Running a bakery business can be profitable and fun. It is a generally upbeat environment with a product that is always in demand, and there is a social aspect to visiting local bakeries that can make this type of work extremely satisfying.
However, there are a lot of risks that come with this type of work, whether the bakery is a smaller neighborhood operation that uses manual processes or a commercial operation that mass produces large quantities of baked goods for distribution to supermarkets.
Bakery insurance can protect bakeries from potentially devastating financial losses due to anything from an employee sustaining severe burns or a customer falling in the establishment and filing a lawsuit.
There are many types of insurance geared toward the risks that bakeries face. Some insurance companies might market a dedicated bakery insurance package. For others, it may fall under the more general category of commercial insurance, but the specific coverage provided will be tailored to suit the bakery’s needs.
Here are 12 insurance policies that all bakeries should obtain:
General Liability Insurance
General liability insurance covers a broad range of bakery accidents and other basic risks. It offers protection for lawsuits related to third-party injuries and property damage. In other words, its coverage is for incidents where someone other than an employee is hurt or the bakery is held responsible for damaging property that it does not own. For example, it can cover instances where a customer is injured inside the bakery and sues for damages.
Product Liability Insurance
Even with the most meticulous precautions, it is always possible that a customer could become sick from the food served at a bakery, whether it is due to unlabeled allergens, foodborne illnesses, or another type of problem. For example, food in a bakery can become contaminated with physical objects from within the kitchen, such as plastic. In these cases, product liability insurance can protect a bakery from the cost of claims that its food made a customer sick.
Property Insurance
Property insurance covers incidents involving damage to a bakery’s property, whether it is the building or its assets that are affected. It is an important type of coverage for bakeries as they rely on expensive machinery and equipment that may be destroyed or damaged in a covered incident.
Property insurance offers protection for perils such as burglary, weather damage, and fire.
The building coverage component of commercial property insurance is necessary for bakeries that own the building, and many bakeries that rent their location will be required by their landlord to insure it. It provides compensation for damage to a building structure should it be damaged by hail, fire, vandalism, or other covered catastrophes.
Additionally, the contents coverage of commercial property insurance covers property within the building, such as display shelves, kitchen appliances, and decorations.
Business Owners Policy
A business owner’s policy, or BOP, is a type of insurance package that many insurance companies offer smaller businesses, allowing them to bundle commercial property insurance and general liability insurance together at a lower price than purchasing each component separately.
Equipment Breakdown Coverage
In a bakery, the equipment used to make baked goods is essential for doing business. The breakdown of a single piece of equipment due to a mechanical failure, power surge, or other problem could be enough to cost the business vital operating hours and significant revenue. It may even be necessary to close the bakery temporarily until repairs can be made.
With equipment breakdown coverage, bakeries can be reimbursed for the repair and replacement costs of equipment that breaks down as well as income that is lost while the equipment is not operable.
Loss Of Income Coverage
Loss of income coverage provides compensation for the profits that are lost and ongoing expenses that are incurred when a bakery’s operations are suspended because of a covered loss, such as a fire. This enables a bakery to pay its bills and keep its employees on its payroll during the time it takes to repair or rebuild the premises. Most policies will cover these costs for up to a year, although some offer longer periods of coverage.
Spoilage Coverage
Keeping food at a safe temperature at all times is essential for meeting health department regulations and ensuring the safety of consumers. An extended power outage can cause food in a bakery’s refrigerators and freezers to spoil, leaving owners with little choice but to throw away mass quantities of expensive food and ingredients. Spoilage coverage provides a bakery with the compensation needed to recover after this type of incident, such as the money the bakery would have received if they had been able to sell the food that spoiled.
Workers’ Compensation Insurance
Workers’ compensation is a type of insurance that is required by law in most states for all types of businesses that have more than one employee. It offers reimbursement for the medical treatment of employees who are injured on the job, as well as their lost wages and coverage for a permanent disability and vocational retraining. It is particularly useful in bakeries because workplace injuries such as burns and slips and falls are common.
Another potential risk in bakeries is the machinery used in the kitchen. Equipment with rotating blades or other moving parts can cause severe cuts and other injuries. Lifting injuries are another concern for workers who need to lift large containers of materials on a regular basis, while spills of ingredients such as flour or sugar can make slip and fall accidents more likely.
Commercial Vehicle Insurance
For bakeries that offer catering and delivery services using company-owned vehicles, commercial vehicle insurance coverage is needed that meets the state’s minimum liability requirements. Insurance can protect against a broad range of potential incidents, such as accidents involving being hit by uninsured drivers, losing control of the vehicle, or inclement weather.
Flood Insurance
Bakeries that are situated in areas vulnerable to flooding need to obtain a separate flood insurance policy as floods are typically excluded from standard business property insurance policies. A commercial flood insurance policy can cover the costs of damage to a bakery’s assets, such as equipment and inventory, in addition to the building itself.
Cyber Liability Insurance
Bakeries may not be thought of as businesses that rely heavily on technology, but if a bakery collects or stores information on a computer, mobile device or online, cyber liability insurance is essential to protect against the costs related to cybersecurity breaches. Smaller businesses like bakeries are becoming increasingly attractive targets to hackers as they do not have the cybersecurity measures that bigger businesses can afford. This type of coverage is particularly important for bakeries that take online orders.
Inland Marine Insurance
Inland marine insurance covers bakeries for damage to equipment and tools that are moved from location to location outside of the bakery itself. For bakeries that offer catering, it would provide protection for damage to delivery equipment, such as food warmers while they are being transported to and from events.
The Cost Of Bakery Insurance
The cost of a commercial bakery insurance policy depends on several factors, but it is generally considered affordable insurance that can quickly pay for itself in the event of a covered event. Here is a quick rundown of some of the factors influencing a bakery insurance policy’s cost.
- The bakery’s location – Bakeries in bigger cities can expect to pay more for their insurance than those in smaller towns. Weather-related and crime-related data can also affect policy costs. For example, bakeries in coastal areas can have significantly higher premiums than those further inland because of the threat of hurricane damage.
- The type of bakery – Insurers charge higher premiums for businesses that are more likely to encounter problems. Therefore, large operations that use automated equipment should expect to pay more for their insurance than smaller bakeries where everything is made by hand.
- The bakery’s business levels – Another aspect of a bakery that is used to calculate its premium is its business projections for the upcoming year. Bakeries that do brisk business can expect to pay more than those whose business tends to be slower.
- The bakery’s employees – The number of employees at a bakery directly influences the cost of workers’ compensation insurance, and it can also have an impact on liability.
Saving Money On Bakery Insurance
Bakeries can reduce their insurance expenses without compromising on coverage in several ways. For bakeries in a building that was recently built or updated, a new or updated construction discount may be available. Another way that bakeries may qualify for discounts on property coverage is by implementing security measures such as cameras or burglar alarms.
Many insurance companies offer a discount for bakery insurance if premiums are paid in a lump sum each year instead of monthly installments. It is also possible to save money by obtaining specially packaged insurance policies that offer a range of protection at a discounted price.
Insurance agents can help bakeries find the coverage that they need at a reasonable price by comparing the offerings of different insurance companies.
Get In Touch With The Bakery Insurance Experts
For more information on how bakery insurance can protect your business, get in touch with the experienced specialists at Southern States Insurance. As one of the largest privately held independent insurance agencies in the southeastern U.S., their professionals work with major carriers to help clients find insurance solutions that meet their needs and budget.