Creating and serving quality baked goods like bread, cakes, and pastries can be a creative and rewarding experience. However, even the smallest of bakeries face certain risks. With bakery insurance, bakery owners can protect their business, finances, and reputation when faced with an unexpected lawsuit or liability issue.
Whether a person specializes in a particular product, such as wedding cakes, or runs a commercial operation that mass produces large quantities of baked goods, having the right amount of bakery insurance coverage is vital for the business’s long-term success. Learn more about what costly liabilities bakery owners should always protect against.
Why Do Bakeries Need Business Insurance?
When opening a new company, most bakery owners are focused on developing tasty recipes that draw in a steady stream of customers. While a bakery owner may have the best intentions and may even use great caution when working in the shop, there is always a chance that an unforeseen disaster could occur.
Purchasing bakery insurance is one of the best decisions a bakery owner can make, aside from crafting a solid business plan. There are many scenarios in which having business insurance for a bakery could come in handy. For example, a customer could slip on the bakery floor on a rainy day.
According to the Centers for Disease Control and Prevention, the average hospital cost of a slip and fall accident is more than $30,000. Fortunately, a standard commercial general liability insurance policy protects businesses against claims of bodily injury and property damage.
Injuries are not the only risk that bakery owners face. A single batch of cookies containing salmonella-infected eggs could cause customers to suffer food poisoning. A food poisoning outbreak can quickly cause medical and legal bills to pile up. Without liability insurance to help offset these costs, most bakeries would be forced to shut their doors.
Accidents do not even have to occur within the business for bakery owners to be deemed liable for damages. For example, if a delivery person is involved in an accident while en route to an event, the company may be responsible for any bodily injuries or property damage that occurs.
Depending on the severity of the accident, the business may also be without a bakery van to make further deliveries, negatively impacting the business and its reputation to deliver on time. In these types of scenarios, having commercial auto insurance can be invaluable.
What Types Of Insurance Do Bakery Owners Need?
Bakery insurance is customized to meet the unique needs of bakery owners, ranging from basic coverage for home bakers to more extensive policies for commercial operations. Selecting the right coverage for a bakery can protect the business from risks that could result in crippling financial losses. Some of the most common types of business insurance required for bakeries located in the U.S. include the following.
Property loss is a real and expensive problem that many bakeries encounter at one time or another. Costly equipment, machinery, or even the building itself can suffer extensive damage, often leaving bakery owners with thousands of dollars in repair or replacement costs.
Commercial property insurance protects a company’s physical assets from theft, vandalism, storms, burst pipes, explosions, fire, and more. Most standard commercial property insurance policies cover the building and everything in it and directly outside of it, such as furniture, computers, exterior signs, inventory, fencing, and important documents.
Bakery owners can be held liable for a wide range of incidents. Commercial general liability (CGL) is an essential business policy that protects against claims of personal injury, bodily injury, and property damage caused by a company’s products, services, or operations that occur on the business’s premises.
CGL offers varying levels of coverage, including property damage that happens on another location as a result of a finished product or service. Business owners can also purchase excess liability coverage to cover any claims that exceed the original policy’s limit.
Equipment Breakdown Insurance
The average bakery owner possesses a variety of equipment, such as commercial refrigerators, freezers, ovens, and mixers. When an essential piece of equipment breaks down or suffers damage due to a mechanical failure or power surge, a business could be left without the tools needed to continue normal operations.
Equipment breakdown insurance protects a company’s electrical, mechanical, and computer equipment from unexpected breakdowns. Most standard policies help cover the cost to repair or replace damaged equipment, spoiled inventory, lost income, and other necessary expenses incurred during the restoration period.
It is important not to confuse equipment breakdown insurance with property insurance. Equipment breakdown insurance protects against internal forces, such as electrical shorts or motor burnout, while commercial property insurance covers damages caused by external forces, such as fire.
Food Spoilage Insurance
Many bakeries have large amounts of food on hand. While some ingredients like flour and sugar are shelf-stable, others like milk, bread, and eggs can spoil quickly, especially when exposed to the right conditions.
Food spoilage coverage can help reimburse businesses for the cost of lost food or beverages up to specified limits found in their policy. Food spoilage insurance covers various scenarios that can lead to the spoiling of food, such as prolonged power outages, mechanical breakdowns, and equipment failures.
Employee Dishonesty Insurance
Although companies do their best to hire honest and dependable employees, there is always a risk that a dishonest worker could cause problems in the bakery. Employee dishonesty coverage protects a bakery owner from losses when employees steal money or property from work.
Most bakery owners cannot afford to absorb losses caused by employee dishonesty. However, upwards of 75 percent of employees admit to stealing at least once from their employer, according to the California Restaurant Association. Employee dishonesty insurance, which is typically written under a commercial crime policy, offers bakeries protection for most types of crimes committed by employees.
Commercial Auto Insurance
Bakeries that own or rent delivery trucks or vans want to ensure that they have the proper coverage. Commercial auto insurance covers a wide range of trucks, vans, and cars used for conducting business. Most commercial policies cover bodily injury, property damage, medical payments, collision coverage, and uninsured motorist coverage.
It is common for vehicles that are used primarily for business to be excluded from personal auto insurance policies. While commercial and personal auto policies have many similarities, there are a few differences. Commercial auto insurance typically has unique eligibility rules, coverage terms, limits, and exclusions.
Cyber Liability Insurance
Data breaches and other cybercrimes are becoming increasingly common and no business is safe from these threats. Cyber liability insurance covers a company’s liability for data breaches that involve sensitive customer information, such as credit card numbers, account numbers, and driver’s license numbers.
Aside from legal fees, cyber liability insurance helps cover a variety of damages. It can be used to recover compromised data, repair damaged computer systems, and restore the personal identities of affected customers. It can also be used to notify customers when data breaches that may affect them occur. It is important to remember that a data breach could impact more than just a computer system, but rather the business’s reputation.
Inland Marine Insurance
Inland marine insurance is a type of business insurance that covers materials, products, and equipment while being transported via land, such as on a train or in a truck. Common perils covered by inland marine insurance include fire, theft, wind, water damage, and hail.
Bakery owners can also purchase additional coverage if they face a greater risk of loss or damage. Mysterious disappearance coverage ensures the replacement of missing property when the cause of the loss cannot be determined. If an item is mishandled or dropped while in transit or while loading or unloading, accidental drop and damage coverage can come in handy.
Workers’ Compensation Insurance
If a bakery has one or more employees, workers’ compensation is a must. Most state workers’ compensation laws require employers to purchase and retain workers’ compensation coverage for all employees.
Workers’ compensation insurance covers numerous illnesses and injuries that an employee may suffer while performing work duties. For an employee to be eligible for workers’ comp, he or she must have suffered an illness, injury, or disability that is directly related to their job duties.
Most workers’ compensation policies provide coverage for medical expenses, compensation for fatal injuries, missed wages during recovery, and lawsuits related to work injuries.
How Much Does Standard Bakery Insurance Cost?
The cost of a bakery insurance policy can vary based on a variety of factors, such as the unique risks the business faces, the location of the business, and the value of the company’s equipment. The average cost that bakery owners pay for a business owner’s policy is $65 per month, according to Insureon.
Other factors can also influence the cost of bakery insurance, such as the company’s claims history, the size of the business, and what type of retail space the business is located in, such as a home, building, or detached commercial space.
Many types of bakeries can benefit from bakery insurance, such as donut shops, mobile bakeries, home-based bakeries, cake shops, baked goods manufacturers, and wholesale distributors. Without access to the proper business insurance policies, bakeries open themselves up to a number of liabilities that could negatively impact their business and the ability to continue serving their communities.
Request a Quote from Southern States Insurance
Located in Alpharetta, Georgia, Southern States Insurance is a reputable insurance brokerage that specializes in tailored business insurance. For more information about the costly liabilities that bakery owners need to protect against or to request a quote for business insurance, contact the insurance experts at Southern States Insurance.