Food Industry Insurance: What Those in the Industry Should Consider When Looking for Coverage

You’re living your dream of owning a food business. What could possibly go wrong?

If you’ve been in the food industry for more than a minute, you’ve quickly learned that the answer is “absolutely everything.”

• A customer accidentally spills their piping hot coffee on their lap.
• Your caterer backs into a client’s mailbox.
• An employee makes off with a week's worth of profits. 

You know you need food industry insurance for your business, but how do you decide which types of coverage are right for you? 

If you’re looking for more information on what food business insurance you need, we can help. 

In this article, we cover the basics of insurance for those in the food industry, so you can make an informed decision about the right coverage for your food business. 

Insurance for Food Businesses: Why Is it So Important? 

If you’re in the food business, you need food business insurance. Trust us on this one. 

Insurance for the food business helps take care of unexpected costs and can keep you up and running if something goes wrong:

• Your cooler breaks down? Food business insurance can help you replace spoiled food.
• A customer slips on a wet floor and breaks a leg? Food business insurance can help cover the inevitable lawsuit.
• One of your catering vans gets into a fender bender? Food business insurance can help foot the bill for repairs.

Whether you own a chain of restaurants, a food truck, or a small-town coffee shop, food business insurance is something you don't want to be without.

What Are the Best Insurance Policies for Those in the Food Business? 

The best insurance policies for your food business will depend on your business. For example:

• If you sell liquor, you’ll want to invest in liquor liability insurance. 
• If you have catering vehicles, you’ll need a commercial auto policy.
• If you have employees, workers’ compensation is a must. 

What Types of Businesses are Considered the “Food Industry?”

The term “food industry” covers a wide range of businesses, including:

• Caterers
• Bars
• Restaurants
• Bakeries
• Farmers markets
• Cookie and cake bakers
• Coffee shops
• Cafés
• Delis 
• Foot trucks
• Food vendors
• Ice cream shops
• Juice bars; and
• Nightclubs

11 Food Business Insurance Policies To Consider

#1: Business Owner’s Insurance

A business owner’s insurance policy rolls general liability insurance and commercial property insurance into one neat plan. 

Often, business owner’s insurance is the most economical choice when it comes to food business insurance for restaurants and bars.

Business owner’s insurance for food businesses can help cover:

• Customer injuries
• Damages to business property; and
• Business interruption incidents

#2: Spoilage Insurance

If you've ever been unfortunate enough to experience …

• A prolonged power outage 
• Equipment breakdown or failure; and
• Faulty refrigeration systems, piping, mechanical, or electrical machines

… then you understand the importance of spoilage insurance for food businesses. 

Food spoilage insurance for businesses is helpful for covering:

• The cost of spoiled food and beverages; and
• Repairs or replacement costs for food-storage-related equipment, including refrigeration systems, piping, and mechanical and electrical machines.

#3: Food Contamination Insurance

Your recurring nightmare has finally happened. The CDC just called to let you know your customers are getting sick — and E. coli is the suspected culprit. 

If you are ever shut down due to food contamination issues, food contamination insurance can be a lifesaver. 

A food contamination policy can reimburse you for the expenses incurred as a result of a food-borne illness outbreak.

Food contamination insurance for businesses can help:

• Cover the cost of cleaning your equipment
• Cover the cost of replacing food
• Reimburse you for income lost due to a temporary shut-down; and
• Provide funds for advertising to help revive your business’s reputation

#4: Liquor Liability Insurance

Liquor liability insurance covers medical fees, legal fees, and settlements in the case that your bar or restaurant serves alcohol to someone who then damages your property or harms other patrons.

Liquor liability insurance for food businesses helps cover:

• Legal defense costs
• Injuries caused by intoxicated customers; and
• Property damage caused by intoxicated patrons

#5: Business Interruption Insurance

Sometimes a business may be forced to temporarily close its doors due to physical loss or damage to business property.

A business interruption policy can help supplement your business' income if it is unable to operate due to a covered loss.

Business interruption insurance for food businesses is helpful for:

• Pay for necessary continuing normal operating expenses
• Covering payroll

• Replacing lost net income during the period of restoration 
• Pay for relocation expenses; and 
• Covering advertising fees if you set up shop at a temporary location

#6: General Liability Insurance 

A general liability insurance policy covers the majority of common food and beverage business risks and is required for most commercial leases.

General liability insurance for food businesses is helpful for covering:

• Slips and falls
• Damages to customer property; and
• Lawsuits due to libel or slander

#7: Worker’s Compensation 

In most states, workers' compensation is a must-have for restaurants and bars that have employees. It can also provide protection for sole proprietors in the instance that work injury costs are denied by health insurance.

A workers’ compensation policy provides benefits to employees who are injured on the job. 

Workers’ compensation insurance for food businesses is helpful for:

• Employee medical expenses
• Missed wages
• Permanent disability; and
• Legal costs

#8: Employee Dishonesty Coverage

According to the Federal Reserve Board in Washington, D.C., an estimated 30% of all business failures are the result of employee theft and dishonesty. This statistic alone explains why every food business needs an employee dishonesty policy.

Employee dishonesty insurance for food businesses compensates your business for financial damages incurred if an employee steals from you.

Employee dishonesty insurance for food businesses protects against the loss of:

• Money
• Equipment
• Supplies
• Fixtures
• Vehicles; and
• Personal belongings 

#9: Cyber Liability Insurance

If your food business stores electronic data online — be it sales projections, tax records, or any form of customer information —  you’re at risk of cybercrime.

Cyber liability insurance can protect your business from potentially hefty out-of-pocket costs should your information be stolen, lost, or otherwise compromised in a cyberattack.

Cyber liability insurance for food businesses can help cover the cost of:

• Notifying your customers about a breach
• Legal defense
• And more

#10: Equipment Breakdown Insurance

When equipment malfunctions, productivity is affected. That’s why no food business should be without equipment breakdown coverage. 

There are five categories typically covered by equipment breakdown insurance:

1. Electrical, which covers transformers, electrical panels, and cables
2. Mechanical, which includes engines, motors, generators, elevators, water pumps, and specialized production equipment
3. Computers and communications, including computer, phone, voice mail, security, and fire alarms
4. Air conditioners and refrigeration systems; and
5. Boilers and pressure equipment

Equipment breakdown insurance for food businesses can help cover the cost of:

• Repairing or replacing damaged equipment, including time and labor
• Loss of income
• Spoiled inventory; and
• Necessary expenses incurred during the restoration period

#11: Commercial Auto Insurance

If you have a business vehicle, you will want to have a commercial auto policy. 

Business commercial auto insurance for food businesses can help cover the cost of:

• Property damage if your vehicle is in an accident
• Legal costs
• Physical damage and collision coverage
• Injuries caused to another person
• Repairs due to theft or vandalism; and
• Repairs due to weather

How Much Does Food Business Insurance Cost?

How much is food business insurance? It depends on the types of insurance that are right for your business. 

On average, food and beverage businesses pay around $135 per month for a business owner's policy. Of course, your particular business may need various additional types of coverage.

Multiple types of insurance can be bundled into your business owner's policy, which typically consists of … 

• General liability
• Commercial property; and 
• Business interruption insurance

… but can always be customized to meet your specific needs.

5 Steps for Purchasing Insurance for Your Food Business

#1: Assess Your Risks

The first thing you’ll want to do as you consider the various types of food business insurance is to evaluate your risks. 

Consider common risks such as:

• Employee injury
• Employee loss of income
• Grease fires
• Food spoilage
• Damaged or broken equipment
• Actions resulting from intoxicated customers
• Natural disasters; and
• Lawsuits

The nature of your business, number of employees, location, and assets will all play a role in assessing your risks.

#2: Choose the Right Type of Insurance for Your Business

Different types of food businesses will need different forms of food business insurance.

You’ll want to cover both general and industry-specific risks, and may want policies such as: 

• General liability
• Commercial property
• Workers’ compensation
• Business interruption
• Liquor liability
• Commercial auto
• Cyber liability
• Equipment breakdown; and
• Employee dishonesty

#3: Compare Policies With Assistance or On Your Own

Of course, you’ll want to shop around. Most insurance companies recommend getting three to five quotes from different providers before settling on the one that’s right for you.

As you compare policies, you’ll want to consider factors such as:

• Policy coverage: What exactly does the policy cover? What does it not cover? You’ll want to be sure you understand the policy’s details to ensure you’re getting the coverage your business needs.
• Limits of liability: How much of a loss does the policy cover? Larger food businesses or those with higher risks may need a higher limit.
• Price: How much is the policy? Is there a deductible? If so, how much is it?
• Reviews: Google the reviews and ratings of insurance providers before you buy a policy. You also check out any complaints that may have been filed against a company by searching the National Association of Insurance Commissioners’ website.

#4: Purchase Insurance 

When you’re ready to shop for food business insurance for your restaurant or food company, you have a few options. 

You may choose to purchase insurance by:

• Contacting providers directly
• Using a broker; or
• Using an online marketplace

#5: Renew Annually 

After you’ve purchased your food business insurance policy, you’ll want to reevaluate your coverage annually to ensure that you still have the right policy for your business’s needs.

When your policy comes up for renewal, consider questions such as:

• Has your existing coverage been adequate?
• Can you find the same coverage at a better price?
• Have you been pleased with the customer care of your existing provider?
• Will your business be facing any new risks in the coming year?
• Are you opening a new location?
• Do you plan on hiring additional employees?