Cannabis Insurance
in Washington
As the first state to legalize cannabis in the United States, they know the needs of all divisions of the cannabis industry. As a result, we have been helping many in the state protect their long-term assets and risks. For example, with a recreational cannabis program that has been active for a decade, Washington has shown the US how to manage cannabis successfully.
Understanding the Washington Cannabis Industry
Washington State was among the first two U.S. states to legalize recreational cannabis in 2012. The voters passed I-502, also known as Initiative 502, which legalized the recreational use of marijuana within the state by users of age 21 and above.
Currently, there are currently 448 licensed recreational and medical marijuana dispensaries in Washington State.
According to the policy, production, retail, and possession of marijuana were no longer civil or criminal offenses within the limits of the state. However, limitations such as not driving under the influence and a fine on public smoking of cannabis, similar to that of consuming alcohol in public, are applied.
Overview of Washington's Cannabis Market
Washington is among the top three market revenue producers for cannabis in the U.S. In 2022, the state collected $515.2 million in cannabis-related revenue, including general funds, fees, taxes, and penalties.
The cannabis market in Washington saw steady growth for seven consecutive years. However, the revenue in 2022 showed an 8% drop compared to the $559 million generated in 2021.
Washington Cannabis Laws and Regulations
Medical use of cannabis in Washington was approved in 1998, and almost a decade and a half later, recreational use was legalized in 2012.
After the legislation for taxation was passed in 2015, there haven’t been significant changes in Washington’s law. However, 2023 expects major changes in the interstate law, which previously forbade Washington residents from carrying cannabis across the state’s limits. The state committee has approved the bill and is awaiting further action.
Risks Faced by Cannabis Businesses in Washington
Although Washington’s cannabis market has been booming for the last decade, a few hurdles remain to overcome. Two main issues across the board threaten businesses:
- High taxes.
- Regulatory issues.
Washington state has placed a hefty 37% excise tax on adult-use sales of cannabis, which further burdens businesses in the low-competition market. This reduces profit margins, holds back company reinvestment, and sends people to the illegal market for better deals.
On top of this, hostile regulatory behavior is also a grave concern for business owners. The Washington Liquor and Cannabis Board has gained a negative image for being tougher on Marijuana businesses compared to those in other industries under the board.
Washington is among the top three market revenue producers for cannabis in the U.S. In 2022, the state collected $515.2 million in cannabis-related revenue, including general funds, fees, taxes, and penalties.
The cannabis market in Washington saw steady growth for seven consecutive years. However, the revenue in 2022 showed an 8% drop compared to the $559 million generated in 2021.
Medical use of cannabis in Washington was approved in 1998, and almost a decade and a half later, recreational use was legalized in 2012.
After the legislation for taxation was passed in 2015, there haven’t been significant changes in Washington’s law. However, 2023 expects major changes in the interstate law, which previously forbade Washington residents from carrying cannabis across the state’s limits. The state committee has approved the bill and is awaiting further action.
Although Washington’s cannabis market has been booming for the last decade, a few hurdles remain to overcome. Two main issues across the board threaten businesses:
- High taxes.
- Regulatory issues.
Washington state has placed a hefty 37% excise tax on adult-use sales of cannabis, which further burdens businesses in the low-competition market. This reduces profit margins, holds back company reinvestment, and sends people to the illegal market for better deals.
On top of this, hostile regulatory behavior is also a grave concern for business owners. The Washington Liquor and Cannabis Board has gained a negative image for being tougher on Marijuana businesses compared to those in other industries under the board.
Types of Cannabis Insurance Coverage in Washington
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 Washington
As you know, cannabis is a business with the same environmental, consumer, and general liability as any company with a crop that sustains its existence. 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. Cannabis insurance works to mitigate these risks, enabling companies to stay on the path to profitability.
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 Washington Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Washington, 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.
In Washington state, cannabis businesses are required to have the same insurance requirements as other industries. However, there are some specific requirements including a general liability or umbrella coverage of $1 million, and Washington state being an additional insured. For opening a cannabis business in Seattle you also need a bond to obtain a business license, but the amount is unspecified.
- 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 Washington
Cannabis Insurance in Washington
Frequently Asked Questions
Cannabis insurance is meant to mitigate any risks your cannabis company may face. The coverage of your insurance depends on the nature, scale, and requirements of your business.
Since the cannabis industry is growing rapidly, and isn’t as standardized as other industries, there’s a lot more risk involved. Here, normal insurance isn’t suited for a marijuana-related business.
Your annual insurance premium can vary based on the policies you choose. An average figure for basic insurance coverage is anywhere from a few hundred dollars to around $10,000. Don’t think of insurance as a business cost, since it’s a safety net for your business and can save you a lot of money in legal situations.
However, you aren’t required to buy every policy that’s available. You can minimize the cost of insurance by focusing on key aspects of your business which need protection, and not investing in policies which aren’t relevant to your company.
Businesses in Washington state are legally required to have cannabis insurance coverage. The categories of businesses include producers, processors, retail stores, and landlords who lease to cannabis businesses.
Keep in mind, insurance coverage can be influenced by federal law and other state legislations. A cannabis insurance broker should be sensitive to federal and state legalities to minimize any regulatory penalties for businesses in the future.
Cannabis insurance claims are similar to claims of other insurance types, the state doesn’t give any specific regulations. As a filer, you need to contact your insurance broker and provide details on the issue.
You should have a complete set of information on the damages or charges they are facing. It’s also required to collect any evidence that can help your claim, such as photos or videos of an accident for a general liability case.