Coverage & Costs – Forbes Advisor – Technologist

Owning a bakery isn’t just about flour, sugar and sprinkles. It also comes with its own set of industry-specific risks. For example, a kitchen fire could result in temporarily closing your bakery and losing income. Or a customer might slip on a wet floor and sue you for injuries.

Think of bakery insurance as a combination of small business insurance coverage types for the problems that affect your particular industry.

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Who Needs Bakery Insurance?

Working in the bakery industry presents its own set of potential problems, like oven fires, equipment malfunctions and employee injuries, making bakery insurance a must-buy. The types of bakeries that need small business insurance include:

• Bakeries.
• Bread, rolls, pies and other baked goods manufacturers.
• Cafes.
• Donut and bagel shops.
• In-home and mobile bakeries.
• Pastry shops.
• Wedding cake shops.

What Does Bakery Insurance Cover?

Much like your favorite recipe blends various ingredients, bakery insurance combines several distinct types of coverage for problems like lawsuits and claims. A great place to start is with a business owners policy (BOP).

A BOP bundles three essential coverage types and it’s cheaper than buying each coverage separately. Here’s what comes with a BOP:

General Liability Insurance

General liability insurance, also known as business liability insurance, covers accidental injuries or property damages to others. For instance, if a customer trips over an object in your bakery and breaks their wrist, your general liability will pay for their medical expenses and your legal costs if you get sued. It also covers other types of problems, such as copyright infringement, reputational harm and advertising injury.

Commercial Property Insurance

Commercial property insurance covers your business building and property for problems like fire, vandalism, severe weather and theft. It covers business items like furniture, display cases, ovens, refrigerators, inventory, supplies and business records. For instance, if a fire damages your bakery, commercial property insurance pays to repair and replace your appliances and kitchenware.

Business Interruption Insurance

This coverage pays for lost income if you have to temporarily shut down your bakery due to a problem covered by your policy, like a fire or severe weather. For example, if a windstorm damages your bakery’s roof, business interruption insurance will cover your lost income and temporary relocation expenses. This coverage is also called business income insurance.

Other Small Business Insurance Types

A BOP is a solid base layer of coverage, but your bakery business will likely require more coverage types to address other types of risks, like car accidents and injuries to your employees. Here are other types of small business insurance to consider:

Commercial Auto Insurance

If you use a vehicle for your bakery business, such as delivering baked goods to clients, commercial auto insurance is necessary. That’s because a personal car insurance policy won’t cover business.

Common types of coverages included with commercial auto insurance include:

• Bodily injury liability. This covers accidental injuries to others if you or your employees cause a car accident.
• Property damage liability. This covers accidental property damage to others caused by you or your employees. For example, your employee backs into a client’s fence while delivering an order.
• Collision insurance. This pays to repair or replace your work vehicle if you or your employees get into a car accident.
• Comprehensive insurance. This pays to repair or replace your work vehicle for problems like theft, fire, vandalism, floods, falling objects, severe weather and collisions with animals.
• Uninsured motorist (UM)/underinsured motorist (UIM) coverage. This pays for you and your passengers’ medical expenses if a driver without insurance or not enough insurance crashes into you. In some states, you may be able to add UM to pay for damage to your work vehicle caused by an uninsured driver.
• Medical payments and personal injury protection (PIP). This pays for medical costs for you and your passengers, regardless of who was at fault for the accident.

Commercial Umbrella Insurance

If you need more coverage on top of your business liability insurance, you can add a commercial umbrella insurance policy. It kicks in when your business liability limits are exhausted. For example, if you get hit with a $900,000 lawsuit but your business liability coverage is limited to $500,000, the umbrella policy would cover the $400,000 shortfall.

Cyber Liability Insurance

You’ll want to buy cyber liability insurance if your bakery business collects and stores sensitive information, such as customer information and credit card numbers. It covers expenses related to cyberattacks, including data and identity recovery, investigative services and legal fees.

Equipment Breakdown Insurance

Equipment breakdown insurance pays to repair or replace your bakery’s equipment for mechanical or electrical issues like mechanical failures, motor burnout, power surges and electrical shorts. This includes equipment such as refrigerators, food processing equipment and retail point-of-service devices. It also covers expenses like food spoilage and lost business income due to the breakdown.

Hired & Non-Owned Auto Insurance

If you or your employees rent a vehicle for business tasks like making deliveries, hired & non-owned auto insurance covers accidental injuries or property damage caused to others. For instance, if one of your employees uses a rented van to deliver a wedding cake and causes a car crash that results in injuries, this coverage would pay for the other driver’s medical expenses.

Workers’ Compensation Insurance

This covers an employee’s medical costs, lost income and other expenses (like physical therapy) if they suffer injuries or become sick due to work-related tasks. If your bakery employs at least one person, most states require you to have workers’ compensation insurance.

What’s Not Covered by Bakery Insurance?

Your bakery insurance won’t cover certain types of risks, including:

• Flood and earthquake damage (you’ll need separate policies to protect against flood-related or earthquake-related losses).
• Government seizures.
• Infectious disease.
• Intentional or fraudulent acts.
• Wrongful termination (unless you have employment practices liability insurance).

How Much Does Bakery Insurance Cost?

Bakery insurance costs about $65 per month for a business owners policy, according to Insureon. Bakeries pay about $165 per month for workers’ comp insurance.

Your bakery insurance costs will depend on several factors, including:

• Your business location: Your bakery’s geographic location will play a role in your insurance costs. Bakeries in urban areas generally face different risks and higher costs compared to bakeries in rural areas.
• Company assets: Your revenue and business assets will factor into your bakery insurance costs, including your bakery equipment, inventory and property.
• Number of employees: The number of employees at your bakery will affect your workers’ compensation costs.
• Policy types and coverage limits: The types of coverage you choose and the limits you set will affect your bakery insurance costs.
• Previous claim history. If you have a history of filing business insurance claims, your insurance cost will likely be higher.

Examples of Bakery Insurance Claims

Bakery Insurance Frequently Asked Questions