Status: Recreational

Cannabis Insurance
in Arizona

After many years, Arizona became a state that has medical and recreational cannabis laws in late 2020. Staying on the path to profitability and mitigating the risks in the cannabis industry, we want to help your business grow by insuring through the beginning years.

Since the cannabis market is fairly new in Arizona, the laws and regulations are evolving and changing. This is why insurance plays a huge role in protecting assets in the billion-dollar industry.

Recreational
No Cannabis Program
Medical Only

Understanding the Arizona Cannabis Industry

In Arizona, medical and recreational marijuana is legal. In 2010, under Proposition 203, medicinal marijuana was made legal in the state. The Arizona Department of Health looks after all ‌operations in terms of sales and regulations, such as testing, product labeling, and licensing.

In November 2020, voters approved Proposition 207 in a ballot election that legalized recreational marijuana‌ use. Under this, adults can each grow up to 6 plants in a household.

Arizona is the 9th biggest cannabis industry in the United States, even though it has just been three years since the recreational use of marijuana was legalized. The market is rapidly expanding, with new dispensaries opening and licenses getting issued. This has led to new job opportunities in Arizona in agriculture, packaging, transportation, and retail.

Arizona is a popular tourist destination, so there’s a high demand from ‌residents and tourists. This is the reason for the huge success the industry has had in so little time.

Overview of Arizona’s Cannabis Market

The first state-licensed sale happened in January 2021, making Arizona the fastest state to go from legalization to regulation. Since legalization, it has made more than $2.6 billion in sales. As of March 2023, there are over 130 dispensaries across the state.

The state collects a $16 excise tax on recreational marijuana on top of ‌normal sales taxes. Moreover, local jurisdictions also charge a 2% tax. In 2022 alone, the medicinal sales tax collected was $13.6 million and $22.5 million from recreational sales.

The cannabis industry to date has employed 23000 people creating more opportunities in the coming year. The cannabis industry pays a hefty dollar in taxes to the state, which is why the business has flourished and proved to be so profitable.

Arizona Cannabis Laws and Regulations

Strict laws regarding no discrimination for patients of medicinal marijuana. These are cardholders, and employers cannot reprimand them if the drug test came positive for marijuana. They can, however, be charged for taking marijuana within work premises and during working hours. Adults are permitted to carry up to 1 ounce of marijuana at any time.

The state has no bans on convicted felons from obtaining medicinal marijuana. However, they are not permitted to grow marijuana or work in dispensaries. Furthermore, it is still illegal to use marijuana in public, while driving, or if your employer prohibits it.

The ADHS has strict laws when it comes to ensuring that the packaging is child-safe and it is labeled with the correct dosages and potency.

Risks Faced by Cannabis Businesses in Arizona

The cannabis industry is flourishing within the state at a high rate, which comes with its own set of risks. Due to this, the Cannabis industry needs to comply with a strict set of rules. These include mindfulness over licensing, secure packaging and transportation, accurate labeling, and cultivation of the products to ensure quality. If these businesses are non-compliant, they can face hefty penalties and charges.

Apart from this, the sale of marijuana is still illegal under Federal law. This creates tension around the sustainability of the business. Moreover, it’s difficult for banks to go into business; hence there are some financial risks and concerns.

The first state-licensed sale happened in January 2021, making Arizona the fastest state to go from legalization to regulation. Since legalization, it has made more than $2.6 billion in sales. As of March 2023, there are over 130 dispensaries across the state.

The state collects a $16 excise tax on recreational marijuana on top of ‌normal sales taxes. Moreover, local jurisdictions also charge a 2% tax. In 2022 alone, the medicinal sales tax collected was $13.6 million and $22.5 million from recreational sales.

The cannabis industry to date has employed 23000 people creating more opportunities in the coming year. The cannabis industry pays a hefty dollar in taxes to the state, which is why the business has flourished and proved to be so profitable.

Strict laws regarding no discrimination for patients of medicinal marijuana. These are cardholders, and employers cannot reprimand them if the drug test came positive for marijuana. They can, however, be charged for taking marijuana within work premises and during working hours. Adults are permitted to carry up to 1 ounce of marijuana at any time.

The state has no bans on convicted felons from obtaining medicinal marijuana. However, they are not permitted to grow marijuana or work in dispensaries. Furthermore, it is still illegal to use marijuana in public, while driving, or if your employer prohibits it.

The ADHS has strict laws when it comes to ensuring that the packaging is child-safe and it is labeled with the correct dosages and potency.

The cannabis industry is flourishing within the state at a high rate, which comes with its own set of risks. Due to this, the Cannabis industry needs to comply with a strict set of rules. These include mindfulness over licensing, secure packaging and transportation, accurate labeling, and cultivation of the products to ensure quality. If these businesses are non-compliant, they can face hefty penalties and charges.

Apart from this, the sale of marijuana is still illegal under Federal law. This creates tension around the sustainability of the business. Moreover, it’s difficult for banks to go into business; hence there are some financial risks and concerns.

Types of Cannabis Insurance Coverage in Arizona

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

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Choosing the Right Cannabis Insurance Policy in Arizona

This industry is still in its early phases. Considering amendments and changes in laws as the years progress, it is ideal to have protections against any unforeseen decisions. Insurances also help you with keeping a compliance check to ensure your work is done legally.

The type of insurance and coverage you use depends on the scope of the company itself. The insurance providers in Arizona offer insurance on the following to a marijuana manufacturer

  • General Liability insurance and workers’ comp
  • Liability insurance for products (in case of consumer harm) and property insurance (in case of any natural disaster
  • Other insurances include protection against cyber attacks, lawsuits, or any other interruptions like electrical outages, etc.

Overall, it’s ideal to cover your business from manufacturing to sales in terms of any unforeseen financial loss that can come up.

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AlphaRoot Badge 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

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Benefits of Cannabis Insurance for Arizona Businesses

AlphaRoot is licensed to provide cannabis insurance coverage throughout Arizona, 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.

Although it is not a legal requirement in Arizona for a cannabis business to have insurance, it is smart to have it.  These businesses need to follow state laws for small business owners. They require you to have certain insurances: workers’ compensation, and commercial auto insurance at the very least.

  • MSO’s
  • Dispensaries
  • Lab Testing
  • Cultivation
  • Investment Funds
  • Manufacturing
  • Distribution
  • Technology
  • Psychedelics
  • Brands Service
  • Providers
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Getting a Quote for Cannabis Insurance in Arizona

Cannabis Insurance in Arizona
Frequently Asked Questions

Cannabis insurance is customizable based on business needs. However, as per state laws, the business needs to have insurance on general liabilities,  product liabilities, property liability, and worker’s compensation for employee safety.  Apart from these, you can also opt for protection against cyber threats, any unforeseen interruptions or officers’ and directors’ reputations, etc.

The cost of Cannabis insurance lies between a few hundred dollars to tens of thousands of dollars. It depends on the size of the business.

The Cost of insurance for cannabis depends largely on what type of insurance a company is getting. Generally, they are high. However, it protects a rapidly growing, unstable industry when it comes to the Federal level. Considering it is new to the state, it’s important to cover the basics and have protection against any unforeseen financial losses.

There is no specific requirement regarding insurance for cannabis industry owners in Arizona. However, they are required to follow the laws for small business owners. In this at least 2 insurances are required by the law: workers comp and commercial auto insurance (if necessary for business). Apart from these, you can get insurance on general liabilities and production for keeping the crops safe.

Just like all insurance claims, in case you need to use your insurance for any unfortunate scenario, contact your insurance provider. They will be able to guide you throughout the whole process. For the claim to be validated, you need to make sure you have enough proof and documentary evidence to support your claims. Always read up on your coverage limits and rights and go through the paperwork before signing anything. Get professional help if needed.