Cannabis Insurance
in Maryland
Maryland became the 20th state to have legalized weed for recreational use. So when a business could have the opportunity to multiply, having a partner who can help your company through all risks, from growers to dispensaries, is essential. So we help you grow your business in this specific environment.
Understanding the Maryland Cannabis Industry
Maryland legalized the use of medical cannabis in 2014, allowing people with a specific list of medical conditions to use it and acquire it through legal means. In 2014, possession of small amounts of recreational marijuana was also decriminalized, reducing the criminal offense to a civil fine of up to $100.
After a proposal for the legalization of the use and purchase of recreational cannabis in 2021, from July 1, 2023, adults will be allowed possession of up to 1.5 ounces of cannabis for personal use. This law will also expunge all previous cases of individuals charged with holding amounts of less than 10 grams.
However, smoking cannabis in public would still be illegal and subject to fines of up to $500.
The referendum has yet to establish a commercial market for recreational cannabis, but a medical cannabis market does exist.
The Maryland Medical Cannabis Commission (MMCC) regulates and oversees the state’s medical cannabis program. It licenses dispensaries, processors, growers, and independent testing labs. Patients must get a recommendation from a registered medical practitioner and register it with MMCC to get medical cannabis from licensed dispensaries.
Overview of Maryland's Cannabis Market
Maryland does not have a recreational cannabis industry, but there is a medical cannabis industry that is worth $600 million with more than 139,000 registered users.
Once the sale and purchase of recreational cannabis are legalized, the market is expected to be worth well over $1 billion.
No concrete decision has been made regarding the taxation of recreational cannabis. It will be apparent once the new law comes into effect on July 1, 2023. Taxation models from states where cannabis has been legalized have been reviewed, so we can expect a model similar to one of those states.
Maryland Cannabis Laws and Regulations
In 2014, Maryland became the 20th state to legalize clinical cannabis. Patients with qualifying ailments could get a suggestion from a registered practitioner and register with the MMCC to buy clinical cannabis from an authorized dispensary in the state.
In the same year, Maryland decriminalized the possession of limited quantities of pot, making ownership of 10 grams or less a common offense with a fine of up to $100. Possession of larger quantities or the intent to distribute stayed a criminal offense.
In 2016, Maryland extended its clinical weed program to incorporate patients with chronic pains as a qualifying ailment. The following year, Maryland also approved opening new medical cannabis dispensaries so that registered patients had more options.
Lastly, in 2021, after a referendum that resulted in an overwhelmingly positive response, cannabis was legalized for recreational purposes. Sale and purchase are expected to start from July 1, 2023, the same day the law will be enacted.
Risks Faced by Cannabis Businesses in Maryland
As there is no recreational cannabis industry in Maryland, the cannabis market is small and only made up of dispensaries offering medical cannabis. But much like any other cannabis market, there are and will be risks for businesses dealing in cannabis.
One of the many problems and risks cannabis businesses face is access to limited banking. Due to the federal illegality of cannabis, banks are hesitant to conduct business with cannabis businesses, which makes getting loans or credits quite tricky.
Another disadvantage they face is limitations on tax deductions. Due to the federal tax code 280E, cannabis businesses are not eligible for standard tax deductions such as employee wages, rent, and utilities. And, of course, due to the illegal status on a federal level, there are always concerns of legal uncertainty, even though the federal government has taken an off-handed approach to legalize cannabis in the US.
Another factor is the MMCC’s regulatory framework. Due to strict regulations and codes, businesses can face difficulty complying. Failure to comply may result in fines, revocation of license, and suspension that can jeopardize the future of cannabis businesses.
Lastly, there is always the concern of cannabis being a high-value product and prone to theft. This raises security concerns associated with the sales and operations of cannabis products. Robberies and break-ins have been recorded in some states where cannabis sales are allowed.
Maryland does not have a recreational cannabis industry, but there is a medical cannabis industry that is worth $600 million with more than 139,000 registered users.
Once the sale and purchase of recreational cannabis are legalized, the market is expected to be worth well over $1 billion.
No concrete decision has been made regarding the taxation of recreational cannabis. It will be apparent once the new law comes into effect on July 1, 2023. Taxation models from states where cannabis has been legalized have been reviewed, so we can expect a model similar to one of those states.
In 2014, Maryland became the 20th state to legalize clinical cannabis. Patients with qualifying ailments could get a suggestion from a registered practitioner and register with the MMCC to buy clinical cannabis from an authorized dispensary in the state.
In the same year, Maryland decriminalized the possession of limited quantities of pot, making ownership of 10 grams or less a common offense with a fine of up to $100. Possession of larger quantities or the intent to distribute stayed a criminal offense.
In 2016, Maryland extended its clinical weed program to incorporate patients with chronic pains as a qualifying ailment. The following year, Maryland also approved opening new medical cannabis dispensaries so that registered patients had more options.
Lastly, in 2021, after a referendum that resulted in an overwhelmingly positive response, cannabis was legalized for recreational purposes. Sale and purchase are expected to start from July 1, 2023, the same day the law will be enacted.
As there is no recreational cannabis industry in Maryland, the cannabis market is small and only made up of dispensaries offering medical cannabis. But much like any other cannabis market, there are and will be risks for businesses dealing in cannabis.
One of the many problems and risks cannabis businesses face is access to limited banking. Due to the federal illegality of cannabis, banks are hesitant to conduct business with cannabis businesses, which makes getting loans or credits quite tricky.
Another disadvantage they face is limitations on tax deductions. Due to the federal tax code 280E, cannabis businesses are not eligible for standard tax deductions such as employee wages, rent, and utilities. And, of course, due to the illegal status on a federal level, there are always concerns of legal uncertainty, even though the federal government has taken an off-handed approach to legalize cannabis in the US.
Another factor is the MMCC’s regulatory framework. Due to strict regulations and codes, businesses can face difficulty complying. Failure to comply may result in fines, revocation of license, and suspension that can jeopardize the future of cannabis businesses.
Lastly, there is always the concern of cannabis being a high-value product and prone to theft. This raises security concerns associated with the sales and operations of cannabis products. Robberies and break-ins have been recorded in some states where cannabis sales are allowed.
Types of Cannabis Insurance Coverage in Maryland
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 Maryland
Getting insurance as a cannabis business elsewhere is highly recommended. There are multiple threats to cannabis businesses, such as environmental risks, consumer risks, and general liabilities. The best way to conduct a cannabis business is to make it as safe as possible.
Many operations have significant workforces, exposing them to employment-related issues, not only general business liability but the unsettling landscape of the cannabis industry. The competition environment means partnering with someone who helps manage these regulations and will have success over time. We help mitigate unknown risks.
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 Maryland Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Maryland, 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.
Find the legal insurance requirements for each state. The link below will have the fist few that we are doing.
- 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 Maryland
Cannabis Insurance in Maryland
Frequently Asked Questions
Cannabis insurance helps cover several potential risks your cannabis business might face. These risks can be associated with problems with growing, processing, and selling cannabis products.
If you experience an unexpected interruption to your business due to damage caused by fires, natural disasters, property damage, consumer and employee liabilities, and theft, your insurance plan can cover these problems and keep your operations up and running.
Your cannabis insurance also covers your business from data breaches and hacking that could compromise sensitive financial and customer information.
The amount you will be paying for your cannabis insurance depends on factors such as the range of coverage, the size of your business, the area where your business is located, and the risks that come with operating a cannabis business.
Cannabis insurance coverage plans can cost anywhere from a few hundred dollars for small-scale businesses to thousands of dollars for larger operations.
Cannabis insurance is usually more expensive than other insurance because the cannabis industry is relatively new and is exposed to many risks that do not apply to other types of businesses. These risks include legal uncertainties due to the federal illegality of cannabis.
In Maryland, there are no state requirements for cannabis insurance. The upcoming legal changes in 2023 might change regulations concerned with cannabis insurance, but currently, there is no law in place to implement cannabis insurance.
It is, however, highly recommended that you get cannabis insurance if you are running a cannabis business, even if the state has no requirements regarding insurance. Cannabis insurance not only gives cannabis businesses peace of mind but also provides them with a stone wall against risks that come with running a cannabis dispensary.
Your focus should be on producing and providing quality products and services instead of thinking about any potential risks, and cannabis insurance helps you make sure that you are protected from risks and liabilities.
Filing a cannabis insurance claim is similar to filing an ordinary insurance claim. Contact your insurance agent if you experience any loss or damage under your insurance plan’s coverage. You will have to provide any necessary information, including the basics, such as the date and time of the incident and evidence.
To gather sufficient evidence for provision, take photos and videos of the incident and damages that you suffered from. Provide any relevant documentation and receipts outlined in your insurance plan.
When the investigation is assessed and completed, you will be offered a settlement offer with respect to your insurance claim. You can review this offer and consult your insurance agent regarding the fairness and adequacy of the offer.