Cannabis Insurance
in South Dakota
Testing positive for cannabis is a misdemeanor offense in South Dakota. Navigating the medical cannabis industry in this state can have complications, but we have helped explain the nature of the business and the successes of insuring your business from risks.
Understanding the South Dakota Cannabis Industry
South Dakota is yet to legalize their cannabis industry. Even though the ballot measure was widely approved by the voters, the implementation of this decision is yet to take place. The delay in the implementation is because the law has been facing challenges and legal action since November 2022.
Because the action hasn’t taken an implementary form, there’s no recreational facility for the cannabis industry in South Dakota.
Among the many reasons why this legalization is facing criticism, the most common ones claim that such an action will lead to an increase in drug abuse, impaired driving, and a list of other negative impacts.
Overview of South Dakota's Cannabis Market
Even though the state is yet to legalize the use of cannabis, in case it does end up following through, the expected market value of Dakota’s cannabis market is going to equal an amount of $15 to $30 million. This amount, according to Marijuana Policy District, is going to be earned via tax revenue.
However, it should be noted that this is only a rough estimate and the real turnover is going to be affected by a number of factors including the tax rules implemented and the regulations to be followed alongside it.
South Dakota Cannabis Laws and Regulations
Under the general medical cannabis law, patients that qualify for a certain set of medical conditions will be able to obtain a registration card along with the ability to purchase cannabis products from dispensaries that are licensed within the South Dakota state.
Moreover, the state Department of Health is going to be responsible for keeping a regulatory check on the cannabis program and developing rules and regulations for the dispensaries, cultivation facilities, and other various testing labs.
Even though there’s no legal law passed for the use of cannabis, its supporters state that the legalization will lead to tax revenue, create a significant amount of jobs, and reduce the burden on criminal law enforcement.
Risks Faced by Cannabis Businesses in South Dakota
In case cannabis ends up being legalized in South Dakota, these newly set up drug dispensaries will for sure face some tough business competition.
One of the most significant challenges is going to revolve around the navigation of a complex and always-changing regulatory landscape.
It should also be noted that the businesses will also have to comply with a range of rules and regulations that will possibly be related to cultivation processing, licensing, sales, and transporting, and these will also be changing with the local laws.
Another potential danger for these new businesses will be the fear of any federal enforcement action that might be taken against the cannabis businesses.
Even though the state is yet to legalize the use of cannabis, in case it does end up following through, the expected market value of Dakota’s cannabis market is going to equal an amount of $15 to $30 million. This amount, according to Marijuana Policy District, is going to be earned via tax revenue.
However, it should be noted that this is only a rough estimate and the real turnover is going to be affected by a number of factors including the tax rules implemented and the regulations to be followed alongside it.
Under the general medical cannabis law, patients that qualify for a certain set of medical conditions will be able to obtain a registration card along with the ability to purchase cannabis products from dispensaries that are licensed within the South Dakota state.
Moreover, the state Department of Health is going to be responsible for keeping a regulatory check on the cannabis program and developing rules and regulations for the dispensaries, cultivation facilities, and other various testing labs.
Even though there’s no legal law passed for the use of cannabis, its supporters state that the legalization will lead to tax revenue, create a significant amount of jobs, and reduce the burden on criminal law enforcement.
In case cannabis ends up being legalized in South Dakota, these newly set up drug dispensaries will for sure face some tough business competition.
One of the most significant challenges is going to revolve around the navigation of a complex and always-changing regulatory landscape.
It should also be noted that the businesses will also have to comply with a range of rules and regulations that will possibly be related to cultivation processing, licensing, sales, and transporting, and these will also be changing with the local laws.
Another potential danger for these new businesses will be the fear of any federal enforcement action that might be taken against the cannabis businesses.
Types of Cannabis Insurance Coverage in South Dakota
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 South Dakota
To achieve ultimate success in the cannabis industry, it’s of utmost importance to work with insurance providers that are extremely good at what they do and can stand with you in the face of adversity. Choosing the right insurance provider is now more crucial than ever due to the constantly changing business aspects.
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 South Dakota Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout South Dakota, 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.
Cannabis is currently illegal for both medicinal and recreational use in South Dakota. Once the program is implemented, commercial cannabis operators will need to meet certain legal requirements to operate within the state.
These requirements may include obtaining a license from the South Dakota Department of Revenue, complying with security and packaging regulations, and ensuring that products are accurately labeled and tested for quality and potency.
Operators will also need to obtain insurance coverage, such as liability insurance, and comply with workers’ compensation requirements. It is also possible that the state may require additional insurance coverage specific to the cannabis industry.
- 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 South Dakota
Cannabis Insurance in South Dakota
Frequently Asked Questions
Your cannabis insurance can cover anything and everything related to risks associated with cannabis businesses. Depending on your coverage and business requirements, your insurance provider can offer coverage for general liability, property insurance, theft, cybercrime, growing and transporting risks, D&O, and much more.
When talking generally, cannabis insurance tends to cost more than other sorts of insurance due to the risks associated with the industry in question.
The cannabis insurance cost will depend upon a number of factors. These include the type of coverage needed, the business’s level of insurance, the size of the business in question, and the location. Insurance premium costs are usually based on the likelihood of a claim and the expected cost of that claim.
In order to find out the exact amount for your cannabis insurance cost, insurance professionals can help you out in a more effective way.
There are no specific laws and regulations implemented yet, as cannabis is still illegal in South Dakota. However, in case it does get legalized one day, there will for sure be laws that a cannabis operator will have to abide by.
There are times when municipalities set it down as a condition for the cannabis business owner to carry out insurance for their business before starting the whole set of operations. Therefore, it’s of utter importance for potential cannabis businesses to be informed about the various insurance laws and regulations to make sure they stay at top of things.
If and when cannabis gets legalized in South Dakota, the cannabis operators will have to follow the following steps to file an insurance claim in the state:
- To file a cannabis insurance claim, first and foremost, the business owner should contact their insurance provider as soon as possible about the events that led to the claim in question.
- You’ll have to provide receipts, medical bills, and police reports to support your claim and provide sufficient documentation.
- After going through the documentation, your insurer will investigate the claim and find out whether the damage is covered under the insurance.
- In case, the damage is covered by the insurance, compensation will be provided to you regarding the costs and everything else involved with it.