After years of mastering your culinary prowess and learning how to bring your passion into a profitable venture, you finally open your first food business – a hippie dog cafe. With hundreds of coffee aficionados and animal lovers flocking to try a latte with some side of cuddles, what could possibly go wrong?
Everything is well – until one customer claims to be bitten by a rowdy Shih Tzu. On table number 14, another customer claims to be suffering from a severe peanut allergy caused by a mismatched order. And during the commotion, one employee suddenly slips and injures his back while mopping the slippery kitchen floor.
Who is held accountable? You, of course. No matter how healthy and tasty your products are, or how safe your work environment is, accidents are inevitable. Apart from compensating for the medical costs of the injured people, you may also face lawsuits against your establishment and risk your profits and assets. That being the case, buying a business insurance is a top priority, especially if you’re in the food industry.
Insurance seems like a waste of money until you finally need it. So don’t wait until you have your first product on the grocery store shelf or on the table of your first customer to purchase an insurance policy. Ahead are 6 of the insurance policies you may need for your food business.
1. General Liability Insurance
If a visitor suffers injury while at your place of business and sues you for the damages, a standard liability insurance may cover you. The policy is issued to business to protect them against liability claims for bodily injuries and property damage arising out of the business operations within the premises. Even minor accidents like slipping to the wet floor can be a heck of a financial loss when you think of the medical expenses topped with legal costs.
Getting a liability insurance ensures you won’t have to bear the full cost. The cost is generally in line with the risk of the industry. Therefore, we can assume that a restaurant that is open to the public will have a higher risk than a jam retailer that receive only a few onsite patrons.
2. Product Liability Insurance
When you think of its health repercussions, food businesses tend to be riskier than other enterprises. A slight hint of a flaw in your product, like faulty packaging, contaminants, and small foreign objects, may lead to a severe illness to consumers. With this, all food production enterprises are required to purchase a product liability insurance, whether it’s a huge bread distributor or a small pastry shop.
As its name implies, this policy covers claims of bodily injury or illness and/or property damage arising from eating or using your products. Product Liability Insurance should be purchased before you introduce your products to the public.
3. Property Insurance
Is your food business situated in a flood-prone area? If it is, then purchasing a property insurance is a must.
The policy protects your building and equipment against damage due to vandalism, fire, and flood as well as unfortunate incidents like theft. Other possible mishaps like windstorms, hail, and explosion may need additional coverage, but purchasing a standard property insurance is a great starting point. The coverage is based on the actual cost of replacing (or repairing) buildings and equipment.
4. Commercial Auto Insurance
Do you use vehicles for your business? Delivery vehicles, like motorcycles and trucks, are business assets that should be insured as well.
Commercial auto insurance is quite similar to what you may already have on your personal cars. It includes property coverage for your vehicle, liability coverage for the damage to other people, their vehicles, or properties, and coverage for the injuries of your driver and other passengers in your vehicle.
5. Workers’ Compensation
Buying workers’ compensation insurance is necessary as soon as you hire your first employee. The policy covers medical and rehabilitation costs, as well as lost wages, in the event your worker/s get injured on the job.
Workers’ compensation insurance works both ways for employees and for you, as an employer. Firstly, it compensates for the medical benefits and wages of the injured worker. Secondly, it protects you as the business owner against lawsuits to be filed against you in the event the employee dies or get permanently disabled. This may sound harsh but in exchange for the given medical benefits, the employee (and/or his family) must agree not to sue the employer for the incident.
6. Business Interruption Insurance
Let’s go back to our previous example – your cafe. Doggos and other frills aside, it is the quality of your coffee that keeps your business running. The coffee beans you use for your base are supplied by one source. If that particular supplier fails to deliver, you’re doomed. Well, not really. In this kind of scenario, business interruption insurance takes effect.
Business Interruption Insurance, as its name suggests, compensates for a company’s financial loss during an interrupted business operation. The policy also caters to companies that require a physical location to do business when the operations are suddenly paused due to a catastrophic event.
Carmina Natividad is one of the enthusiastic writers for Insurance Adviser, one of the largest and most credible General Insurance businesses in Australia and New Zealand, providing high quality risk management advice for business owners.