If you own a home-based bakery or another similar business (bagel or donut shop, wholesale distributor, manufacturer, etc.), you may likely know that it’s important for you to carry insurance to protect your business against certain risks and liabilities, such as property damage, general liability, food spoilage, and food contamination claims. However, you may also be wondering whether certain services such as delivery are covered by a home bakery insurance policy. Here is a closer look at this subject.
What Does Home Bakery Insurance Cover?
Although the exact coverages may vary depending on the insurer, a standard at-home bakery insurance policy covers:
Public Liability Insurance
This type of coverage shields you in the event a customer becomes injured or suffers a loss as a direct result of a service your bakery provides. For example, a customer could sustain a head, arm, or leg injury after slipping and falling inside your business. Public liability coverage can help you avoid paying large sums out of pocket following a claim. Be sure to ask your insurer whether your policy can help pay for attorney’s fees and other legal costs in the event of a lawsuit.
Much like public bakeries, home-based bakeries also face the risk of property damage. Therefore, it’s essential to carry property insurance, which typically includes two coverages: building and contents coverage. The former coverage protects your bakery’s physical structure (e.g., the kitchen within your home), while the latter shields any items that aren’t permanently attached to your home, such as baking trays and cash registers. Both your bakery’s building and contents can become damaged due to vandalism, fire, and weather-related events like hail and windstorms.
If you think your home bakery faces the risk of sustaining flood-related damages, don’t hesitate to ask a knowledgeable insurance agent about flood coverage, which is normally not included in a business owners policy (BOP). The National Flood Insurance Program (NFIP), which the Federal Emergency Management Agency (FEMA) oversees, provides this type of coverage. Also, keep in mind that there are several fire hazards in a kitchen, whether it’s home-based or industrial. These include ovens, fuel sources, oil and grease from fryers, and dust that comes from baking ingredients.
Commercial Auto Insurance
This type of policy pays for property damage (and in some cases passenger injuries) resulting from accidents involving vehicles your bakery owns or borrows, such as cars, vans, and trucks. Depending on the insurer, damages caused by incidents of theft, vandalism, or weather-related events may also be covered (collision vs. comprehensive coverage).
Workers’ Compensation Insurance
This coverage protects you after one of your employees becomes sick or injured on the job and files a claim against you. Workers’ compensation insurance can help you pay for medical expenses and lost wages in these cases. Most states require all businesses that employ at least two employees to carry workers’ comp, but make sure to check the specific laws regarding this in your location.
According to the Bureau of Labor Statistics (BLS), there were 3.6 cases of nonfatal injuries and illnesses (per 100 full-time workers) among “sugar and confectionery product manufacturing” workers in 2020. In 2019, there were also 30 total transportation accidents among workers in this field, 20 of them involving “motorized land vehicles.” Although these rates aren’t as high as those for other industries, it’s important to know that your home bakery’s workers can become injured due to slip-and-fall incidents, overexertion or allergic reactions, use of baking tools and equipment, or transportation accidents.
Food Spoilage & Product Liability Insurance
Sometimes, a bakery’s freezers and fridges (whether your bakery is home-based or not) can stop functioning when power is lost (e.g., in the event of a blackout, which can be caused by a hurricane or other type of storm). In these scenarios, your bakery’s products can go rotten and thus become unsellable. That’s why it’s imperative to have food spoilage coverage. Baked goods can also be contaminated with bacteria, glass, or plastic and thereby cause customers to suffer food-borne illnesses (E. coli, salmonella, etc.) or allergic reactions. In the latter case, you may have to issue product recalls. In the event of food spoilage, bakery insurance can help pay for lost sales revenue. In the case of food contamination, your policy could help pay for the cost of issuing recalls or combatting lawsuits from customers.
Other key coverages you can acquire as part of a bakery insurance policy include:
- Equipment breakdown insurance: As its name suggests, this coverage pays for the cost to replace or repair baking machinery such as ovens and mixers after a mechanical breakdown.
- Cyber liability insurance: If you have a website for your home bakery and take orders online, this type of coverage will help pay for the cost to recover following a data breach or other cyberattack that compromises customer information such as names and credit card numbers.
- Employee dishonesty insurance: This protects you after an employee steals money or other property from your home bakery business.
- Inland marine insurance: Sometimes, baking tools and equipment can become damaged while in transit. Inland marine insurance helps cover claims arising from these types of damages. If you provide catering services, this coverage is a must if you want to protect items such as warmers, carts, and trays.
If you have a BOP, you can potentially save money on your insurance by bundling these coverages. An experienced insurance agent can help you determine what type of policy is the best fit for your bakery given your unique coverage needs and risks.
Home Bakery Insurance & Delivery Services
Today, many bakeries (including home bakeries) conveniently offer delivery services instead of — or in addition to — providing pickup for baked goods. If your home-based bakery delivers products, you may be asking yourself whether any type of insurance policy can cover such services. Let’s look closely at how these two are related.
The short answer is “yes.” A standard home bakery insurance policy covers injuries and damages arising from delivery services. However, be sure to speak with an experienced agent to determine whether there are any exceptions or exclusions to this coverage.
There are many risks that can occur when carrying out deliveries to customers from your bakery, including:
- You can accidentally damage a customer’s property with your equipment or with your vehicle upon arriving at their home.
- You can deliver the incorrect product or fail to deliver an order on time. For this, you may need errors and omissions (E&O) insurance, which can be especially beneficial if you cater professional events such as conferences and business meetings.
- You can deliver baked goods that have gone bad (spoiled) or been contaminated by harmful substances.
All of these types of incidents can lead to lawsuits that can prove to be extremely costly without insurance. Therefore, don’t underestimate how much insurance coverage can help protect your home bakery in these scenarios. No matter how close or far you or your employees travel for delivery services, bakery insurance can help cover many different types of claims that your customers file for any of the reasons listed above. As with any other type of insurance, an experienced and knowledgeable agent can help you choose a policy that will protect your business to the extent that is necessary.
Cost Of Home Bakery Insurance
Home bakery insurance premiums typically depend on multiple factors, including:
- The number of employees you hire
- The number of vehicles you use for your business
- Your annual sales revenue
- Location (city, county, state, etc.)
- Whether you’re a renter or homeowner
As a home bakery owner, you’re typically responsible for managing your location, employees, customers, and vendors. A home bakery insurance policy can help you significantly reduce the cost of resolving claims associated with injuries to these individuals or damages to these things. As the COVID-19 pandemic continues and the state of uncertainty remains, it’s especially important to stay protected against these risks.
Speak To The Home Bakery Insurance Experts
Reach out to the professionals at Southern States Insurance for more information on what home bakery insurance covers. At Southern States, we understand the liabilities associated with this type of home-based business. Our policies cover food spoilage and contamination, equipment breakdown, employee dishonesty, commercial auto, cyber liability, and inland marine claims. If your bakery provides delivery services, our policies can cover this as well. Call SSI today at (888) 971-6304 or request a bakery insurance quote online.