Guide to Food Business Insurance

Insurance seems like a waste of money until you need it. Learn your options.

Small food crafter
Food business insurance can cover those unexpected events. Susie Wyshak

Business insurance for any small startup is critical. Especially when making food, whether by yourself or with a contract food manufacturer (co-packer), you don't want to risk messing up your whole life just to save a few hundred dollars.

Even a seemingly harmless scenario can cause big issues. Think about this example: You may use a pan that had contact with nuts by accident when you get that big order and label your products as nut-free.

You’ll be glad you had both recall and liability insurance.

How to Work With an Insurance Broker

You can contact insurance companies yourself. Or work with an insurance broker who acts as your agent, doing the work for you and interacting with the insurance company which ends up covering your business.

Choose an insurance broker that is experienced in helping food businesses, as you will benefit from their expertise. For example, the company that provided insights for this article insures many growing farmstead cheese companies, food trucks and artisan producers.

Brokers should look for the best value coverage in price and scope, among other services.

An insurance company is going to look at how a food business is starting from the ground up.

The broker will probably start out by asking you just enough to be able to look into various insurance options. For example:

  • What you’re doing, where you’re doing it and the size of the operation
  • Insurance companies will look at your production process. If you don’t have a formal production process in place, insurance companies will perceive your production as higher risk than a company making millions of units.
  • They will look at your experience as compared to factories that have been in business for decades.

    Then, in turn, the insurance broker will go out to insurance companies to get rates and scope of coverage.

    The broker will get back in touch with you to analyze which is cheapest. A lot of times the cheapest is the best value. If you learn you aren't eligible for business insurance, look into other options.

    More Insurance Coverage Is Better Than Less

    One look at this list and you may decide to put the brakes on starting your food business. Not to worry. This is a list of most types of insurance coverage a food manufacturer making deliveries with employees might need.

    It’s worth talking to an insurance broker for your particular situation. You may find you can start out with less coverage than you’ll see here:

    • Manufacturing facility and equipment damage or loss 
    • Inventory loss due to vandalism, theft, weather, disasters or other issues. (For home-based cottage food businesses, your home owners and renters’ insurance may cover some of your ingredients.)
    • Workers’ compensation insurance for W2 employees
    • Liability coverage for someone visiting who slips and falls
    • Vehicle coverage for any company cars or delivery trucks

      Particularly if your company is making its own deliveries, you have a food truck, or you have a literally hot mobile pizza business, increasing the time you’re on the road, adequate coverage in case of accidents can be the difference between saving your company and going under. 
       
    • Property-in-transit coverage in case anything happens to your food or beverages during shipment
    • Food liability insurance, to cover claims from people eating or using your foods and beverages. This product liability insurance would cover claims, up to the policy limits, for people stating that your food caused bodily injury or property damage.

      Say you’re making a nut free food that accidentally is cross-contaminated with almond flour. Or someone chokes on a piece of wrapper.

      You never know what kind of bizarre situation might arise. Product liability insurance for foods and drinks is really essential to your own peace of mind and company health.

    • Employment Practices Liability insurance, once you have more than 10 employees
    • Business Interruption Insurance covers a scenario where you’re dependent on a component or ingredient that may not become available.

      Take a peanut butter recall for example. If your entire business depended access to a  particular peanut butter supplier (which was a major issue a few years ago), Business Interruption Insurance could cover any loss and obligations to deliver your products.

    • Product Recall Insurance

      The pace of food recalls has increased in the last few years. The ice cream industry has had a few challenging years of recalls. Especially with products that are potentially hazardous, recall insurance is critical.

      One insurance broker noted has seen businesses earning about $1 million in revenue or less, making products that rarely tend to have recalls or use ingredients that tend to have recalls, sometimes choosing to self-insure, to avoid the cost of insurance. The cost of a recall might be less than the cost of the insurance premium and deductible. 

    • Loss of income due to any or all of the above, in addition to sickness or other issues.

    Umbrella Policies Simplify Insurance for Growing Companies

    Like an umbrella, umbrella insurance policies provide additional layers of protection for your company for situations when your auto policy of, say, $1,000,000 is insufficient to recover from damage or claims.

    Look Into Insurance Sooner Than Later

    Wanting to save money on insurance is understandable. It’s impossible to predict when the really bad things are going to happen. 

    The few days you thought would be OK to go without insurance coverage may be the days your neighbor has a fire that spreads to you!

    Thanks to Charlie Massie of ISU Massie & Beck Insurance Services for contributing his thoughts  on insuring food businesses. This article is informational only and should not be considered advice for your particular needs. Consult with an insurance broker to determine what's right for your business.

    More Insurance Coverage is Better Than Less

    One look at this list and you may decide to put the brakes on starting your food business. Not to worry. This is a list of most types of insurance coverage a food manufacturer making deliveries with employees might need.

    It’s worth talking to an insurance broker for your particular situation. You may find you can start out with less coverage than you’ll see here:

    • Manufacturing facility and equipment damage or loss 
    • Inventory loss due to vandalism, theft, weather, disasters or other issues. (For home-based cottage food businesses, your home owners and renters’ insurance may cover some of your ingredients.)
    • Workers’ compensation insurance for W2 employees
    • Liability coverage for someone visiting who slips and falls
    • Vehicle coverage for any company cars or delivery trucks

      Particularly if your company is making its own deliveries, you have a food truck, or you have a literally hot mobile pizza business, increasing the time you’re on the road, adequate coverage in case of accidents can be the difference between saving your company and going under. 
       
    • Property-in-transit coverage in case anything happens to your food or beverages during shipment
    • Food liability insurance, to cover claims from people eating or using your foods and beverages. This product liability insurance would cover claims, up to the policy limits, for people stating that your food caused bodily injury or property damage.

      Say you’re making a nut free food that accidentally is cross-contaminated with almond flour. Or someone chokes on a piece of wrapper.

      You never know what kind of bizarre situation might arise. Product liability insurance for foods and drinks is really essential to your own peace of mind and company health.

    • Employment Practices Liability insurance, once you have more than 10 employees
    • Business Interruption Insurance covers a scenario where you’re dependent on a component or ingredient that may not become available.

      Take a peanut butter recall for example. If your entire business depended access to a  particular peanut butter supplier (which was a major issue a few years ago), Business Interruption Insurance could cover any loss and obligations to deliver your products.

    • Product Recall Insurance

      The pace of food recalls has increased in the last few years. The ice cream industry has had a few challenging years of recalls. Especially with products that are potentially hazardous, recall insurance is critical.

      One insurance broker noted has seen businesses earning about $1 million in revenue or less, making products that rarely tend to have recalls or use ingredients that tend to have recalls, sometimes choosing to self-insure, to avoid the cost of insurance. The cost of a recall might be less than the cost of the insurance premium and deductible. 

    • Loss of income due to any or all of the above, in addition to sickness or other issues.

    Umbrella Policies Simplify Insurance for Growing Companies

    Like an umbrella, umbrella insurance policies provide additional layers of protection for your company for situations when your auto policy of, say, $1,000,000 is insufficient to recover from damage or claims.

    Look Into Insurance Sooner Than Later

    Wanting to save money on insurance is understandable. It’s impossible to predict when the really bad things are going to happen. 

    The few days you thought would be OK to go without insurance coverage may be the days your neighbor has a fire that spreads to you!

    Thanks to Charlie Massie of ISU Massie & Beck Insurance Services for contributing his thoughts  on insuring food businesses. This article is informational only and should not be considered advice for your particular needs. Consult with an insurance broker to determine what's right for your business.