Protect Yourself: A Beginner’s Guide to Food Business Insurance
When starting and running a food business, there’s not much you can guarantee. One outcome is certain: things will probably go wrong at some point. One of the ways to make sure a mistake or accident won’t destroy your business is to get insurance. Most states require at least some level of insurance (typically general liability insurance), but there are a number of other types of insurance to review. The right choice depends on your specific situation.
General Liability Insurance
As mentioned before, General Liability (GL) is typically required by most municipalities to operate. Even if it isn’t, this is an absolute must! GL will protect you against most third-party liability. In basic terms, this includes: if someone hurts themselves because of you, or if you break something that doesn’t belong to you. You’ve heard this nightmare before: a client trips when visiting you, sues you, and costs you your business. Scary, but avoidable! Because this type of insurance is so common, you can get it from almost any insurer that provides business insurance.
Product Liability Insurance
As a food maker, your risk is inherently large: you’re producing a product that could potentially kill someone. Of course, you follow good food safety practices, and your staff is well-trained with food handler certificates.
However, there is still the unfortunate possibility that as you scale you could experience a food safety issue that gets someone sick. Product liability insurance provides coverage if a claim is made against you. (Note for the risk-takers out there: insurance does not replace food safety!)
Business Personal Property/Inland Marine Insurance
These two types of insurance protect your company against the loss or damage of any of your business’ property. Let’s say someone breaks into your kitchen and steals your prized white truffle collection. Business personal property insurance could potentially cover your damages. Or a broken pipe floods your brand new walk-in cooler, again, this insurance will cover your bases. And don’t let the “marine” in inland marine fool you – this type of insurance covers anything you might be transporting over land.
Commercial Auto Insurance/Food Trailer Insurance
If you’re mobile, whether as a food truck or just during self-distribution, you’ll need additional coverage. While personal auto insurance may cover some of your activities, make sure you read the fine print. You don’t want to get into a fender bender and find out doing a work delivery invalidates the coverage you thought you had. And if you’re a mobile vending unit, there’s an insurance for that too. Whew!
Business Interruption Insurance
If your food business is a side hustle, you might want to skip this one. But if your business is your main source of income, check out Business Interruption Insurance. Recall the previous example: business personal property insurance will cover the flood in your walk in, but what happens if it takes a month for your walk in to be fixed? Business interruption insurance is your safety net. It will keep cash coming in while you get your facility back to where it needs to be.
There are even more types of insurance out there! Here, Forbes details the 13 Types of Insurance Small Business Owners Should Have. But at the end of the day, it’s a good idea to reach out to your insurance company for more details. Have them walk through the worst scenarios you can think of and ask what type of insurance would protect you. Find out how much it is and decide if it’s right for you.
If you’re just starting the journey, one of the food industry standards for the very small food business is the Food Liability Insurance Program (FLIP). Check out their article about culinary insurance for more details.