles.
Patients with one of approximately twenty conditions, including anxiety, depression, sleep disorders, PTSD, and intractable pain, may purchase medical marijuana in the form of capsules, lozenges, oils, suppositories, and topical patches.
Although some provisions of the legislation can be burdensome on patients, it represents a significant step forward in providing safe and legal access to cannabis for medicinal purposes.
Risks Faced by Cannabis Businesses in Alabama
There are strict regulations in place to ensure the quality of the product. In Alabama, growers and processors/handlers of cannabis are not granted any financial assistance by the government.
Before harvesting, a THC analysis is required to confirm that the THC content does not exceed 0.3% by dry weight. If the pre-harvest test reveals a higher THC content, a post-harvest sample is taken, and if it still exceeds the limit, the law requires the demolition of the field.
If you’re interested in becoming a licensee, be aware that you’ll need to pay a non-refundable application fee of $2,500. The annual licensing fees range from $10,000 to $50,000, depending on the size of your operation. Additionally, there’s a 9% gross proceeds tax on the retail sale of medical cannabis.
The legalization of medical cannabis has led to growing demand. According to a recent poll by the Alabama Medical Cannabis Association, there is significant support for medical marijuana across party lines, with 79% of respondents in favor of its legalization.
This demand has led to 64 municipalities and local governments authorizing the operation of medical cannabis dispensaries within their jurisdictions.
The industry is projected to retail around $48 million in its first year, $163 million in the second year, and approximately $387 million in the third year of legal and medical sales.
The state began accepting license applications for medical cannabis businesses on September 1, 2022. With a projected launch in spring 2023, the medical cannabis market in Alabama is expected to generate significant revenue for businesses and the state while providing much-needed relief to those suffering from qualifying conditions.
Alabama currently prohibits recreational cannabis, with possession of even small amounts considered a misdemeanor offense. This can lead to a fine of up to $6000 or one year in jail.
However, the state has legalized medical marijuana, available to patients who have failed to respond to traditional medications. Nonetheless, the current medical cannabis regulations have certain restrictions, such as the requirement for patients to try opioids first and a ban on raw flowers, vaporizer devices, and edibles.
Patients with one of approximately twenty conditions, including anxiety, depression, sleep disorders, PTSD, and intractable pain, may purchase medical marijuana in the form of capsules, lozenges, oils, suppositories, and topical patches.
Although some provisions of the legislation can be burdensome on patients, it represents a significant step forward in providing safe and legal access to cannabis for medicinal purposes.
There are strict regulations in place to ensure the quality of the product. In Alabama, growers and processors/handlers of cannabis are not granted any financial assistance by the government.
Before harvesting, a THC analysis is required to confirm that the THC content does not exceed 0.3% by dry weight. If the pre-harvest test reveals a higher THC content, a post-harvest sample is taken, and if it still exceeds the limit, the law requires the demolition of the field.
If you’re interested in becoming a licensee, be aware that you’ll need to pay a non-refundable application fee of $2,500. The annual licensing fees range from $10,000 to $50,000, depending on the size of your operation. Additionally, there’s a 9% gross proceeds tax on the retail sale of medical cannabis.
Types of Cannabis Insurance Coverage in Alabama
There is a wide variety of plans to choose from when it comes to you and your business. Some of these include:
Dispensary Insurance
Several risks specific to cannabis dispensaries can significantly affect the operations, due to which the state may require you to get comprehensive insurance coverage before issuing you a valid cannabis dispensary license.
Product Liability Insurance
Cannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Products liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.
Property Insurance
Property Insurance is a first-party insurance policy, reimbursing cannabis companies for direct property loss (i.e., vandalism, fire, or natural disaster). This policy covers real property, business personal property, and cannabis inventory.
D&O Insurance
Shareholders, competitors, investors, etc., can sue a cannabis company’s executives, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Workers’ Compensation Insurance
Employers are typically responsible for their medical costs and lost wages when employees sustain work-related injuries. This policy covers these expenses, protecting employees while simultaneously keeping cannabis companies running smoothly
Several risks specific to cannabis dispensaries can significantly affect the operations, due to which the state may require you to get comprehensive insurance coverage before issuing you a valid cannabis dispensary license.
Cannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Products liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.
Property Insurance is a first-party insurance policy, reimbursing cannabis companies for direct property loss (i.e., vandalism, fire, or natural disaster). This policy covers real property, business personal property, and cannabis inventory.
Shareholders, competitors, investors, etc., can sue a cannabis company’s executives, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Employers are typically responsible for their medical costs and lost wages when employees sustain work-related injuries. This policy covers these expenses, protecting employees while simultaneously keeping cannabis companies running smoothly
Choosing the Right Cannabis Insurance Policy in Alabama
With many state regulations, there are many risks; being insured to protect your company can mitigate risks over time. Unfortunately, there is no dispensary in the state, and there are only 16 conditions to qualify for a medical card; the limited companies that licensed growers, processors, and distributors need protection.
Working with an Experienced Cannabis Insurance Broker
AlphaRoot
AlphaRoot is a full-service insurance brokerage that focuses exclusively in the cannabis, hemp, CBD, holistic medicine and psychedelic industries. We work with companies across the entire supply chain, from seed to sale, as well as, ancillary and capital providers. Our team is heavily invested in these industries and our goal is to help companies scale to propel them forward.
Factors to Consider When Choosing Cannabis Insurance
An insurance broker is responsible for different tasks. Hiring the wrong cannabis insurance broker will waste both your time and money. The right cannabis insurance broker will understand your values and bring the right solution to you. When looking for a reliable broker, there are some essential things to consider.
- familiarity with this fluctuating cannabis industry.
- Do they offer risk management resources?
- Know their broker expertise.
- How many insurance carriers do they carry
- Can the broker analyze your contracts and advise you?
- You can add or ask for other things depending on your business’s status.
Common Mistakes to Avoid When Buying Cannabis Insurance
They don't purchase insurance at all
One of the biggest mistakes cannabis business owners are making is not having a policy at all. While the wrong policy is problematic, not having any coverage can be devastating to a new or even an established business. Investing in insurance covers the unforeseen and mitigates risk.
They don’t purchase cannabis specific insurance
Cannabis insurance is a very specialized niche in the insurance industry. Not all insurance agents/brokers have specific knowledge about the risks in the cannabis industry. Insuring cannabis is not like insuring your house or automobile strictly because of the nature of what you’re trying to insure and how it’s viewed by the government. If you don’t have a policy that is specific to cannabis, there may be certain exclusions based on the Schedule I status of cannabis or illegal substances.
They don’t work closely enough with a cannabis insurance specialist
Working closely with someone that knows the cannabis insurance industry is critical when choosing a policy. Cannabis business owners have to ask their agents/brokers questions, lots of questions and the broker/agent needs to be able to answer those questions.
Cultivators fail to buy crop insurance
If you are a cultivator or a grower, you rely on your cannabis crop for your income. Cannabis is agriculture, just like corn, wheat, or soy. Cultivators have to protect their income; therefore, they must have cannabis insurance and, specifically, crop insurance. Every year, wildfires ravage thousands of acres of land and crops, resulting in millions of dollars of losses for cultivators.
They don’t know what's included in their policy
As a cannabis business owner, knowledge is power. You have to be aware of the changing laws at the federal, state, and local level. You also need to know your business inside and out. Part of knowing your business is understanding what is and is not in your insurance policy. You have to know what is covered and what is excluded. There are many cannabis specific exclusions that are often overlooked. https://www.s2sinsure.com/post/cannabis-insurance-top-5-mistakes-to-avoid
Benefits of Cannabis Insurance for Alabama Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Alabama, not to mention across the entire US.
AlphaRoot is not in the insurance business. We’re in the business of guiding cannabis companies through the unique risks of our industry. It’s why we don’t merely broker insurance, we curate powerful cannabis risk management solutions.
Insurers looking to provide commercial cannabis insurance to this budding market should understand its rapidly shifting landscape. They must contend with legal uncertainty, evolving regulations, lack of data, and developing business practices. Insurers will also need to understand how the cannabis industry’s first and third‐party coverage needs are unique from other industries.
There are no legal insurance requirements for cannabis companies in Alabama since recreational use is not legal yet. Still, the industry comes with its risks that are unique, so don’t leave your business unprotected – take the necessary steps to secure the right insurance coverage for your cannabis company today!
- MSO’s
- Dispensaries
- Lab Testing
- Cultivation
- Investment Funds
- Manufacturing
- Distribution
- Technology
- Psychedelics
- Brands Service
- Providers
Cannabis Businesses
That May Need Insurance
Getting a Quote for Cannabis Insurance in Alabama
Cannabis Insurance in Alabama
Frequently Asked Questions
Cannabis companies can protect themselves against various risks by obtaining insurance coverage. Whether it’s general liability, product liability, property damage, or theft, insurance policies can help mitigate these risks.
Insurance coverage can also include defense against court claims, litigation, and protection for inventory, machinery, and crops. Some plans even cover worker’s compensation, wage loss, and online liability. It’s essential for cannabis companies to carefully review their insurance agreements to ensure they have sufficient coverage for their specific needs.
Insurance costs are higher than in other industries due to the unique risks associated with the cannabis industry. However, the cost of insurance can vary greatly, ranging from hundreds to several hundred thousand dollars, depending on the size and requirements of your business.
It’s essential to keep in mind that the price you pay for insurance is directly related to the coverage you need to protect your business adequately.
Cannabis insurance is not required by law in Alabama. However, it’s highly recommended that cannabis businesses obtain insurance coverage to protect themselves against potential risks and liabilities. Without insurance, businesses may be exposed to significant financial losses in the event of accidents, theft, or lawsuits.
If you need to file a cannabis insurance claim in Alabama, contact your insurance provider right after the incident or loss. Your insurance company will walk you through the claims process, providing the necessary forms and documentation to submit.
A detailed description of the damage or loss and any supporting documentation that can help substantiate your claim. Your insurance provider will assess the claim and determine if it’s covered under your policy. If so, they will provide you with appropriate compensation.