Cannabis Insurance
in Tennessee
Although cannabis is illegal in Tennessee, the hemp industry is growing. From cultivation to product, hemp is becoming a booming industry. Therefore, ensuring that businesses can navigate these regulations are essential.
Understanding the Tennessee Cannabis Industry
Tennessee is one of the few states that have made little to no progress toward legalizing cannabis to any extent. Within the state boundaries, all cannabis products are illegal except for low-CBD oils (0.9% THC) that can only be used on medicinal grounds by patients of specified illnesses.
Technically, while medical marijuana is legal, it is inaccessible. There are no legal provisions for cannabis available in the state. Registered patients must outsource products that meet the state criteria from other states. However, proof of your purchase is necessary, as obtaining CBD products illegally from out-of-state is a crime.
The overall situation is grim for patients who require cannabis-related products for treatment. Additionally, cultivation and possession of cannabis are illegal in the state, with 29 days of imprisonment and up to $2,500 for fines. On the flip side, Nashville and Memphis have decriminalized the possession of small amounts of cannabis.
Overview of Tennessee's Cannabis Market
Tennessee has a bustling hemp industry, thanks to the farm bill, but it isn’t on the same page with cannabis. There are currently no legal provisions for medical marijuana within the state, so registered patients solely rely on out-of-state purchases.
Its neighboring state, Illinois, collected roughly $1.4 billion in sales in 2022. Out of this total, $39,241,860.83 were from out-of-state purchases, which include those of Tennesseeans. That shows the existing demand that can sustain Tennessee’s potential cannabis market.
The value for projected tax revenue in Tennessee is estimated at $132,509,552. The current no-sale situation means the state hasn’t even begun scratching the surface of what’s in store for it. However, there’s a long way to go before revenue is generated.
Legislators are still working on laws to regulate medical cannabis sales, but authorities are rejecting any potential movement that comes to the floor. Multiple bills have been rejected in the previous few years, frustrating local patients.
Tennessee Cannabis Laws and Regulations
The timeline in Tennessee’s cannabis journey is pretty straightforward. No real step was taken to legalize cannabis until 2015, when medical cannabis was allowed under strict circumstances. The same laws were mildly modified in the coming years, but no major progress came about.
Within the modification, in 2016, the THC upper limit was set to 0.9%. Then, in 2017, the new Hemp Farming law introduced products with 0.3% THC into the market. Finally, the latest update in 2021 was that more illnesses were allowed access to THC products with the same 0.9% limit.
Now, Tennesseans are waiting for the legal sale of medical cannabis to begin within the state. There’s a long way to go before the state authorities take concrete steps. As far as recreational cannabis is concerned, there are little to no expectations of laws passing anytime soon.
Risks Faced by Cannabis Businesses in Tennessee
The biggest challenge for potential cannabis businesses in Tennessee is that there’s no state-wide regulated dispensary system. As there are no regulations on licensing and taxation, there is no way of legally opening a business.
Cultivation and processing are uncharted territories in Tennessee due to possessing half an ounce or less of cannabis being illegal. However, as the hemp businesses are booming, there’s a possibility to open a hemp-related business.
There are currently 2000+ licensed hemp cultivators in the state, as its hemp program is one of the most successful in the country. As the industry blooms, there are considerably fewer barriers in the hemp category and a considerable amount of support from state authorities.
Tennessee has a bustling hemp industry, thanks to the farm bill, but it isn’t on the same page with cannabis. There are currently no legal provisions for medical marijuana within the state, so registered patients solely rely on out-of-state purchases.
Its neighboring state, Illinois, collected roughly $1.4 billion in sales in 2022. Out of this total, $39,241,860.83 were from out-of-state purchases, which include those of Tennesseeans. That shows the existing demand that can sustain Tennessee’s potential cannabis market.
The value for projected tax revenue in Tennessee is estimated at $132,509,552. The current no-sale situation means the state hasn’t even begun scratching the surface of what’s in store for it. However, there’s a long way to go before revenue is generated.
Legislators are still working on laws to regulate medical cannabis sales, but authorities are rejecting any potential movement that comes to the floor. Multiple bills have been rejected in the previous few years, frustrating local patients.
The timeline in Tennessee’s cannabis journey is pretty straightforward. No real step was taken to legalize cannabis until 2015, when medical cannabis was allowed under strict circumstances. The same laws were mildly modified in the coming years, but no major progress came about.
Within the modification, in 2016, the THC upper limit was set to 0.9%. Then, in 2017, the new Hemp Farming law introduced products with 0.3% THC into the market. Finally, the latest update in 2021 was that more illnesses were allowed access to THC products with the same 0.9% limit.
Now, Tennesseans are waiting for the legal sale of medical cannabis to begin within the state. There’s a long way to go before the state authorities take concrete steps. As far as recreational cannabis is concerned, there are little to no expectations of laws passing anytime soon.
The biggest challenge for potential cannabis businesses in Tennessee is that there’s no state-wide regulated dispensary system. As there are no regulations on licensing and taxation, there is no way of legally opening a business.
Cultivation and processing are uncharted territories in Tennessee due to possessing half an ounce or less of cannabis being illegal. However, as the hemp businesses are booming, there’s a possibility to open a hemp-related business.
There are currently 2000+ licensed hemp cultivators in the state, as its hemp program is one of the most successful in the country. As the industry blooms, there are considerably fewer barriers in the hemp category and a considerable amount of support from state authorities.
Types of Cannabis Insurance Coverage in Tennessee
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 Tennessee
Being prepared in your business is mitigating all risks that can occur in a company is a great way to have long-term success. Insuring from liability from crop to revenue can ensure your business survives when fluctuating trends arise.
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 Tennessee Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Tennessee, 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.
Currently, there are no state-defined guidelines for opening cannabis businesses in Tennessee. The legal sale of medical cannabis hasn’t begun in the state, and its government is yet to announce any measures they’ve taken for the program.
- 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 Tennessee
Cannabis Insurance in Tennessee
Frequently Asked Questions
Cannabis insurance covers different aspects of your business that require protection. You can buy a General Liability policy, which caters to accidental injuries, damages, etc. There’s a wide variety of policies to choose from, such as Automobile insurance, Professional Liability, Workers’ Compensation, and so on.
It would be best to choose a premium covering any policies your state law requires and your business needs.
The cost of cannabis insurance varies based on the nature of your business, the coverage you need, and the broker you opt for. There is no standard figure to compare the insurance quotes you receive, as insurance isn’t the same for each client. However, it can range between a few hundred dollars to tens of thousands of dollars.
You can collect estimates for different policies you’ll need and compare them. You should select the policy that best suits your business needs and knows your industry.
Tennessee’s government currently provides no guidelines regarding cannabis businesses insurances. It is recommended to have some sort of insurance for your cannabis business or any sort of business to manage your risks carefully.
The state’s government defines no specific process, as cannabis businesses are inactive. However, once they do become active, the process would be similar to filing any other insurance claim in Tennessee.
This process can include contacting your insurance provider and sharing images or any proof of damages that you’re covered for. Then your insurance provider can offer you a deal for compensation after going through the damages incurred.