Remember back in the 90s when a woman sued McDonald’s after being burned by hot coffee? The jury stated that the restaurant should pay out $2.9 million for the incident.
If you run a food service business, a story like this one might give you chills.
The company was responsible, but that does not make it any less anxiety-inducing to read about. After all, anyone can make a mistake. What if one of your workers serves a drink that is too hot? What if a customer who eats at your restaurant gets food poisoning? What if they slip on a freshly cleaned floor in the bathroom?
To protect you from life’s “what ifs” when you operate a restaurant or another foodservice business, you need food liability insurance.
In this guide, we will tell you all about the different types of food liability insurance and give you some recommendations for how you can choose a suitable policy for your business. But first, let’s explain a little bit more about what food liability insurance is.
What is Food Liability Insurance?
Food liability insurance is simply a policy or set of policies designed to protect food service businesses.
There are risks associated with operating a foodservice business that simply are not applicable in other industries.
So, insurance policies designed for other types of businesses do not adequately address the needs of foodservice professionals. Food liability insurance covers those gaps.
Do You Need Food Liability Insurance?
You need food liability insurance if you operate any of the following:
- Restaurant
- Food truck
- Food trailer
- Concession stand
- Catering business
- Farmer’s market booth
- Food cart
- Private chef business
- Commercial kitchen
- Coffee shop
- Bakery
- Etc.
The list above is not exhaustive. If another term describes your business but you operate in the foodservice industry, you still need food liability insurance.
Not only do you need food liability insurance to protect your business, but you could also need it to operate.
For example, say you want to set up a booth to sell food at a special event. To even register to sell food at that event, you will have to meet certain insurance requirements.
Another example would be if you are opening a restaurant. To receive approval for a lease, you will need specific coverage.
Types of Insurance for Food Manufacturers
Here are the basic types of insurance you need. Some of these types of policies apply to businesses in general. Others are specific only to culinary businesses.
- General liability: This is a good starting point for insurance for your business. It can cover you in a wide variety of scenarios, including situations where customers are injured, copyrights are infringed, or there is property damage.
- Commercial property insurance: You can cover damage to your property that results from natural disasters, electrical fires, vandalism, or smoke using this type of insurance.
- Business interruption insurance: Sometimes property damage can be so extensive that it forces you to close your restaurant. When that happens, you can lose income. This type of insurance provides coverage for those revenue losses.
- Product liability: This is the type of coverage you need to protect yourself should one of your customers suffer an allergy attack or food poisoning episode after eating something you serve.
- Damage to premises rented: Some culinary businesses operate out of rented spaces. You can protect those spaces using this type of coverage. It could even be a prerequisite to start renting in the first place.
- Liquor liability insurance: If you operate a bar, restaurant, or other type of business that serves alcohol, you will need liquor liability insurance. Should an inebriated individual damage property and injure themselves or another person, liquor liability insurance can pay out.
- Inland marine: If the equipment you use for your foodservice business breaks down, this coverage can help offset repair costs. The same goes for paying to replace equipment if it is damaged beyond repair or someone steals it. You might also see policies to protect equipment sold as “equipment breakdown insurance.”
- Cyber liability: What happens if someone hacks your company’s records, resulting in the theft of private data?
- Employee dishonesty coverage: While you do your best to hire employees you can trust, you never know when one of them might decide to help themselves at the register. With employee dishonesty coverage, you can have some protection should that happen.
- Professional liability: Some catering outfits may offer cooking classes. While you will do your best to give accurate, thorough information, mistakes can happen. Should one of those mistakes result in a customer raising a negligence claim, you are protected with this form of coverage.
- Trailer endorsement: Do you operate with a trailer? You can purchase an endorsement for insurance for a food trailer.
- Commercial auto insurance: Whether you cook or prepare food out of a vehicle or you have a delivery service, commercial auto insurance will protect drivers and vehicles.
- Workers’ compensation insurance: As would be the case in any other industry, you need workers’ comp in foodservice. In fact, kitchens can be dangerous places, so this type of insurance is extra important in this sector.
Factors that Impact Food Vendor Insurance Costs
Exactly what you can expect to pay for food liability insurance depends on a number of different factors. These include:
- What types of insurance you need. This is one of the single biggest factors, because there can be a huge amount of variation from one business to the next. One company may not use vehicles at all, while another could operate a whole fleet. Some businesses may have a lot of employees, while others could employ few or none. There might also be companies that have a lot of high-value equipment to insure, while some others may not. Naturally, the more types of coverage you require, the higher your costs will be.
- What coverage levels you choose. You will need to decide how much coverage you want for each type of policy. There are likely certain minimums you will need to meet to operate, after which you can decide whether it would be appropriate to purchase more.
- Your deductibles. As you likely know from buying other types of insurance, your deductible amounts have a huge influence on your costs. If you want to lower your food liability insurance premiums, you can try raising your deductibles. Of course, the drawback is that your coverage will not kick in until you meet those deductibles. You will have to weigh the pros and cons and decide what is right for your business.
- Whether you bundle your coverage types. By bundling together different types of coverage from the same provider, you may be able to get a discount.
- Your geographic location(s). The exact requirements for minimum insurance coverage for your food business will depend on the jurisdiction(s) where you are going to be making and selling your food.
- The specific location(s) where you operate. The nature of the locations where your restaurants, food trucks, or other venues are located also will have an impact on what you need to pay for certain types of coverage. Some environments are not all that well-controlled (like street corners). Since more things could feasibly go wrong in those environments, insurance for operating in them may be more expensive.
- What types of equipment/vehicles you need to insure. Higher value equipment and vehicles will cost more money to insure than those with lower value.
- Payroll costs. Your payroll is a factor when calculating how much workers’ compensation insurance will cost you.
- Employee roles. Another factor that will influence the cost of workers’ comp insurance is the jobs that your employees are doing. Riskier occupations result in higher costs for workers’ comp insurance.
- Whether you have made claims in the past. As with other types of insurance, your claim history is an important factor in your costs. The more claims you have made, the more expensive your insurance will be. The insurance company will perceive you as a high-risk customer, and charge accordingly. But with a clean claims history over time, your rates may go down.
- The provider you choose. Some insurance companies may charge more or less than others for comparable coverage. Go with a company that offers competitive pricing and coverage along with great service, even if it is not the lowest price.
Where to Apply for Food Liability Insurance Programs
To cover your food vendor insurance needs, you have two main options. You can either go through a major insurance company that offers a broad range or products, or you can go with a more specialized insurance company.
For example, general insurance providers such as Nationwide or Progressive offer food service insurance products alongside the other policies they offer for your home and vehicles.
The advantage of choosing a general provider is that you might be able to bundle your food business insurance with other types of insurance you have purchased from these providers.
But some companies are dedicated specifically to food liability insurance. The advantage of working with one of these businesses is that they have a much deeper understanding of the needs of food vendors.
The coverage options they offer are often more comprehensive. Indeed, they may offer types of coverage that are not available elsewhere. Below are a couple of recommendations for where you can buy your food liability insurance.
1. Food Liability Insurance Program (FLIP)
Food Liability Insurance Program (FLIP) may be one of the best-known providers in the food business insurance space.
This program starts at just $299/year, and is available in all 50 states. Special features include instant coverage and customized dedicated limits. You can even get a policy with zero deductible on your general liability claims.
FLIP lists the following coverage details:
| General Liability Aggregate Limit | $2,000,000 |
| Products-Completed Operations Aggregate Limit | $2,000,000 |
| Personal and Advertising Injury Limit | $1,000,000 |
| General Each Occurrence Limit | $1,000,000 |
| Damage to Premises Rented to You (Any One Premises) | $300,000 |
| Liability Deductible | NO DEDUCTIBLE |
| Business Personal Property / Inland Marine Limit (Any One Article / Aggregate) | $5,000/$10,000 |
| Business Personal Property / Inland Marine Limit (Per Occurrence) – Deductible | $250 |
Why we love it: FLIP specializes in food business insurance and knows the industry inside and out. The coverage is both affordable and competitive, and with zero liability deductible, you can breathe easy.
2. NEXT Food and Beverage Insurance
NEXT serves small businesses across a wide range of industries. Through NEXT, you can bundle together your food and beverage policy with other NEXT insurance policies such as commercial property insurance, commercial auto insurance, and workers’ comp insurance. Doing so reduces your costs.
Policies through NEXT are entirely customized to your needs. So, you can just get the insurance you need and skip what you don’t, maximizing your bottom line.
Why we love it: Getting set up with a NEXT insurance policy is ridiculously quick and easy, making it perfect for those just breaking into the foodservice business.
Plus, NEXT focuses exclusively on small businesses, and understands the unique challenges and requirements that go with operating one. So, this too makes it excellent for a foodservice startup.
Get the Policy You Need to Protect Your Food service Business Now
Whether you are a going to be running a restaurant, selling food out of a truck or stall, or shipping online food orders across the country, it is essential to find the right food business insurance policy.
Ready to get the coverage you need to open now and protect your property, equipment, employees, vehicles and profits? Click any of the links in this post to purchase coverage.