Cannabis Insurance
in Arkansas
Adult-use cannabis is prohibited in Arkansas. Patients with certain medical conditions can purchase from dispensaries, but it is regulated more than in most states. Following and understanding these regulations to ensure your business’s success is one of our missions.
Understanding the Arkansas Cannabis Industry
Arkansas ranks as the 30th cannabis industry in the USA. The state has only legalized medicinal marijuana and has very strict laws regarding the use of cannabis. It’s famously known as one of the “Smoke a joint, lose your license “ under which you can lose up to 6 months of your driver’s license privileges if caught illegally smoking marijuana.
Arkansas first attempted to legalize medicinal marijuana in 2012; however, the votes failed.
In the second attempt made in 2016, Arkansas Medical Marijuana Amendment was approved with 53% votes. Under this, patients with only 12 specific medical issues are allowed to possess 2 ½ ounces of marijuana. Arkansas Medical Marijuana Commission, established in 2017, overlooks the distribution of licenses all over the state.
Even though medicinal marijuana was legalized in 2016, it wasn’t until May 2019 that the first sale was made. The 1st dispensary was opened in Hot Springs. Since then, Arkansas has continued introducing laws to help flourish the medicinal cannabis industry.
The state did try to legalize recreational marijuana in the state. However, in November 2022, the ballot failed with 44% votes.
Overview of Arkansas’s Cannabis Market
Even though the industry is fairly new, it has been making waves in the past few years. 2022 was the biggest year in terms of revenue.
The state dispensaries sold more than 50,000 pounds of marijuana, making sales of $273.6 million. The start of 2023 proved that the industry would continue to grow this year. In the first two months, collective sales were $45.5 million, already 10% up from last year.
Arkansas has 33 dispensaries, out of which 30 are currently operational. The state charges a 6.5% sales tax on each purchase. Cultivators and dispensaries are charged a 4% privilege tax.
Cannabis Laws and Regulations in Arkansas
Recently introduced to a world where medical marijuana is legal, Arkansas has strict laws and policies on its usage. Possessing above 2.5 ounces and under 4 ounces of marijuana is considered a misdemeanor with a $2500 fine and one-year imprisonment.
Similarly, strict laws are placed on the delivery of marijuana as well. Unlike in other states, patients are not allowed to cultivate plants themselves.
As per the 2016 amendment, the state can currently only issue licenses for 40 dispensaries. Furthermore, the state can license only eight cultivators for now.
Risks Faced by Cannabis Businesses in Arkansas
The cannabis industry is a fairly new business in Arkansas. Just like any other business, it comes with its risks. Cannabis is a highly regulated industry with constant changes in laws and regulations.
Considering the fragile nature of the products, it’s important to show 100% compliance with all regulations that come with this industry.
Medicinal marijuana is still illegal under federal law. So, the business comes with a risk factor. Moreover, banks hesitate to work or invest in this business for the same reasons. So, financials are something that is a risk factor.
For this very reason, it’s smart to protect your assets when getting into the marijuana business. You should have ideal insurance that can protect you from any unforeseen risks that may arise.
Even though the industry is fairly new, it has been making waves in the past few years. 2022 was the biggest year in terms of revenue.
The state dispensaries sold more than 50,000 pounds of marijuana, making sales of $273.6 million. The start of 2023 proved that the industry would continue to grow this year. In the first two months, collective sales were $45.5 million, already 10% up from last year.
Arkansas has 33 dispensaries, out of which 30 are currently operational. The state charges a 6.5% sales tax on each purchase. Cultivators and dispensaries are charged a 4% privilege tax.
Recently introduced to a world where medical marijuana is legal, Arkansas has strict laws and policies on its usage. Possessing above 2.5 ounces and under 4 ounces of marijuana is considered a misdemeanor with a $2500 fine and one-year imprisonment.
Similarly, strict laws are placed on the delivery of marijuana as well. Unlike in other states, patients are not allowed to cultivate plants themselves.
As per the 2016 amendment, the state can currently only issue licenses for 40 dispensaries. Furthermore, the state can license only eight cultivators for now.
The cannabis industry is a fairly new business in Arkansas. Just like any other business, it comes with its risks. Cannabis is a highly regulated industry with constant changes in laws and regulations.
Considering the fragile nature of the products, it’s important to show 100% compliance with all regulations that come with this industry.
Medicinal marijuana is still illegal under federal law. So, the business comes with a risk factor. Moreover, banks hesitate to work or invest in this business for the same reasons. So, financials are something that is a risk factor.
For this very reason, it’s smart to protect your assets when getting into the marijuana business. You should have ideal insurance that can protect you from any unforeseen risks that may arise.
Types of Cannabis Insurance
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 Arkansas
While attempts are being made to pass new laws, complying with the existing regulations in the state of Arkansas can be challenging. Although there may be potential benefits for businesses, the unique nature of the cannabis industry creates complexities in adhering to both state and federal laws. It is advisable to safeguard your business by obtaining appropriate insurance.
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 Arkansas Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Arkansas, 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.
Like any other state and small business, marijuana businesses have to follow similar insurance policies. Ideally, it should have the following protections in place
- General Liability Insurance
- Workers’ Compensation
- Commercial Auto (if dealing with delivery of marijuana)
- Property Insurance
- Cyber liability insurance
Apart from this, there are specific insurances that you need to cultivate or sell medicinal marijuana in Arkansas. For dispensaries, you need proof of assets worth $200,000 or surety bonds worth $100,000. Moreover, you also need a $100,000 performance bond.
For cultivation, you need $ 1 million worth of proof of assets or a surety bond and a $500,000 performance bond.
- 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 Arkansas
Cannabis Insurance in Arkansas
Frequently Asked Questions
Cannabis insurance can cover general liability, theft, cybercrime, property damage, and a ton of other cannabis-associated risks. What your cannabis insurance covers depends on the type of insurance you choose.
Ideally, you need to have proof of assets and performance bonds for your dispensaries or cultivations. Furthermore, it is advised to have general liability and workers’ compensation. To select the best policy for your business needs, you should consult a professional.
For cultivators, basic cannabis insurance coverage can cost anywhere around $1-$1.5 million. For dispensaries, basic coverage will cost less than $400,000. You can also get insurance within the range of a few hundred dollars depending on your requirements.
Any additional coverage based on your business needs is an add-on. It depends on the scale of your business as well as what provider you are using for your insurance
There are no specific laws to have cannabis insurance in Arkansas apart from having proof of assets and performance bonds. However, even though there are not any specific laws for marijuana businesses, commercial business laws still apply.
You are recommended to get general insurance such as workplace injury, or property liability insurance if required by their landlords to mitigate any losses the company might incur.
All cannabis insurance claims in Arkansas are filed through your insurance company like any other insurance claim. You must work with them to make the whole process easier.
Providing as much physical proof and witnesses as possible makes your case stronger. This fastens up the whole process in case you need to claim your insurance money.