Status: Medical Only

Cannabis Insurance
in Utah

Medical cannabis is allowed in Utah for medically approved diseases in a state where the regulations are not legal, insuring your company from liability to specific cannabis production. To stay afloat in a regulated climate, you must maximize all risks to ensure profitability is an easy choice. From agriculture to the consumer, we understand the influxes in the changes in the industry.

Recreational
No Cannabis Program
Medical Only

Understanding the Utah Cannabis Industry

Recreational cannabis is not in the books for Utah. However, the state has a bustling medical marijuana industry. Utah legalized the use of cannabis for medicinal purposes in November 2018, which went into effect a month later in December of the year.

The original Proposition 2 was followed up by a compromise bill that streamlined the authorities’ efforts toward a well-regulated system. Medical marijuana is available as a treatment for a select number of illnesses, and patients must be registered to avail of it from medical dispensaries.

There isn’t much discussion on legalizing recreational cannabis in Utah due to the state’s stance and much of the general public’s views.

Overview of Utah's Cannabis Market

Contrary to popular belief, Utah’s medical cannabis market is booming. The lack of recreational sales isn’t as big of a drawback as some would expect. Although Utah citizens voted on the ballot in 2018, medical sales officially began in March 2020.

The steadily growing market has seen some impressive numbers over the years. The net medical sales were $74.8 million in 2021 and $118.7 million in 2022 and are projected to be as high as $165 million in 2023.

Utah currently has eight active cannabis cultivation projects and isn’t expecting to increase them anytime soon. That’s because of their steady demand and already high revenue. It’s important to note that cannabis is Utah’s largest cash crop, meaning it outsells all other crops grown in the state.

The numbers are only expected to rise in the state. As of the latest, 61,991 cannabis cards are active in the state. Since getting a cannabis card is mandatory, with time, more registered patients can benefit from this facility after becoming card holders.

Utah Cannabis Laws and Regulations

Utah has rigid cannabis laws that aren’t easily influenced by any party. Before 2018, they followed federal law and considered cannabis a Schedule I drug under the Controlled Substances Act (CSA) of 1970.

Taking a quick recap, the history of cannabis in Utah starts back in 1915. The substance was banned in all forms on all levels. However, the use was widespread back then, which led to numerous arrests and imprisonments in the following years.

Later in 2014, the first use of cannabis in any form was legalized. That was when low-THC CBD oil became available for patients under medical marijuana. After that, in 2018, the official legalization of medical cannabis began after voting on Proposition 2, which favored cannabis users. However, the margin was small, with only 53% of voters in favor.

The laws passed in the initial voting were changed, with stricter measures put in place. Within these measures, most of the cannabis consumption was reserved for registered patients. However, low-THC CBD oil was deemed legal for all.

Efforts are still underway to control the recreational use of cannabis. The strict regulations of the medical marijuana industry are a testament to that. Utah authorities don’t take matters of cannabis lightly and remain firm in their stance against the adult use of cannabis.

Risks Faced by Cannabis Businesses in Utah

Regardless of the revenue, there’s room for major improvements in Utah’s cannabis industry. While authorities claim that there’s enough supply to meet demand comfortably, the patient population disagrees.

Due to the limited number of state suppliers (8 total cultivators), there’s a great deal of shortage in many locations. Additionally, there aren’t enough medical dispensaries to cater to all cities or counties. That means there’s a significant gap that can be filled with more cultivators and licensed businesses.

Additionally, the quality control isn’t up to par. A lack of competition and a general lack of options limits many users to low-quality products, which can be unsafe and ineffective. Having a larger market would motivate businesses to produce high-quality products.

Lastly, cannabis products are too expensive for the average individual. Most insurances don’t cover the cost of cannabis-related medicines or products, which results in out-of-pocket payments. The high cost comes from low supply and overwhelming demand, which is slowly becoming unavoidable.

Contrary to popular belief, Utah’s medical cannabis market is booming. The lack of recreational sales isn’t as big of a drawback as some would expect. Although Utah citizens voted on the ballot in 2018, medical sales officially began in March 2020.

The steadily growing market has seen some impressive numbers over the years. The net medical sales were $74.8 million in 2021 and $118.7 million in 2022 and are projected to be as high as $165 million in 2023.

Utah currently has eight active cannabis cultivation projects and isn’t expecting to increase them anytime soon. That’s because of their steady demand and already high revenue. It’s important to note that cannabis is Utah’s largest cash crop, meaning it outsells all other crops grown in the state.

The numbers are only expected to rise in the state. As of the latest, 61,991 cannabis cards are active in the state. Since getting a cannabis card is mandatory, with time, more registered patients can benefit from this facility after becoming card holders.

Utah has rigid cannabis laws that aren’t easily influenced by any party. Before 2018, they followed federal law and considered cannabis a Schedule I drug under the Controlled Substances Act (CSA) of 1970.

Taking a quick recap, the history of cannabis in Utah starts back in 1915. The substance was banned in all forms on all levels. However, the use was widespread back then, which led to numerous arrests and imprisonments in the following years.

Later in 2014, the first use of cannabis in any form was legalized. That was when low-THC CBD oil became available for patients under medical marijuana. After that, in 2018, the official legalization of medical cannabis began after voting on Proposition 2, which favored cannabis users. However, the margin was small, with only 53% of voters in favor.

The laws passed in the initial voting were changed, with stricter measures put in place. Within these measures, most of the cannabis consumption was reserved for registered patients. However, low-THC CBD oil was deemed legal for all.

Efforts are still underway to control the recreational use of cannabis. The strict regulations of the medical marijuana industry are a testament to that. Utah authorities don’t take matters of cannabis lightly and remain firm in their stance against the adult use of cannabis.

Regardless of the revenue, there’s room for major improvements in Utah’s cannabis industry. While authorities claim that there’s enough supply to meet demand comfortably, the patient population disagrees.

Due to the limited number of state suppliers (8 total cultivators), there’s a great deal of shortage in many locations. Additionally, there aren’t enough medical dispensaries to cater to all cities or counties. That means there’s a significant gap that can be filled with more cultivators and licensed businesses.

Additionally, the quality control isn’t up to par. A lack of competition and a general lack of options limits many users to low-quality products, which can be unsafe and ineffective. Having a larger market would motivate businesses to produce high-quality products.

Lastly, cannabis products are too expensive for the average individual. Most insurances don’t cover the cost of cannabis-related medicines or products, which results in out-of-pocket payments. The high cost comes from low supply and overwhelming demand, which is slowly becoming unavoidable.

Types of Cannabis Insurance Coverage in Utah

There is a wide variety of plans to choose from when it comes to you and your business. Some of these include:

General Liability

General liability offers broad protection against some of the most fundamental risks cannabis companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.

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

General liability offers broad protection against some of the most fundamental risks cannabis companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.

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

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Choosing the Right Cannabis Insurance Policy in Utah

Having a business means there are many risks and situations you must plan for in advance. From the crop to the product to the client, cannabis insurance mitigates these risks, enabling companies to stay profitable. We have been helping the industry protect itself as it grows.

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AlphaRoot Badge 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

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Benefits of Cannabis Insurance for Utah Businesses

AlphaRoot is licensed to provide cannabis insurance coverage throughout Utah, 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.

The state of Utah doesn’t have minimum insurance requirements specified for cannabis businesses. However, there are a few strict legal steps.

There are separate licenses for cultivating and processing hemp. It costs $500 per application as a grower and $2,000 per application as a processor. An Industrial Hemp Retail Permit is necessary to sell industrial hemp products. These include CBD, hemp seed oil, etc. The permit is $50 per location.

Additionally, while meeting the application conditions to gain a license, a Performance and Surety Bonds of $150,000 – $250,000 is mandatory. Keep in mind all businesses in Utah must have Workers’ Compensation Insurance. Other policies can come in handy but aren’t required by law.

  • MSO’s
  • Dispensaries
  • Lab Testing
  • Cultivation
  • Investment Funds
  • Manufacturing
  • Distribution
  • Technology
  • Psychedelics
  • Brands Service
  • Providers
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Getting a Quote for Cannabis Insurance in Utah

Cannabis Insurance in Utah
Frequently Asked Questions

To reduce risks, your cannabis business needs insurance. It can protect your business in case of accidental injury, client complaints, property issues, etc. depending on your level of coverage.

Due to the federal government’s position on cannabis, regular insurance brokers aren’t fit to cover your cannabis business. Therefore, you need coverage from a reliable cannabis insurance provider.

Insurance will reduce any unforeseen expenses that your business might incur. So, opt for policies that protect the essential elements of your business or those that can incur high costs.

The cost of cannabis insurance mainly varies depending on your business’s nature and size. Insurance can’t follow the one-size-fits-all approach since there’s no method to compare your company’s requirements to another’s. So, there’s no general range to follow, but the cost can range between a few hundred dollars to tens of thousands of dollars.

If you’re looking for the best deal, you can compare quotes from various insurance brokers for the required coverage. Choose the insurance premium that best protects your company.

Utah’s law doesn’t require cannabis insurance. However, all businesses operating with employees must have Workers’ Compensation Insurance. A general rule towards insurance is opting for basic policies such as General Liability, Business Owner’s Policy, etc.

Together, a few useful policies are enough to protect your small business.

Like any other insurance claim, you can submit one for cannabis insurance. You must contact your broker and let them know what happened. They will analyze your situation and inform you if they can provide coverage for the charges you’re facing.

You can also supply more information to help understand whether the event was an accident, intentional injury, deception by a third party, etc.