Cannabis Insurance
in New Jersey
With new opportunities come unknown risks. As the blooming industry, keeping above the regulations and safe in a fluid atmosphere can be challenging. Companies with the best success partner ensure all risks from growers to dispensaries.
- Introduction to Cannabis Insurance in New Jersey
- Risks Faced by Cannabis Businesses in New Jersey
- Comprehensive Coverage: Types of Cannabis Insurance Available
- Benefits of Having the Right Cannabis Insurance
- AlphaRoot Cannabis Insurance: Tailored Solutions for Your Business
- Cannabis Insurance FAQs
- Speak to a Cannabis Insurance Advisor
Introduction to Cannabis Insurance in New Jersey
On February 22, 2021, Governor Phil Murphy of New Jersey signed three bills that legalized adult-use cannabis. This move decriminalized possession of up to six ounces of cannabis or hashish and introduced a framework to tax the newly born cannabis industry in New Jersey. Amendments were introduced in August of the same year, and only medicinal cannabis sales were legalized.
However, on April 21, 2022, cannabis sales for adult use were also legalized. This was a long-awaited move and a hope for many cannabis users. The prices offered by dispensaries were higher than cannabis acquired by illegal means, but the ease of access and high quality made up for the price.
Overview of New Jersey 's Cannabis Industry
With the very recent legalization of cannabis sales, the cannabis industry in New Jersey has taken off, earning over $100 million in just the third quarter of 2022. If medical sales are added, this number goes up to around $177 million. Proponents expect the industry to eventually exceed the $2 billion mark per year.
New Jersey charges an additional Social Equity Excise Fee (SEEF) of $1.52 per ounce. The sales tax is 6.625%. All these taxes levied on cannabis have resulted in tax revenue of $7.7 million from July 2022 to September 2022, with an additional $225,000 earned from SEEF.
New Jersey Cannabis Laws and Regulations
Over the years, New Jersey has undergone a cannabis evolution, and recently, significant changes have been made. It all started in 2010 when New Jersey legalized medicinal cannabis under the compassionate use medical marijuana act.
After a long pause, in 2019, New Jersey decriminalized possession of up to 2 ounces of marijuana, making the possession a civil penalty instead of a criminal offense. Finally, in 2021, medicinal cannabis sales were legalized, and recreational cannabis sales were legalized in the following year, 2022.
Currently, there are 35 dispensaries across New Jersey dealing in medical and recreational cannabis.
Risks Faced by Cannabis Businesses in New Jersey
As with many other states, the cannabis industry in NJ is facing multiple issues and risks. One of the most significant ones is cannabis banking. Banking systems are regulated by federal law.
Since cannabis is still illegal on a federal level, many banks hesitate to work with cannabis businesses as they might face legal repercussions. This puts the cannabis industry in New Jersey at risk and diminishes the opportunity for maximum growth.
Another disadvantage is federal tax deductions. Due to the illegal status on a federal level, cannabis businesses are not eligible for tax deductions, and this results in high tax bills for these businesses.
When running a cannabis business, regardless of whichever state the business is operating in, there is always the risk of theft due to the high value of cannabis products. There have been reports of robberies and break-ins in other states where cannabis has been legalized.
Lastly, cannabis businesses in New Jersey must comply with a complex set of regulations set by the Cannabis Regulatory Commission in New Jersey. This puts hurdles in the way of these new businesses, which must also comply on local and state levels.
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Comprehensive Coverage: Types of Cannabis Insurance Available
General liability insurance offers broad protection against some of the most fundamental risks cannabis companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
Learn MoreCannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Product 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.
Learn MoreProperty 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.
Learn MoreShareholders, 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 cannabis operations made wrongful acts managing the business.
Learn MoreEmployers 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.
Learn MoreGeneral liability insurance offers broad protection against some of the most fundamental risks cannabis companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
Learn MoreCannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Product 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.
Learn MoreProperty 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.
Learn MoreShareholders, 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 cannabis operations made wrongful acts managing the business.
Learn MoreEmployers 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.
Learn MoreExpert Advice: Choosing the Right Cannabis Insurance Policy
As cannabis businesses are dependent on cannabis plants/crops, running such a business brings in multiple liabilities that can be related to the environment, consumer or be general in nature. This is why choosing the right cannabis insurance is of utmost importance.
Protecting your business from all angles helps create long-term opportunities and validate your dedication to cannabis tenants. Cannabis has unique struggles compared to other consumer products from not being federally regulated. Cannabis insurance works to mitigate these risks, enabling companies to stay on the path to profitability.
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 III 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 levels. You also need to know your business inside and out. Part of knowing your cannabis business insurance 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.
Benefits of Having the Right Cannabis Insurance
AlphaRoot provides dispensary insurance and is licensed to provide cannabis insurance coverage throughout New Jersey, not to mention across the entire US.
Protecting Your Investment
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 and insurance solutions.
Managing Risks and Liability
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 insurance needs in other industries.
Meeting Legal Requirements
Find the legal insurance requirements for each state. The link below will have the fist few that we are doing. Types of Businesses Covered: MSO’s Dispensaries Lab Testing Cultivation Investment Funds Manufacturing Distribution Technology Psychedelics Brands Service Providers
AlphaRoot Cannabis Insurance: Tailored Solutions for Your Business
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.
Cannabis Insurance FAQs
Cannabis insurance protects your cannabis business from risks associated with processing, selling, and distributing your products. Like any other insurance, the best coverage amount and plans depend on the scale of the cannabis business you want to insure, as well as the laws and regulations of the state.
Diving deeper into the specific risks cannabis insurance might cover, any unforeseen circumstances such as natural disasters, fires, product liability, property damage, workers’ compensation, and theft are included in the risks that can be insured by cannabis insurance.
Another rarely discussed benefit of cannabis insurance is that your coverage might protect you from risks like consumer or financial information breaches due to cyber attacks.
The exact cost crop coverage of cannabis insurance depends on the coverage your plan provides, the size of the business, the location, and other risks associated with operations that may or may not be a particular case in your area.
This entails that cannabis insurance plans can range from a few hundred to tens of thousands of dollars. It is important to note that cannabis side insurance policies may set you back a bit more than other business insurance plans, as cannabis businesses are open to a multitude of different risks.
There is also the factor of the federal illegality of cannabis, which might raise legal liability and security concerns. While the costs might be higher, the cost you might run into if you don’t have good cannabis insurance will be much more substantial.
No, cannabis insurance is not required by law in New Jersey. However, it is highly recommended that cannabis businesses insure themselves because the cannabis industry is fairly new in New Jersey and open to multiple risks like liability claims, property damage, and theft.
While cannabis insurance is not a requirement in New Jersey, some local jurisdictions may require cannabis businesses to have certain types of insurance as a condition of their licenses. For instance, in New Jersey, cannabis businesses are required to carry general liability insurance with minimum coverage of $1 million per occurrence and $2 million in aggregate.
If you run into a loss or damage that is covered by your cannabis insurance plan, you will have to contact your insurance agent as soon as possible. Be ready to provide all the relevant information, which will include date and time of incident, location, necessary documentation and evidence of the incident.
You will have to gather photo and video proof and necessary documentation which has been outlined in your insurance plan. Cooperating with the insurance agent is also important and this will ensure a complete and fair investigation of the incident.
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.
Speak to a Cannabis Insurance Advisor
To ensure comprehensive protection for your cannabis business in New Jersey, it’s essential to partner with Alpharoot, an insurance provider experienced in the cannabis insurance industry. Contact us today to get a quote and learn how we can help safeguard your business.
