In this Q&A style interview, Clint Bishop, Vice President of Marketing for Veracity Insurance and Food Insurance Liability Program (FLIP) answers some of the most important questions asked by businesses when seeking insurance for their food business.
What are the different types of insurance for food business?
Depending on the type of business, there are a variety of insurance policies a small to mid-sized food business should carry. The most common is General Liability insurance, which covers your most basic third-party liabilities when running a food business. Many local and state regulations mandate specific requirements for businesses to carry general liability insurance with minimum coverage amounts because they’re typically intended to protect customers and other third-parties. We encourage all of our insured or potential clients to check those local requirements to ensure their selected coverage fulfills these mandates. Policy limits vary; however most policies include limits up to $2,000,000 in General Liability aggregate coverage with variations in limits such as per occurrence or personal injury.
Other types of business-specific policies or coverage include Product Liability insurance (coverage for liabilities associated with the food you serve) which is usually included in a General Liability policy, or equipment coverage (also known as Inland Marine insurance) which is an additional policy operators can add over and above the limits of your base General Liability policy. Depending on the type of food business, operators should look for insurance providers who are specialists in their businesses and offer custom solutions catered to their needs. For instance, a caterer may need coverage for damages incurred on a client’s property or rented equipment. Or mobile bartenders may need liquor liability coverage either in blanket form or per event. We highly recommend that food business owners seek out information online or work with insurance providers who are experts in the food service sector to delineate what coverage they may need and not rely just on generalized brokers for the right information.
Does every business need to carry all types of coverage?
Every business type requires different coverage based on their specific needs, income level, legally required limits, and other factors such as asset values and service type. General Liability coverage and Workers’ Compensation coverage are mostly standardized although their costs and coverages vary among the different sectors operators work in.
What are the top 5 things to look for when selecting an insurance provider?
Searching for insurance can be daunting and overwhelming for many operators. Good providers should make the process seamless and personalized. When selecting insurance providers, we suggest the following:
- Expertise. Find providers who understand your sector. In the case of food industry operators, there are a select few organizations that cater to this sector specifically, with FLIP being one of them. Working with a provider that understands your business can mean the difference between thousands of dollars in out-of-pocket costs associated with an unforeseen claim.
- Flexibility. Look for flexibility in payment options. Small and mid-sized businesses need to deploy their capital into building their businesses and insurance providers should be open to being a part of this growth by offering flexible payment terms such as monthly installments. Upfront and substantial annual fees can dig into operating capital for a business and unnecessarily put operators in a cash crunch.
- Convenience. Historically insurance has been procured through brokers. Since the days of the “digital transformation”, many insurance providers offer direct-to-business plans through online portals. Many clients find this system significantly easier to navigate, saving them time in their insurance search and effort in selecting the right policy. Insureds are able to get quotes, request additional insured, and make policy changes all without going back and forth via email with an intermediary.
- Reputable. Pick someone who people like working with. More and more decisions are being made based on recommendations from peers or strangers via reviews. Previously it was hard to gain insight into what working with a provider was like; however, the days of open reviews have changed this paradigm. We always encourage operators to look at online reviews of carriers when selecting their provider. There are many very happy customers out there – you’ll want to be one of them!
- Sizeable. In insurance, larger can be better. While mom and pop insurance shops may be appealing to some operators, in insurance, size can matter. Whether you are looking to scale your business, or if a large-scale catastrophe happens, working with a national carrier can have advantages such as stability and scalability. Even if you choose to work with a smaller agency or brokerage, it’d still be advised to make sure the actual carrier is stable, and many of them are rated by A.M. Best or Moody’s, for example. In the unfortunate case of needing to file a claim against your policy or wanting to grow your business by adding additional coverage, larger carriers are historically more capable of helping their insured to rise to those occasions than smaller shops. The depth of their resources is a perk of working with the carrier and the impact of unforeseen circumstances can be minimized when working with a larger carrier.
What is the average cost of a policy for small food businesses?
Pricing insurance is a bit like pricing houses–the range can be broad if you ask how much a small house costs because materials, location, quality, builder, etc. vary widely. Similarly, insurance costs can vary widely based on who you choose, what size and number of coverages you select, etc. But while all costs depend on the type of business, coverage limits, and policy types, the average monthly cost of general liability insurance for a small food business (those doing less than $500,000 a year in revenue) can be as little as $25/month – or $299 per year. Expect to pay that at a minimum and more if you’re adding other coverages, higher limits, or working through the more traditional commissioned agents or brokers.
Do businesses need a broker to get insurance?
Going direct to insurance providers without the use of a broker or agent is becoming the new normal. Many food business owners prefer the convenience of working directly with carriers, primarily due to the emergence of online portals giving owners/operators direct access to make payments, policy changes, and file claims. Of course working with a broker is always an option, more and more we are seeing operators go around brokers for their small business insurance needs. Brokers and traditional agents can provide a little more hand-holding, but it of course typically comes with a cost.
Is there anything that insurance doesn’t cover? Or specific additional insurances a food business should carry?
Every policy is going to have exclusions on it, so it’s absolutely recommended to read those for an idea of what’s not covered. Once you know that, you can explore supplemental coverages if those things are important to you or just know the risks moving forward.
When selecting your insurance, it is important to think about “what you are covering” and then ensure your coverage matches those needs. For instance, a food truck operator may think that their truck would be included in an auto policy add-on; however, what about the equipment or food within the truck? Or a food festival food vendor whose event got canceled due to rain? That would most likely not be covered under a General Liability insurance policy so that operator would need to seek additional event coverage. The best way to ensure you are covered is to make a list of “all that could go bad”, then work with a trusted insurance company that can help identify what type of policy would cover that instance, and secure each type of policy.
Anything else you would add:
At the end of the day, insurance is “the business of risk”, and when you’re buying insurance you’re ultimately deciding how much risk you want to keep versus how much risk you want to pay a premium for the carrier to assume. Core questions are going to be “Who am I most interested in covering risks for?” “Am I trying to cover and protect against claims from customers and third parties?” That’s General Liability, Product Liability, and other forms of insurance. “Or am I trying to cover and protect against claims from my employees?” That’s typically Workers’ Compensation and other forms of insurance.
We often get asked, “How much insurance should I buy?”, but that’s really the wrong question. Instead, ask yourself, “How much can I afford to lose?”. Even if you experience a claim from a customer, landlord, venue owner, or employee that’s not valid, it’s still going to potentially cost a significant amount of money and time just to demonstrate that the claim is invalid. Can you afford to lose a claim? Can you afford the cost just to defend one? Answering those questions alone can help you decide in at least a small way how much and what types of coverage you need.
