Considerations for Choosing Food Business Insurance Coverage

Every business needs insurance, regardless of industry. When it comes to businesses that prepare and serve food, there is a great deal of risk involved. That’s why it is critically important that these businesses have all of the necessary insurance products in place to protect themselves.

What is Food Business Insurance?

Food vendor insurance is tailored to the needs of food businesses and concessionaires. It is structured based on factors such as number of employees and level of risk. For example, a business with one small location faces a different risk level than one with multiple locations or franchises. Additionally, food businesses rely on expensive appliances and equipment that are liable to break down or experience electrical failure. This can then lead to major revenue loss in the form of spoilage and having to replace broken machinery. Fortunately, there are many different food business insurance products available to protect food vendors.

Who Needs It?

• Restaurants
• Coffee shops
• Bars and breweries
• Food trucks
• Food carts
• Caterers
• Personal and private chefs
• Concessionaires
• Event spaces and venues

Considerations for Choosing a Policy

Determine What’s Covered

• General Liability – General liability insurance is the most common coverage used by food businesses to protect themselves from mishaps at the job that could result in lawsuits. For example, an employee might slip and fall due to an oil spill in the kitchen. Depending on the circumstances, they might be able to file a lawsuit against the restaurant. General liability insurance can be used to cover damages associated with such incidents.
• Cyber Insurance – More and more food businesses are taking operations online. Consumers expect to be able to order food and/or groceries directly from their phones and computers. Restaurants with any level of digital operations should equip themselves with cyber insurance. Data breaches can expose sensitive customer and/or restaurant data and cause major problems. It’s important to mitigate that risk and protect your business with cyber insurance.
• Business Owners’ Policy (BOP) – A BOP is a combination of general liability insurance and additional coverages, especially property damage. This makes the policy simpler and easy to manage while providing the necessary protection. A BOP can also include coverage for food spoilage, typically anywhere from a $10,000 to a $100,000 policy limit. It can be customized to meet the specific needs of the business based on factors like size of the restaurant or number of employees.
• Liquor Liability – Any business that sells and/or serves alcohol needs liquor liability insurance. It protects the business in the event of an accident or damage caused by an intoxicated person who was served alcohol by the policyholder.
• Workers’ Compensation – Workers’ compensation insurance protects employees in the event of an injury or accident at work. This is critically important for food business workers who regularly work with dangerous materials like knives, gas, and open flames. Workers’ compensation can be used to cover medical expenses and loss of wages for employees, even if they were injured as a result of their own negligence.

Mobile vs. Brick-and-Mortar

Mobile food vendors are exposed to a different set of risks than brick-and-mortar vendors. For example, a restaurant can experience issues with sewer, electricity, water, gas, and communications/internet services, which can cause the restaurant to have to shut down completely. These problems may not affect mobile food businesses as much. However, commercial auto insurance is critical for businesses like food trucks and caterers who depend on their automobiles to operate. It provides coverage for damage caused to the vehicle in addition to permanently attached appliances and equipment.

Equipment and Assets

In selecting insurance products, food businesses must consider the value of the appliances and tools they rely on to operate every day. Food storage and preparation materials are often extremely expensive, so covering commercial property is critical. Food businesses should insure the machinery on which they depend, such as:

• Refrigerators
• Ovens
• Freezers
• Ice makers
• Boilers
• Steamers
• Fryers
• Ventilation systems

This type of equipment can easily break down or experience electrical problems, which can then cause a major loss of revenue and costly spoilage.

Peak Season

Many restaurants generate their highest volume of business at certain times of the year, such as summer or Christmastime. Peak season insurance can be added to your policy in order to provide a higher limit for personal property coverage during that specific period. Many BOPs automatically include peak season coverage, offering a 25% seasonal increase. Ask your underwriter if you are unsure about whether you need peak season insurance.

Food Contamination and Spoilage

Every food business is at risk of accidentally serving contaminated or spoiled food that could make a customer sick. This can cause serious problems for the business, so it is important to be prepared. Consider your specific business, the amount of food waste you generally produce, and the volume of stored food you keep on location. Businesses that keep large quantities of food at one time should definitely have insurance that protects it. Your policy can be tailored to this in order for your business to be reimbursed for perishable stock if spoilage occurs as a result of a power outage or equipment failure. It can also cover employee medical testing, lost revenue, and equipment cleaning costs should the business have to close due to food poisoning or any other illness.

Contact us

To get started insuring your food business, call 888-9OSPREY (888-967-7739) today or visit our insurance shop. Our underwriters can help you choose the insurance products you need to protect your business.