Catering can be a lucrative business model when entrepreneurs take the necessary steps to protect their livelihood. Insurance is a critical component for catering businesses of all sizes. Insurance protects caterers from various risks that the business could encounter, such as physical injuries, property damage, equipment breakdown, and employee actions. Insurance policies can also cover assets, such as company vehicles.
Many different types of food-related companies can benefit from catering insurance, such as wedding and special event caterers, concession caterers, corporate caterers, and banquet halls that employ catering staff. No two catering businesses are exactly the same, meaning business owners must take the time to choose insurance policies that best protect their people, property, and finances.
Preparing and serving delicious dishes is just one part of a catering company’s responsibilities. Business owners must also consider how to protect against costly risks. Here is a look at some essential insurance policies that every catering business should consider acquiring.
Business Owner’s Policy
A business owner’s policy (BOP) is a type of insurance that combines liability and property coverage into one convenient package. BOP insurance is popular among small- and mid-sized businesses due to its versatility and affordability. Business owner’s policies include basic coverages that are required by most business owners, bundled and sold at a premium less than the total cost of the individual policies.
BOP insurance contains two main types of coverage:
- Liability Coverage – The liability protection included in most business owners’ policies is similar to those found in general liability policies. This includes protection against liabilities like property damage, customer injury, advertising injury, and product-related claims.
- Property Coverage – BOP insurance provides coverage for commercial buildings and transportable property owned by and used for business purposes. This type of coverage can also be used to pay for other expenses, such as loss of income, debris removal, and pollution cleanup as part of a covered loss.
Business interruption insurance is sometimes included in a BOP. With this type of coverage, business owners are protected against a loss of income resulting from a fire or other covered catastrophe that disrupts their normal business operations. Business interruption insurance can also cover the expense of operating in a temporary location while repairs or renovations occur at the original location.
A BOP may make sense if the company is located outside of the home, has less than $5 million in annual sales, has fewer than 100 employees, and has equipment or property that needs protection.
Workers’ Compensation
Nearly every state in the U.S. requires employers to carry workers’ compensation insurance to protect employees against work-related illnesses or injuries that put them out of work. Workers’ compensation protects business owners from lawsuits when employees become ill or injured on the job.
Workers’ compensation insurance is purchased by companies and underwritten by insurance companies; however, in some states, these policies are underwritten by publicly supported state funds. A workers’ compensation policy can protect a business and its employees by covering the following:
- Missed Wages – If an ill or injured employee requires time off from work, workers’ compensation may provide wage replacement.
- Medical Expenses – Workers’ compensation insurance generally covers an employee’s medical expenses related to an illness or injury caused at work.
- Vocational Rehabilitation – If an employee requires ongoing care to help them get back to work, workers’ compensation may cover these expenses.
- Death Benefits – Workers’ compensation insurance may provide death benefits, such as covered funeral costs if an employee passes away due to a work-related incident.
There are some limitations to workers’ compensation insurance. For example, these policies do not cover illnesses or injuries that stem from fights that an employee caused, that was intentionally caused by an employee, that happen to an employee who is intoxicated, or that take place during an employee’s commute.
General Liability Insurance
General liability insurance protects companies from “general” claims involving property damage and bodily injuries. Also referred to as business liability insurance, this type of coverage is needed by nearly every business, including caterers. General liability insurance is not required by law but it should be a priority for most companies. If the business’s operations or employees cause personal injury, property damage, or harm to someone’s reputation, a general liability insurance policy could cover any resulting legal and settlement costs.
A general liability insurance policy will typically pay out in cases of:
- Third-Party Bodily Injury – If an incident occurs on the company’s property or as a result of an interaction with the business or its employees, general liability insurance may help cover any medical fees, lost wages, and legal expenses.
- Third-Party Property Damage – General liability insurance will generally cover damage to another person’s property caused by the business or its employees.
- Personal and Advertising Injury – Insurance can help protect companies if they say something publicly that prompts someone to sue them for libel, slander, or copyright infringement.
General liability insurance does have some limitations. It does not protect catering businesses from harm that results from inadequate performance or harm caused by a product that was manufactured, delivered, or sold by the business.
Commercial Auto Insurance
Commercial auto insurance covers damage to company vehicles and bodily injuries to employees caused by an accident. Catering companies often rely on vans, delivery trucks, or other vehicles to transport food to customers. If an accident should occur while driving, commercial auto insurance could protect the business from significant losses.
Standard commercial auto insurance policies provide coverage for collision, liability damages, and comprehensive physical damage loss to company vehicles. The five main types of insurance protection that commercial auto insurance policies provide include:
- Auto Liability – Liability coverage protects against costly lawsuits if a person sues over damages to their vehicle.
- Collision Coverage – This type of coverage can be used to repair damage to a vehicle from a collision with another vehicle.
- Medical Payments – Commercial auto insurance covers medical bills that can accumulate due to injuries suffered in a vehicle accident.
- Uninsured Motorist Coverage – This type of coverage protects businesses in the event that a driver without insurance injures the driver or passengers in the commercial vehicle.
- Comprehensive Coverage – With comprehensive coverage, companies can protect against vehicle theft and damage from other incidents, such as vandalism.
Commercial auto insurance only covers company-owned vehicles. It does not cover personal vehicles that are used for business purposes unless it is the vehicle’s primary function. Employees that use their own vehicles for work errands can benefit from carrying hired and nonowned auto insurance.
Commercial Property Insurance
If a catering business uses a commercial kitchen to prepare food, it is important to have the proper insurance to protect against incidents that could negatively affect the property. Fires, burglaries, vandalism, natural disasters, and other incidents could cause damage or loss that makes it difficult for the company to continue normal operations. Commercial property insurance can help cover the cost of repairing or replacing business property, such as kitchen equipment, planning accessories, and the building itself.
Commercial property insurance can typically be purchased as part of a BOP or as a standalone policy. Most standard commercial property insurance policies cover the following:
- Furniture
- Equipment
- Computers
- Fence and landscaping
- Exterior signs
- Inventory
- Important documents
- Others’ property
The cost of a commercial property insurance policy can vary greatly depending on a number of factors, such as location and industry. Insurance companies will also consider the construction of the building and whether it is made with fireproof materials or has been recently updated with new electrical wiring, plumbing, and HVAC equipment. Areas that are prone to storms and other types of natural disasters may encounter higher premiums.
Liquor Liability Insurance
Some catering businesses may have acquired the proper licenses to serve alcohol at events, which is known as a caterer’s alcohol permit. If a caterer does choose to get this permit and serve alcohol, it is wise to also carry liquor liability insurance. Liquor liability coverage is designed for companies that sell, serve, or distribute alcohol. This type of insurance can help cover claims of property damage or bodily injury that an intoxicated person causes after a business has served them alcohol.
Liquor liability coverage can help cover a wide range of expenses, such as medical bills to treat an injury, repair costs to fix property damage, legal costs, and settlements or judgments. A liquor liability insurance policy can help cover claims related to:
- Assault and Battery – If a customer who was served alcohol by the catering company physically injures another person, liquor liability coverage could help cover any medical bills that result from the injury.
- Drunk Driving – If an intoxicated person who was served alcohol by the catering business causes a vehicle accident that results in property damage or leaves another person with a bodily injury, liquor liability coverage could help cover any damages.
- Property Damage – If a customer who was served alcohol by the catering company causes damage to another person’s belongings, liquor liability insurance could help cover the repair or replacement costs.
The cost of liquor liability insurance can vary depending on factors like location and claims history. Insurance companies view businesses that have a poor claims history as a higher risk, often resulting in higher premiums.
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Catering insurance can help protect catering businesses from a variety of risks, allowing them to grow and thrive without fear of financial setbacks caused by uncovered lawsuits or incidents. For more information about what insurance policies are needed by catering businesses, contact the experts at Southern States Insurance.