Small business insurance is the key ingredient in your business's continuity plan. Without adequate coverage, your food business is on its own if it has to replace expensive kitchen equipment damaged in a fire or shell out hundreds of thousands of dollars in a liability suit. And if you are like most small business owners, money is tight enough without extra financial burdens.

But if you're new to the world of business insurance, you likely need a few pointers to lead you in the right direction. That's why we've put together this quick guide. You'll discover…

  • Which insurance policies can protect your business and your finances.
  • Which risks these policies cover.
  • Ways to avoid coverage gaps.
  • How to keep your premiums low.
  • How to make an insurance claim.

Read on to find out how to build a foolproof protection plan for your restaurant, bar, banquet hall, or catering business.

Small Business Insurance Policies for Food Services Businesses

Small Business Insurance Policies for Food Services Businesses

Your insurance needs depend in part on your industry (e.g., catering, mobile food truck, night club), the size of your workforce, and the services you offer. But to give you a general idea of the types of coverage you should consider, our expert insurance agents recommend:

Why these policies, you ask? Follow the links for an in-depth explanation of each coverage type or keep reading for an overview of the protection each policy offers.

General Liability Insurance

General Liability Insurance (GL) is your go-to coverage for third-party liability protection. It covers attorneys' fees, court-ordered compensation, and other legal costs when someone sues your food business for…

  • Bodily injuries they sustained on your property.
  • Damaging or losing their property.
  • Offering products or services that harmed them (e.g., your signature dish caused an allergic reaction).
  • Replicating their advertising.
  • Libel or slander.

Think of GL as your safety net against the unpredictable. You never know when a guest may trip, fall, and break an ankle at your establishment. And who's to say you'll never serve a dish with allergens? Better to arm your business with an insurance policy that can help you survive costly and time-consuming lawsuits.

Property Insurance

Commercial Property Insurance protects your business's covered assets. If, for example, your kitchen catches fire and you need to replace your ovens, stoves, and refrigeration units, your policy can compensate your business for the cost of replacing your insured items. Covered events include loss or damage caused by…

  • Fires and windstorms.
  • Theft and vandalism.
  • Power surges and outages.

Your Property Insurance can also cover your commercial real estate, furnishings, signage, and other essential items.

Off-Premise Insurance

Off-Premise Insurance is a type of Property Insurance that travels with your covered items. If you own a mobile food business or catering business, consider carrying this coverage so your assets aren't vulnerable once they leave your primary premises.

Off-Premise Insurance can cover…

  • Others' property in your custody (such as leased or rented equipment).
  • Equipment and supplies in transit or in use at a venue.
  • Accounts receivable.
  • Replacement products and inventory due to broken or damaged equipment.

Typically, Off-Premise coverage compensates you for damage or loss caused by a fire, windstorms, theft, or faulty electrical currents.

Liquor Liability Insurance

Liquor Liability Insurance is a staple for food businesses that sell, serve, or furnish alcohol. Most states have dram shop laws that allow alcohol-selling establishments to be sued for damages caused by their intoxicated patrons. For instance, if you serve a customer drinks all night and they drive drunk and kill a pedestrian, the pedestrian's family can sue your business for its negligent service. Such lawsuits can easily exceed millions of dollars in damages.

Liquor Liability Insurance can pay for your legal defense fees if your business is sued for liquor-related claims and court-ordered compensation if you're liable for wrongdoing.

Covered events may include damages caused by…

  • An intoxicated guest who leaves your establishment and causes damage elsewhere (e.g., a drunk-driving accident).
  • Bartenders who drink while working.
  • A fight that occurs at your business.
  • A patron's witnessing of a violent act by an intoxicated person (in this case, the damages would be emotional or psychological).
  • Other specific events perpetuated by an intoxicated patron (e.g., sexual assault, stabbings, shootings, etc.).

To learn more about liquor liability, read the post "Liquor Liability for Restaurants" on our food services blog.

Business Owner's Policies

Business Owner's Policies (BOPs) bundle your basic insurance coverages together for less. Generally, these plans include…

  • General Liability Insurance.
  • Property Insurance.
  • Business Interruption Insurance.

To qualify for the affordable coverage a BOP offers, your business must be considered "small" and have what your insurance provider deems a "low" risk profile.

Workers' Compensation Insurance

Workers' Compensation Insurance steps in when your employees are injured while carrying out their work. It can help your business pay for…

  • Your injured employees' medical expenses and foregone wages.
  • Support payments and funeral costs if an injury kills an employee.
  • Legal costs if your employee sues your food business for the negligence that caused their occupational injury.

Most states require employers to carry Workers' Compensation Insurance. To find out what your Department of Labor mandates, be sure to check out our guide, "Workers' Compensation Laws by State."

Hired and Non-Owned Auto Insurance

Hired and Non-Owned Auto Insurance (HNOA) steps in if your food services business is sued for an auto accident that happens in a rented or personal vehicle. This policy covers liability for…

  • Accidents that happen in rented cars while the driver is performing business duties.
  • Accidents that happen when an employee runs business errands in their personal vehicle.

This policy only covers liability – any property damage to the vehicles will have to be covered by other policies. Also, it only offers lawsuit protection for your business, not the individual driver of a car.

Umbrella / Excess Liability Insurance

Umbrella Liability Insurance (aka Excess Liability Insurance) is a kind of "booster" policy. It can extend the limits of your…

  • General Liability Insurance.
  • Employer's Liability Insurance (part of your Workers' Compensation policy).
  • Hired and Non-Owned Auto Insurance.

For a single premium, Umbrella Liability can raise the limits of all three policies by millions of dollars. Your Umbrella premium may be as low as a few hundred dollars a year.

Avoiding Gaps in Your Coverage

Avoiding Gaps in Your Coverage

No single policy can account for every incident, accident, or situation. But with the right endorsements, you can ensure that your policies are as close to bulletproof as possible. You can think of endorsements as "mini" insurance policies. They are typically inexpensive since they offer protection against a specific event.

As a food business owner, you may be interested in the following endorsements:

Food Spoilage Coverage

Proper refrigeration is the backbone of your business. Without it, you could lose thousands of dollars in inventory and premade products. And if you accidentally serve spoiled or contaminated food to a customer, your establishment could be sued for associated medical expenses.

When a power outage leaves your restaurant scrambling, the Food Spoilage endorsement (which you can add to your Property Insurance policy) can cover the cost of…

  • Replacing damaged food.
  • Lost revenue caused by contamination or spoilage.

Coat Check Coverage

Coat Check Coverage is another type of endorsement that can beef up your Property Insurance policy. This endorsement…

  • Protects others' property against loss or theft while it is in your custody.
  • Reimburses you for the cost of replacing your customers' stolen or lost property.
Keeping Your Premiums Low

Keeping Your Premiums Low

Now that you know which policies can protect your food business, let's take a look at some accident-prevention tips that can keep your rates affordable:

  • Clear the clutter. Be sure to keep your kitchen, walkways, and dining areas clear of obstacles and spills. This will go a long way to reducing the chance of trips, slips, and falls.
  • Stay safe on the move. If you own a catering company or food truck, insist that your drivers stay off their phones while driving. Also, be sure that your drivers have proper licensing and insurance before they represent your company behind the wheel.
  • Help customers make informed choices. Make sure your patrons are aware of potential allergens in your menu items. For example, if a dish has peanuts, make note of the ingredient on the menu. Other common allergens you'll want to note are dairy products and shellfish. Consider noting the presence of MSG, gluten, and other ingredients your customers may be sensitive to. If you offer undercooked items (e.g., rare steaks), include a disclaimer about the hazards of eating undercooked animal products.
  • Train employees in safe alcohol service. Make sure your employees are certified in alcohol service and safety. This kind of training will help your servers recognize the signs of intoxication and learn how to refuse service to intoxicated guests. Oftentimes, proof that your staff has had this type of training can lower your Liquor Liability premiums.
How to File a Small Business Insurance Claim

How to File a Small Business Insurance Claim

If your business receives a demand letter from a third party (such as a letter demanding money for medical expenses over an allergic reaction), or a fire, theft, or windstorm hits your business, you'll need to tap into your insurance benefits.

So how can you do this? First, you'll need to file a business insurance claim. Here's a general overview of how the process works:

  • Contact your insurance agent and company right away and inform them about what happened. (For lawsuits, your provider will give you further instructions.)
  • Be sure to report any criminal activity to the police.
  • Read your insurance policy so you're aware of your responsibilities in the event of a covered claim (e.g., your deductible).
  • For a Property claim, save your damaged equipment parts in case the claims adjuster needs to look them over.
  • For a Business Interruption claim, be able to show your business's income both before and after the loss.

If you have any questions about small business insurance products, rates, or risks, feel free to chat with one of insureon's food business insurance agents. We're happy to help!

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