Cannabis Insurance
in Oregon
Oregon has been working with the cannabis industry regulations for a while. Ensuring your assets’ long-term helps protect your investment. Cannabis insurance aims to protect this unique market, where one-size-fits-all insurance products can’t. Only insurance calibrated to the cannabis industry can measure up to the challenges.
Understanding the Oregon Cannabis Industry
Oregon State had the Medical Marijuana Act (OMMA) passed in 1998 for treating patients with the help of cannabis products. However, the state wasn’t on board with the recreational adult use of cannabis for an extended period.
After three unsuccessful attempts of legalizing marijuana retail in the following years, the state of Oregon finally legalized recreational cannabis in 2014 through the Adult and Medical Use of Cannabis Act.
After a successful vote, Oregon citizens aged 21 and up could grow and use cannabis on private properties. However, some counties chose to opt out of allowing licensed recreational marijuana facilities and still haven’t changed their decisions.
Overview of Oregon's Cannabis Market
The Oregon Liquor and Cannabis Commission (OLCC) recorded that compared to previous years, sales in Oregon declined in 2022 to $994 million. The majority of sales were made for recreational use totaling roughly $932 million, whereas medical sales reached almost $63 million.
Although Oregon’s cannabis market is just short of being worth $1 billion in 2022, it’s important to note that it has previously hit the billion-dollar mark twice, in 2020 and 2021. On average, the state collects $150 million per annum in tax revenues, credited to the 17% state tax, which can have a maximum additional 3% local tax stacked on.
Oregon Cannabis Laws and Regulations
Cannabis laws have come a long way in Oregon state. The first laws included approval for the medical use of cannabis in 1998 and industrial production of hemp, which was allowed in 2010.
After 2014, personal use by adults and commercial licensing were legalized to boost the cannabis industry in the state.
From 2022, some new rules have been into effect. Those include a new limit of purchasing cannabis which allows up to two ounces of marijuana, increased from the one-ounce limit in most states, and deliveries across cities and counties that were previously restricted.
Risks Faced by Cannabis Businesses in Oregon
There are two main threats to cannabis businesses in Oregon state:
- Low demand.
- And high taxes.
Oregon’s cannabis industry faces some of the worst cases of over-supply. Especially in 2022, when the market went into decline, the effects of overproduction have shown losses for businesses.
As interstate sales are prohibited, producers are stuck in a high-competition market with staggeringly low prices.
Secondly, with taxes as high as 20% (total of state and local) and prices as low as $4 per gram, the profit margin for businesses is diminishing. Local producers in Ontario, Oregon, are now concerned over a possible increase of local taxation to 10%.
The Oregon Liquor and Cannabis Commission (OLCC) recorded that compared to previous years, sales in Oregon declined in 2022 to $994 million. The majority of sales were made for recreational use totaling roughly $932 million, whereas medical sales reached almost $63 million.
Although Oregon’s cannabis market is just short of being worth $1 billion in 2022, it’s important to note that it has previously hit the billion-dollar mark twice, in 2020 and 2021. On average, the state collects $150 million per annum in tax revenues, credited to the 17% state tax, which can have a maximum additional 3% local tax stacked on.
Cannabis laws have come a long way in Oregon state. The first laws included approval for the medical use of cannabis in 1998 and industrial production of hemp, which was allowed in 2010.
After 2014, personal use by adults and commercial licensing were legalized to boost the cannabis industry in the state.
From 2022, some new rules have been into effect. Those include a new limit of purchasing cannabis which allows up to two ounces of marijuana, increased from the one-ounce limit in most states, and deliveries across cities and counties that were previously restricted.
There are two main threats to cannabis businesses in Oregon state:
- Low demand.
- And high taxes.
Oregon’s cannabis industry faces some of the worst cases of over-supply. Especially in 2022, when the market went into decline, the effects of overproduction have shown losses for businesses.
As interstate sales are prohibited, producers are stuck in a high-competition market with staggeringly low prices.
Secondly, with taxes as high as 20% (total of state and local) and prices as low as $4 per gram, the profit margin for businesses is diminishing. Local producers in Ontario, Oregon, are now concerned over a possible increase of local taxation to 10%.
Types of Cannabis Insurance Coverage in Oregon
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 Oregon
The cannabis industry has unique regulations and liabilities, and those risks are uniquely different from other companies needing insurance. From growers to cultivation experts to distributors, the consumer’s landscape is everywhere, from your dispensary to delivery. Therefore, ensuring and protecting your assets is essential to long-term success.
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.
Benefits of Cannabis Insurance for Oregon Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Oregon, 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.
Oregon state doesn’t have special requirements for insurance of cannabis businesses. However, they are required to comply with the standards set for companies in all other industries. Major cities and specific counties may have certain conditions to follow for which businesses need to consult local authorities. Oregon law mandates that Workers’ Compensation Insurance is mandatory for commercial establishments and that a general liability policy is necessary with a coverage of at least $1 million.
- 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 Oregon
Cannabis Insurance in Oregon
Frequently Asked Questions
Depending on your insurance premium, you can have coverage for accidental damages, injuries, customer claims, property issues, and so on. Since the standard insurance broker might not be willing to insure your cannabis business for legal reasons, you need coverage from a reliable cannabis insurance company.
It would be best to opt for insurance covering your business’s essential aspects, which could incur high charges or damages. Insurance coverage will decrease the out-of-budget expense your business will have to handle.
The cost of cannabis insurance varies based on your business, the coverage you require, and the broker you work with. There is no ballpark figure to compare the insurance quotes you get because insurance isn’t one-size-fits-all.
You can collect estimates for different policies you’ll need and compare them between insurance brokers. You should select the policy that best protects your business and understands your industry well.
Cannabis insurance isn’t specified by law. However, your business must be insured to the state’s standard for commercial operators. In Oregon, workers’ compensation insurance is obligatory, so technically, you’re required by law to have an insurance plan for it. However, since cannabis insurance companies fully understand the risks your business can face, it’s best to opt for cannabis insurance over regular insurance.
You would file a cannabis insurance claim like any regular insurance claim. The first step is communicating with your insurance company about the situation. You can collect evidence in physical or virtual form to help your plea. Your insurance company will review the relevant policy and inform you whether you’re covered for the instance or not.