Cannabis Insurance
in Connecticut
With recreational products coming on board end of 2022, the market is in the startup stages. Migrating risks with insurance successful can be a great business venture to stay on track. Being the gateway to New England, the laws about cannabis are dynamic and making sure you are protected is important.
Understanding the Connecticut Cannabis Industry
Connecticut is one of the most recent states that legalized recreational cannabis. That doesn’t come as a surprise, as it allows medical marijuana as late as 2012. That is one decade after many states allowed treatment for patients using cannabis and medical marijuana dispensaries.
In July 2021, Connecticut passed a bill for the use of recreational marijuana, which legalized adults cultivating and consuming cannabis. However, the ruling for growing plants was limited to individuals with medical cards and only permitted indoors. In 2023, the official retail of cannabis began from licensed local businesses.
Overview of Connecticut's Cannabis Market
As cannabis sales started less than a few months ago, the Connecticut market is still settling. Few concrete values are available; however, considerable numbers are estimated in sales.
In 2023 alone, recreational sales in Connecticut are projected to reach $300 million to $375 million. This number is set to soar as high as $800 million by 2026. The medical marijuana market has been around more than a decade longer than the adult-use one and is expected to cap at around $175 million to $215 million this year.
The state expects to collect as high as $1.1 billion in state and local tax revenue within the first seven years of recreational cannabis sales. This value is calculated with the current 6.35% sales tax and 3% local tax in place. These tax percentages are significantly lower than in some states.
Connecticut Cannabis Laws and Regulations
The state is working towards regulating the cannabis industry to help local businesses and boost the cannabis market. The laws have changed slowly but are now coming up to par with other states that have legalized recreational cannabis.
To recap, the state of Connecticut allowed the possession of ½ ounce of cannabis by decriminalizing it in 2011. That was the first step towards progress on cannabis laws. Shortly after, medical marijuana was legalized in 2012.
Till that point in time, the possession of recreational marijuana was still considered a criminal offense due to federal law. In a big step during 2015, possession of recreational marijuana was made a first offense with only a fine.
The S.B. 1201, which granted the legal use of cannabis, was passed in July 2021. The bill discussed the cultivation, possession, and use of cannabis. It also laid down how 50% of licenses will be reserved for equity applicants to support their businesses.
In 2022, the laws which came into effect revoked the criminal records of cannabis-related offenders. It worked towards clearing the penalties of those who were charged for crimes where 4 ounces or less of cannabis was in possession.
Near mid-2022, the first dispensaries for recreational cannabis were opened. And finally, from January 2023 onwards, citizens of Connecticut are allowed to engage in cannabis sales with licensed businesses.
Risks Faced by Cannabis Businesses in Connecticut
As a newer market, licensed cannabis businesses in Connecticut are still experiencing a period of soaring sales and commercial bliss. However, one major hurdle has been identified early on, worrying potential cannabis retailers in the state—the exorbitant costs of obtaining commercial licenses.
Connecticut charges a $1 million fee for dispensaries to obtain their license. At the same time, producers face a $3 million fee. These costs are also a great challenge for some companies that have joined the market and are struggling to collect funds for smooth operation.
The regulating authorities have proposed one way of substantially decreasing this cost. If businesses can set up joint ventures with two separate social equity applicants, their application fees are lowered, and they may obtain two additional licenses.
As cannabis sales started less than a few months ago, the Connecticut market is still settling. Few concrete values are available; however, considerable numbers are estimated in sales.
In 2023 alone, recreational sales in Connecticut are projected to reach $300 million to $375 million. This number is set to soar as high as $800 million by 2026. The medical marijuana market has been around more than a decade longer than the adult-use one and is expected to cap at around $175 million to $215 million this year.
The state expects to collect as high as $1.1 billion in state and local tax revenue within the first seven years of recreational cannabis sales. This value is calculated with the current 6.35% sales tax and 3% local tax in place. These tax percentages are significantly lower than in some states.
The state is working towards regulating the cannabis industry to help local businesses and boost the cannabis market. The laws have changed slowly but are now coming up to par with other states that have legalized recreational cannabis.
To recap, the state of Connecticut allowed the possession of ½ ounce of cannabis by decriminalizing it in 2011. That was the first step towards progress on cannabis laws. Shortly after, medical marijuana was legalized in 2012.
Till that point in time, the possession of recreational marijuana was still considered a criminal offense due to federal law. In a big step during 2015, possession of recreational marijuana was made a first offense with only a fine.
The S.B. 1201, which granted the legal use of cannabis, was passed in July 2021. The bill discussed the cultivation, possession, and use of cannabis. It also laid down how 50% of licenses will be reserved for equity applicants to support their businesses.
In 2022, the laws which came into effect revoked the criminal records of cannabis-related offenders. It worked towards clearing the penalties of those who were charged for crimes where 4 ounces or less of cannabis was in possession.
Near mid-2022, the first dispensaries for recreational cannabis were opened. And finally, from January 2023 onwards, citizens of Connecticut are allowed to engage in cannabis sales with licensed businesses.
As a newer market, licensed cannabis businesses in Connecticut are still experiencing a period of soaring sales and commercial bliss. However, one major hurdle has been identified early on, worrying potential cannabis retailers in the state—the exorbitant costs of obtaining commercial licenses.
Connecticut charges a $1 million fee for dispensaries to obtain their license. At the same time, producers face a $3 million fee. These costs are also a great challenge for some companies that have joined the market and are struggling to collect funds for smooth operation.
The regulating authorities have proposed one way of substantially decreasing this cost. If businesses can set up joint ventures with two separate social equity applicants, their application fees are lowered, and they may obtain two additional licenses.
Types of Cannabis Insurance Coverage in Connecticut
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 Connecticut
Being successful long term in a new marketplace has challenges. We have dispensary online, cultivators, and extractor separate insurance or any combination of the protect your need for your employees, business, and general liability.
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 Connecticut Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Connecticut, 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.
The state of Connecticut doesn’t require cannabis insurance by law, mainly because recreational cannabis is newly legalized. However, as any commercial party that’s carrying out business, you are required by law to have an insurance policy covering Workers’ compensation and liability insurance and commercial vehicle or auto insurance.
- 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 Connecticut
Cannabis Insurance in Connecticut
Frequently Asked Questions
With cannabis insurance, you can be covered for unintentional harm, accidents, injuries, customer complaints, property problems, and so on. You need insurance from a reputable cannabis insurance provider because the typical insurance broker might be unable to insure your cannabis business due to legal considerations.
It would be advisable to get the insurance that covers your company’s crucial components, as they could result in expensive costs or damages. Insurance will lessen the unexpected costs that your company may have to pay in case of an unforeseen accident or malicious attack.
The coverage depends on your insurance premium, which varies in policies and prices. The price of cannabis insurance varies depending on your company, the level of coverage you need, and the broker you use. Since insurance isn’t the same across the board, you can expect to pay anywhere between a few hundred dollars to tens of thousands of dollars.
After gathering estimates for your company’s insurance needs, you can compare quotes from various insurance brokers. Choose insurance that fully protects vulnerable aspects of your company and understands the nature of the cannabis industry.
The Connecticut government doesn’t require cannabis businesses to have cannabis insurance.
However, the Connecticut Insurance Department has released a report with potential cannabis insurance policies that cannabis companies may require. These include Agriculture insurance, Liability insurance, and Property Insurance. Keep in mind that Workers’ compensation and auto insurance are already required by law.
You can file a cannabis insurance claim just like a regular insurance claim. The first step is to contact your insurance company about your problem. They will explain whether the insurance company is authorized to help you based on the insurance premium you’ve signed. You can collect physical or virtual evidence to support your plea.