Cannabis Insurance
in Rhode Island
With a recreational program in the startup phase in December 2022, protecting your growing investment is a critical and long-term investment. With unique exposure to cannabis insurance, only the proper insurance can provide the security you need from employees to consumers.
Understanding the Rhode Island Cannabis Industry
The state of Rhode Island allowed the use of medical marijuana in the year 2006. In 2009, non-profit centers were allowed to retail, medical marijuana, which made its access more realistic. Since then, the government of Rhode Island has been improving laws for medical marijuana, followed by voting on the acceptance of recreational cannabis.
The Rhode Island Cannabis Act legalized recreational cannabis in May 2022. The law states that adults (21 and up) can cultivate, possess, and purchase cannabis without previous restrictions.
Licenses will be available for businesses to participate in the legal retail of recreational marijuana. Additionally, the state government will expunge cannabis-related misdemeanors or felony convictions by 2024.
Overview of Rhode Island's Cannabis Market
As a newer market, the numbers for Rhode Island’s cannabis sales aren’t solidified yet. 2023 is their first year of operation, with mostly hybrid retailers and a growing number of adult-use businesses. It’s important to note that 33 of 39 state municipalities have opted-in, which is an excellent sign for the industry.
The projected value for recreational sales is $80 million within the first year. This number is only expected to grow, with a high estimate of $300 million in sales by the fourth year of operation.
Although the numbers for medical marijuana sales are unavailable, they are likely much higher and make up a substantial chunk of the cannabis market.
With a cannabis retail excise tax of 10%, local sales tax of 3%, and normal sales tax of 7%, the Rhode Island government expects to collect substantial tax revenues. The 20% tax applies to recreational marijuana, whereas medical marijuana is only taxed at 7%. By the end of the fiscal year in June 2023, the state expects to collect $5.9 million in taxes.
Rhode Island Cannabis Laws and Regulations
Rhode Island is one of the newer states to legalize recreational cannabis, and it has certainly come a long way in its journey to do so.
The improvements in cannabis laws primarily began with access to medical marijuana in mind. Over the years, as the number of patients and dispensaries have increased, more attention has come to the use of cannabis by the larger public.
Medical marijuana was approved in 2006 through the Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act.
The Rhode Island Cannabis Act was voted in by a steep majority in May 2022, and shortly after, in December 2022, the act was implemented. The act allows medical marijuana dispensaries to achieve the status of “hybrid” dispensaries, catering to patients and regular-use adults.
The 2022 Act wasn’t only monumental for the recreational use category and further improved medical users’ position. The legislation has removed majority fees for medical cannabis patients, such as registration and renewal fees for their patient cards and plant tag fees for patients who grow their cannabis at home.
Risks Faced by Cannabis Businesses in Rhode Island
With a fresh market, Rhode Island cannabis businesses face primary challenges in their operations and sales. Many have voiced their opinions on the lack of banking, cannabis insurance, and high taxes.
Since the industry is still new, and demand isn’t through the roof, companies are seeing a slower amount of sales than they had anticipated. However, they do expect to see the number rise over the years.
Since medical marijuana is widely used across the state, the high number of patients opting for medical marijuana also impacts the expected numbers for recreational sales. That’s simply because most of the demand is being fulfilled through this channel.
As a newer market, the numbers for Rhode Island’s cannabis sales aren’t solidified yet. 2023 is their first year of operation, with mostly hybrid retailers and a growing number of adult-use businesses. It’s important to note that 33 of 39 state municipalities have opted-in, which is an excellent sign for the industry.
The projected value for recreational sales is $80 million within the first year. This number is only expected to grow, with a high estimate of $300 million in sales by the fourth year of operation.
Although the numbers for medical marijuana sales are unavailable, they are likely much higher and make up a substantial chunk of the cannabis market.
With a cannabis retail excise tax of 10%, local sales tax of 3%, and normal sales tax of 7%, the Rhode Island government expects to collect substantial tax revenues. The 20% tax applies to recreational marijuana, whereas medical marijuana is only taxed at 7%. By the end of the fiscal year in June 2023, the state expects to collect $5.9 million in taxes.
Rhode Island is one of the newer states to legalize recreational cannabis, and it has certainly come a long way in its journey to do so.
The improvements in cannabis laws primarily began with access to medical marijuana in mind. Over the years, as the number of patients and dispensaries have increased, more attention has come to the use of cannabis by the larger public.
Medical marijuana was approved in 2006 through the Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act.
The Rhode Island Cannabis Act was voted in by a steep majority in May 2022, and shortly after, in December 2022, the act was implemented. The act allows medical marijuana dispensaries to achieve the status of “hybrid” dispensaries, catering to patients and regular-use adults.
The 2022 Act wasn’t only monumental for the recreational use category and further improved medical users’ position. The legislation has removed majority fees for medical cannabis patients, such as registration and renewal fees for their patient cards and plant tag fees for patients who grow their cannabis at home.
With a fresh market, Rhode Island cannabis businesses face primary challenges in their operations and sales. Many have voiced their opinions on the lack of banking, cannabis insurance, and high taxes.
Since the industry is still new, and demand isn’t through the roof, companies are seeing a slower amount of sales than they had anticipated. However, they do expect to see the number rise over the years.
Since medical marijuana is widely used across the state, the high number of patients opting for medical marijuana also impacts the expected numbers for recreational sales. That’s simply because most of the demand is being fulfilled through this channel.
Types of Cannabis Insurance Coverage in Rhode Island
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 Rhode Island
As the cannabis business grows in Rhode Island, maintaining operational liabilities from the grassroots means mitigating risks. The fact that states have different laws makes the regulations far harder to navigate than regular consumer products. Plus, the global cybersecurity landscape is unsettling. Therefore, we can partner with any part of the industry to help protect all assets.
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 Rhode Island Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Rhode Island, 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.
Rhode Island has no legal requirements for cannabis insurance in place. However, any cannabis business must follow the basic standards set for business insurance by the government. The requirements include General Liability, Workers’ Compensation insurance (as well as Unemployment and Disability insurance), Auto insurance, and Crime insurance.
- 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 Rhode Island
Cannabis Insurance in Rhode Island
Frequently Asked Questions
A useful cannabis insurance premium combines different types of small business insurance requirements. This helps protect your business from a variety of problems that are both precedent and unprecedented.
That can include customer claims, theft, production, business property or machinery damage, and lawsuits. You should choose the coverage that will keep your business from taking big financial hits from such problems.
There isn’t a fix cost for cannabis insurance. The cost mainly varies based on the policy and the amount of coverage you opt for.
You can expect the total expense to be anywhere from a few hundred dollars to $10,000 per year. The value can change based on the size of your company, the nature of your business, possible risks, etc.
Cannabis insurance is priced higher because of the additional risks associated with the industry. However, that’s one more reason to get cannabis insurance.
Rhode Island has no legal requirements for cannabis insurance in place. Cannabis businesses should have the basic standards set for all business insurance by the government.
The government has stipulated that Commercial General Liability, Workers’ Compensation insurance (for four employees or more), Auto insurance, and Crime insurance are mandatory for each company.
You can file a cannabis insurance claim as you usually would file any other insurance claim. You should contact your insurance company immediately to report a claim.
When you submit your claim, you’ll receive a corresponding claim number and claim adjuster from the start to the end of the process. Try to document any proof you can gather. That includes images and video surveillance. Your insurance company will ask for this information when you make a claim.
Always be aware of the conditions covered by your insurance broker. You should double-check your insurance coverage and contact your agent for any confusion. While the process carries on, ask your insurer to provide a solution to relieve some stress off your company in the meantime.