Cannabis Insurance
in New Mexico
The cannabis industry is building in the New Mexico landscape. The governing board licensing and maintaining the ship and ensuring that your business is protected in this fluid landscape is important. As the cannabis industry grows in the next few years, companies with the best success will partner with someone who can help with the specific risks of the industry.
Understanding the New Mexico Cannabis Industry
The cannabis industry in New Mexico has massive growth potential. The unlimited number of licenses, comparatively cheap licensing costs, and cannabis tax rates indicate that as soon as the adult-use market takes off, there will be an influx of competitors to capture market share.
With 27% of the state’s residents living in Albuquerque, New Mexico is primarily an agricultural state with a dense population. The total population of the state’s three biggest cities—Las Cruces, Rio Rancho, and Santa Fe—is 12%.
With cross-border Texas consumers making up 21% of adult cannabis users and patients, smaller towns on the eastern side of New Mexico can anticipate a spike in tourism flow.
The time it may take for manufacturing to catch up with buyer demand will drive wholesale costs high and keep merchandise flying off the racks. Therefore, New Mexico can grow into a very lucrative and rapidly expanding cannabis market in the US.
Overview of New Mexico's Cannabis Market
The cannabis industry in New Mexico has become an intriguing new market in the US. The state’s rapidly expanding medicinal cannabis industry was a strong foundation for adult-use sales, formally launched on April 1, 2022.
With a strong, extensive medicinal cannabis program, New Mexico generated $129 million in income in 2019 and a total of $203 million in 2020. More than $214 million worth of cannabis for recreational use was generated in New Mexico since its launch in April 2022.
It is projected that by 2026, the total value of the cannabis business will be worth $782 million ($266MM for medicinal purposes and $517MM for adult use) as the state’s marijuana business develops and a larger proportion of the population becomes involved.
New Mexico Cannabis Laws and Regulations
According to the current marijuana laws and regulations in New Mexico, there is no limit to the ounces of marijuana kept at home. However, only two ounces can be taken outside.
Each individual is permitted to grow their own harvest of six mature plants and six immature plants, with a cap of 12 mature plants per residence. If certain conditions are fulfilled, businesses will be permitted to give on-site consumption, but consumption in public is still prohibited.
In addition to the standard sales tax, retail transactions have an excise fee of 12%. Starting in 2025, this excise duty will rise by 1% annually until it reaches 18% in 2030. The quantity of store licenses that the state can grant is unlimited.
Local authorities will be permitted to regulate the location or number of clinics but not to prohibit them outright. Any charges or sentences for actions made lawful by these measures will be immediately nullified.
Risks Faced by Cannabis Businesses in New Mexico
The high tax load that New Mexico’s cannabis companies might face is a potential threat. Cannabis purchases now incur a 12% excise tax from the state, which can build up fast for companies.
Maintaining compliance with licensing and regulation requirements can also be expensive for companies.
When the adult-use marijuana market in New Mexico began in 2022, a few marijuana stores opened their doors with little to no stock. However, as demand outpaces supply, merchants now request higher wholesale prices.
The state refers to the marijuana businesses that carried on from the medicinal market as “legacy producers.” These established producers assisted in the shift from medicinal to recreational use and maintained a constant supply.
Hence, these legacy producers have a headstart over the new marijuana companies entering the market, so it’s not easy for other companies. The newly established companies have to develop all of their own infrastructure, links, and operations.
Since cannabis is still unlawful on a federal level, banks will not lend money to companies that deal in marijuana. Due to this, small companies are now compelled to use personal lenders, who typically charge interest rates from 25% to 30%.
The cannabis industry in New Mexico has become an intriguing new market in the US. The state’s rapidly expanding medicinal cannabis industry was a strong foundation for adult-use sales, formally launched on April 1, 2022.
With a strong, extensive medicinal cannabis program, New Mexico generated $129 million in income in 2019 and a total of $203 million in 2020. More than $214 million worth of cannabis for recreational use was generated in New Mexico since its launch in April 2022.
It is projected that by 2026, the total value of the cannabis business will be worth $782 million ($266MM for medicinal purposes and $517MM for adult use) as the state’s marijuana business develops and a larger proportion of the population becomes involved.
According to the current marijuana laws and regulations in New Mexico, there is no limit to the ounces of marijuana kept at home. However, only two ounces can be taken outside.
Each individual is permitted to grow their own harvest of six mature plants and six immature plants, with a cap of 12 mature plants per residence. If certain conditions are fulfilled, businesses will be permitted to give on-site consumption, but consumption in public is still prohibited.
In addition to the standard sales tax, retail transactions have an excise fee of 12%. Starting in 2025, this excise duty will rise by 1% annually until it reaches 18% in 2030. The quantity of store licenses that the state can grant is unlimited.
Local authorities will be permitted to regulate the location or number of clinics but not to prohibit them outright. Any charges or sentences for actions made lawful by these measures will be immediately nullified.
The high tax load that New Mexico’s cannabis companies might face is a potential threat. Cannabis purchases now incur a 12% excise tax from the state, which can build up fast for companies.
Maintaining compliance with licensing and regulation requirements can also be expensive for companies.
When the adult-use marijuana market in New Mexico began in 2022, a few marijuana stores opened their doors with little to no stock. However, as demand outpaces supply, merchants now request higher wholesale prices.
The state refers to the marijuana businesses that carried on from the medicinal market as “legacy producers.” These established producers assisted in the shift from medicinal to recreational use and maintained a constant supply.
Hence, these legacy producers have a headstart over the new marijuana companies entering the market, so it’s not easy for other companies. The newly established companies have to develop all of their own infrastructure, links, and operations.
Since cannabis is still unlawful on a federal level, banks will not lend money to companies that deal in marijuana. Due to this, small companies are now compelled to use personal lenders, who typically charge interest rates from 25% to 30%.
Types of Cannabis Insurance Coverage in New Mexico
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 New Mexico
The cannabis industry has the potential for long-term opportunities. Maintaining those operational business risks with employees, cultivation, distribution, and cyber security can be vital to long-term success. We are passionate about ensuring cannabis experts and businesses from all dangers.
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 New Mexico Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout New Mexico, 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.
There are no legal insurance requirements for cannabis companies in New Mexico but the industry comes with it’s own risks that are unique but also similar to other industries like medical and agriculture. Getting cannabis business insurance in New Mexico will protect your company, so you can focus on your business.
- 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 New Mexico
Cannabis Insurance in New Mexico
Frequently Asked Questions
Cannabis companies can get covered for various risks, including general liability, product liability, property harm, and property theft. Depending on the insurance, coverage could cover defense against court claims, litigation, and protection for inventory, machinery, and crops.
Additionally, some plans cover worker’s compensation, wage loss, and online liability. To make sure they have sufficient coverage for their unique requirements, cannabis companies should thoroughly review their insurance agreements.
Generally, cannabis insurance is priced higher than other insurance because of the more risks associated with the industry. Due to the nature of business and its associated risks, insurance costs can vary from hundreds to a few hundred thousand dollars. The price you pay for cannabis insurance depends on your requirements and your business’s size.
Obtaining insurance is not mandated by laws for cannabis companies in New Mexico. However, insurance may reduce dangers and guard against possible monetary losses.
Additionally, the state of New Mexico is creating new rules for cannabis businesses, and these rules may include mandatory insurance. For example, even though the level of coverage may not be stated, the New Mexico weed Control Division may require Cannabis businesses to get product liability insurance.
If you need to file a cannabis insurance claim in New Mexico, contact your insurance provider after the incident or loss. Your insurance company will guide you through the claims process and provide you with the necessary forms and documentation.
It’s important to provide as much information as possible when filing a claim, including the date and time of the incident, a detailed description of the damage or loss, and any supporting documentation. Your insurance provider will assess the claim and determine if it is covered under your policy, and if so, provide compensation accordingly.