Food contamination and spoilage is something every bakery will encounter. We compare spoilage and equipment breakdown policies and which you should add to your bakery insurance
In understanding spoilage coverage it is important to know what your covered property encompasses. Covered property refers to the perishable stock located at the bakery which should be describe in the policy. Perishable stock simply means personal property maintained under controlled conditions for its preservation that is susceptible to loss or damage. This type of policy limits coverage to two causes of loss:
1. Breakdown or contamination and
2. Power Outages
One or both can be chosen when building your personal bakery insurance coverage, but it is better to combine the two. Breakdown and contamination can also be defined in two ways: as the change in temperature resulting from mechanical breakdown of cooling systems or the contamination by a refrigerant. Power outages simply refers to the change in temperature resulting from interruption of electrical power. This can be due to conditions beyond your control like inclement weather or natural disasters such as Hurricane Sandy.
The effective spoilage coverage is very broad. This particular add-on to your bakery insurance protects you against the financial loss from damaged personal property.
Equipment breakdown has more limitations on the type of coverage you can get for your bakery. Breakdown is defined as loss due to a breakdown of equipment, but by using the term “breakdown” it actually severely limits the coverage you can receive.
Within this policy, “breakdown” is defined as direct physical loss that causes damages to the equipment and now requires repair or even replacement. If the power goes out or equipment just wears out, any resulting spoilage is just not covered. In other words, there must be actual physical damage for coverage to kick in, such as your equipment catching on fire or falling off a delivery truck.
As you can see protection provided by the spoilage coverage does not require that the equipment actually sustain physical damage. If picking one or the other, a spoilage endorsement will cover more damage and loss, but if you want to ensure the broadest protection for your bakery it is best to include both coverages in your bakery insurance.
For more information about insurance for your bakery be sure to request one of our free quotes!