Owning and operating a bakery can often be challenging, regardless of whether it’s a public shop or an at-home business. There are several risks associated with running a bakery, which means it’s critical to protect yourself in order to avoid reputational damage and having to pay large sums of money out-of-pocket to resolve claims.
An effective way to do this is by purchasing bakery insurance. Examples of businesses that need this type of insurance include bakeries, donut and bagel shops, cafes, mobile bakeries, bakery manufacturers, and wholesale distributors. However, home-based bakeries also need insurance, and there are notable differences between bakery insurance and home bakery insurance coverage. Here is a close look at this subject.
What Does Bakery Insurance Cover?
The exact coverages included in a bakery insurance policy, whether your business is public or home-based, may vary depending on the insurer (among other factors). However, most such policies contain the following coverages:
Property insurance for bakeries typically includes both building and contents coverage. The former type of insurance shields your business’s actual structure, which can sustain damages due to incidents like vandalism, hail, wind, and fire. Both homes and shops are susceptible to damage for these reasons, so it’s important to be protected against these risks. The amount of coverage depends on factors such as:
- Your building’s size
- Your building’s age and construction type
- Your chosen limits and deductibles
If your bakery is home-based, speak with the agent in charge of your policy to determine the specifics of your coverage. Additionally, be sure to always stay aware of fire hazards in your business (whether it’s home-based or not), such as baking ovens, fuel sources, dust from ingredients, and oil or grease from deep-fat fryers.
Meanwhile, contents coverage protects items within your building, such as cash registers, cooking trays, and display shelves. Essentially, anything that isn’t permanently attached to your structure is covered. As with building coverage, an experienced insurance agent can help you understand what contents your policy does and doesn’t cover.
Most commercial property policies don’t include flood insurance. Therefore, ask a knowledgeable agent whether you can acquire flood coverage separately if you wish to protect your bakery from this risk. Flood coverage is provided through the National Flood Insurance Program (NFIP), which is overseen by the Federal Emergency Management Agency (FEMA). However, the cost and coverages of personal flood insurance and commercial flood insurance differ significantly, so be sure to do adequate research.
In addition to property damage, bakeries also face risks associated with general and product liability claims. Here is what liability insurance covers.
General liability coverage protects you in the event a customer suffers an injury on your business property (e.g., after slipping and falling on a wet surface inside your bakery). This insurance typically covers medical expenses and any associated legal costs, including attorney’s fees. The cost of general liability insurance usually depends on factors like your chosen limits and deductibles.
Just like products at any other food-based business (restaurants, ice cream shops, etc.), baked goods such as bread and donuts can sometimes be contaminated by materials like glass and plastic. They can also cause food-borne illnesses like E. coli and salmonella. Therefore, it’s imperative to have product liability insurance in order to avoid lawsuits and costly product recalls.
The unfortunate reality is that goods sold by bakeries cannot only become contaminated, but they can also spoil. This often happens when a bakery loses power for a long time (e.g., following natural disasters like hurricanes), which means perishable food products stored in refrigerators or freezers can quickly go bad. Food spoilage insurance can help cover the sales revenue you lost by not being able to sell these goods.
Loss of Income Insurance
This insurance covers you when your bakery is forced to shutter because of incidents like storms and fires. Loss of income coverage can help pay for monthly bills such as payroll, rent or mortgage, and utilities. If your bakery is home-based, be sure to ask your insurer what is covered by the loss of income portion of your policy as there may be restrictions on coverage for items like payroll expenses.
Commercial Auto Insurance
Whether you own or rent vehicles such as vans and trucks for your bakery, accidents can always happen. Incidents such as inclement weather (hail, rain, etc.) and an uninsured motorist hitting you can lead to vehicle damage and injuries. Depending on the insurer and policy, you may have either collision or comprehensive coverage.
Cyber Liability Insurance
If your bakery has a website and you accept online orders, you should strongly consider acquiring cyber liability coverage. This type of insurance will help protect customer information in the event of a data breach or other cyberattack.
Employee Dishonesty Insurance
Bakeries also face the risk of untrustworthy workers stealing money or other property from the business. Employee dishonesty insurance will cover any losses caused by worker theft.
At-Home Bakery Insurance Coverage
If you own and operate an at-home bakery, you may benefit most from purchasing a business owners policy (BOP). This type of policy combines multiple key commercial insurance coverages, often at a lower cost. Here are how some of the previously listed coverages apply to at-home bakery businesses.
For home bakeries, public liability insurance is typically called “commercial general liability coverage.” This coverage can help pay for any claim or event associated with customer injuries, including slip-and-fall accidents and burns from hot pans or plates. Some liability insurance policies can also cover injuries to vendors or business partners.
Commercial Property Insurance
As its name suggests, this insurance covers your at-home bakery’s property following events such as fires. If your oven were ever to overheat and your kitchen or entire home burned down as a result, a commercial property insurance policy would help pay for any necessary repairs or replacements.
Food Product Liability Insurance
By acquiring this type of coverage, you can potentially save thousands of dollars should your fridge or freezer break and your baked goods become spoiled, which means you can’t sell them. Similarly, your products can become contaminated and you may be forced to issue a recall in order to avoid lawsuits if your customers suffer food-borne illnesses.
Workers’ Compensation Insurance
Whether a bakery is public or home-based, its employees (if there is more than one) face the risk of becoming ill or injured on the job. A workers’ comp insurance policy can help cover any medical expenses or wages lost following on-site accidents, such as burns, cuts, or slip-and-fall incidents.
Safe working conditions (including the use of safety equipment such as gloves for opening an oven) can help reduce the probability of such injuries. Be sure to check your state’s laws and requirements regarding workers’ compensation insurance for home-based businesses with one or more employees.
Per the Bureau of Labor Statistics (BLS), there were 820 cases involving nonfatal occupational injuries and illnesses among “sugar and confectionery product manufacturing” workers in 2019. The top reasons for these injuries were “contact with objects or equipment,” “falls, slips, and trips,” “overexertion and bodily reaction,” and “transportation incidents.”
How Much Does Bakery Insurance Cost?
Compared to other types of insurance policies, bakery insurance is relatively affordable. According to insurance comparison marketplace Insuranks.com, the average cost of bakery insurance is approximately $35 per month or $415 per year. If your bakery is home-based, however, your premiums may be even lower ($25 per month or $300 annually), especially if the space you operate out of is smaller. Nevertheless, there are several factors that impact the cost of bakery insurance, including:
- Your business’s size (size of structure and number of employees)
- Whether you rent or own your property
- Location (city, county, state, etc.)
- Number of customers your business serves
- Annual sales revenue
- Number of vehicles your bakery owns
Speak with an experienced insurance agent to determine which policy fits your bakery’s unique coverage needs and risks. Whether a bakery is home-based or a retail business, owning and operating one can be extremely rewarding.
However, it’s important to always be aware of all the risks you could face and the requirements and laws you may have to follow and comply with, no matter how much experience you have as a baker, how large your business is, or what types of goods you sell. The insurance industry is highly volatile and one small precaution (or lack thereof) can save you or cost you a significant amount of money. Be sure to always request as many quotes as possible from each insurer you contact, as this can help you make a more informed decision.
Speak to the Bakery Insurance Pros
Reach out to the professionals at Southern States Insurance, an independent insurance agency, to learn more about the differences between bakery insurance and home bakery insurance. Since our founding in 1992, we have been dedicated to providing high-quality insurance solutions to clients throughout the Southeastern U.S., including Georgia.
At Southern States Insurance, we understand the risks associated with managing a bakery (whether it’s public or home-based) and are thus committed to protecting your business against these liabilities. You can also receive coverage for equipment breakdown, food spoilage, loss of income, employee dishonesty, cyber liability, commercial auto, inland marine, and workers’ compensation claims.
If your bakery is home-based, certain insurance carriers will allow you to add an endorsement to your homeowners’ policy for your business. Call SSI today at (888) 971- 5657 or contact us online to request a quote.