Cannabis Insurance
in Michigan
Michigan has been working with the cannabis industry regulations. Ensuring your assets’ long-term helps protect your investment. Cannabis insurance aims to protect this unique market. Insurance calibrated to the cannabis industry can measure up to the challenges.
Understanding the Michigan Cannabis Industry
With a record $2.3 billion revenue in 2022, Michigan has the 7th largest cannabis industry in the US. Michigan has a fast-growing cannabis industry. It legalized the use and possession of cannabis for medical use in 2008 through the Michigan Medical Marijuana Act. This allowed patients with debilitating medical conditions to be qualified for medical marijuana prescriptions.
Recreational cannabis use was legalized in Michigan on November 6th, 2018, when the majority of the voters chose adult use of cannabis to be allowed. This approval of proposal 18-1 is also known as the Michigan Regulation and Taxation of Marijuana Act or MRTMA. This allowed adults of age 21 and older to possess, use and cultivate cannabis for personal use.
Individuals are allowed to keep 2.5 ounces on their person and 10 ounces at their residence. They can also cultivate up to 12 plants at their residence as long as they’re in a secure location, not visible to the public.
Overview of Michigan's Cannabis Market
The cannabis industry in Michigan is doing well, hitting revenue of $2.3 billion in 2022. This makes it the second-largest cannabis market in the US. Michigan brought in $325 million in tax revenue from the sales of medical and recreational marijuana, signifying the importance of the cannabis industry to its economy.
Michigan charges a 10% excise tax and 6% sales tax on cannabis, according to the state’s Cannabis Regulatory Industry. The average retail price for an ounce is $91, which has significantly decreased over the years due to high competition and industry growth.
Michigan Cannabis Laws and Regulations
Michigan became the 13th state to legalize Marijuana for medical use in 2008 under the MMMA. Patients with certain ailments were allowed to use through prescriptions after being recommended by a doctor.
In 2018, marijuana was legalized for recreational use under the MRTMA, and thirteen months after the legalization, in December 2019, recreational marijuana sales began officially.
In 2019, the Marijuana Regulatory Agency started accepting applications for licenses for the sale of recreational marijuana through dispensaries and applications for growing and processing it.
Despite all the progress, there are still laws in place that strictly govern the use of cannabis. For instance, driving under the influence of marijuana is illegal. Employers can also drug test employees and make decisions if the test comes out positive.
Risks Faced by Cannabis Businesses in Michigan
With the significant growth of the cannabis industry in Michigan, there have been many incidents and hurdles the industry has to face as well. Amidst the news of record-high sales in 2022, there have been reports of multiple robberies, with 13 cases of delivery drivers reporting a theft.
Supply is also a concern since the demand skyrocketed after the legalization of recreational marijuana. And because of interstate transportation limitations, the supply of cannabis is not consistent.
There have also been only a few municipal opt-ins. There are more than 100 recreational cannabis provision centers throughout Michigan, but around 1000 communities have opted out of the MRTMA. There are only a few who have opted-in, and some are still undecided. This provides an obstacle for users and cannabis businesses to operate across Michigan efficiently.
The cannabis industry in Michigan is doing well, hitting revenue of $2.3 billion in 2022. This makes it the second-largest cannabis market in the US. Michigan brought in $325 million in tax revenue from the sales of medical and recreational marijuana, signifying the importance of the cannabis industry to its economy.
Michigan charges a 10% excise tax and 6% sales tax on cannabis, according to the state’s Cannabis Regulatory Industry. The average retail price for an ounce is $91, which has significantly decreased over the years due to high competition and industry growth.
Michigan became the 13th state to legalize Marijuana for medical use in 2008 under the MMMA. Patients with certain ailments were allowed to use through prescriptions after being recommended by a doctor.
In 2018, marijuana was legalized for recreational use under the MRTMA, and thirteen months after the legalization, in December 2019, recreational marijuana sales began officially.
In 2019, the Marijuana Regulatory Agency started accepting applications for licenses for the sale of recreational marijuana through dispensaries and applications for growing and processing it.
Despite all the progress, there are still laws in place that strictly govern the use of cannabis. For instance, driving under the influence of marijuana is illegal. Employers can also drug test employees and make decisions if the test comes out positive.
With the significant growth of the cannabis industry in Michigan, there have been many incidents and hurdles the industry has to face as well. Amidst the news of record-high sales in 2022, there have been reports of multiple robberies, with 13 cases of delivery drivers reporting a theft.
Supply is also a concern since the demand skyrocketed after the legalization of recreational marijuana. And because of interstate transportation limitations, the supply of cannabis is not consistent.
There have also been only a few municipal opt-ins. There are more than 100 recreational cannabis provision centers throughout Michigan, but around 1000 communities have opted out of the MRTMA. There are only a few who have opted-in, and some are still undecided. This provides an obstacle for users and cannabis businesses to operate across Michigan efficiently.
Types of Cannabis Insurance Coverage in Michigan
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 Michigan
Like any other business that is dependent on crops, the cannabis business is subject to the same environmental, consumer, and general liability. In addition to this, there are threats when considering the global cybersecurity landscape.
Cannabis insurance ensures that companies can reduce any risks they might be facing and help them stay profitable even if they run into unfortunate circumstances.
Cannabusinesses have various cannabis insurances to choose from. These insurances cover workplace injuries, compensations, theft, and other liabilities which the cannabis business might run into while operating.
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 Michigan Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Michigan, 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.
https://content.naic.org/404
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 Michigan
Cannabis Insurance in Michigan
Frequently Asked Questions
Cannabis insurance helps protect businesses by covering a range of risks associated with the processing, selling, and distributing of cannabis products. The specific coverage depends on the scale of the business and other factors, such as laws and policies, which may differ.
Cannabis insurance covers risks like business interruptions due to unforeseen circumstances, fires or natural disasters, property damage, product liability, workers compensation, and theft. Another benefit is that cannabis insurance may also be applicable for cyber liabilities such as breaches of customer or financial information.
The cost a business will incur to acquire cannabis insurance depends on the amount of coverage, the size of the business, the location, and the risks associated with the operations of the business.
This means insurance plans can cost anywhere from a few hundred dollars for a small cannabis dispensary to tens of thousands of dollars or more for a business with larger cultivation operations and multiple locations of business.
Cannabis insurance is oftentimes more expensive than other types of insurance due to the multitude of different risks associated with the business, such as federal regulations on cannabis, legal uncertainties, and security concerns. However, the cost of not having adequate cannabis insurance can be much higher if an incident occurs.
The Michigan Regulation and Taxation of Marijuana Act (MRTMA) requires licensed cannabis businesses to have cannabis insurance by law. Under this act, licensed businesses are required to obtain and maintain both general and product liability insurance coverage of $100,000.
Similarly, licensed growers and processors are required to have property insurance for cultivation and processing operations.
MMMA dictates the requirement of cannabis insurance for medical cannabis businesses by law
If you have experienced a loss or damage that is covered by your cannabis insurance program, contact your insurance agent/broker immediately. Be ready to provide all the necessary information, such as date, time, location, and any relevant documentation or evidence of the event.
Take photos or videos of the damage and get any relevant receipts or documentation which might come in handy. Cooperate with the insurer to make the process smoother. Provide any relevant details required.
A settlement offer will be provided once the insurance company has assessed and investigated the claim. Review the offer and consult an insurance agent to make sure it’s adequate and fair.