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What Types of Insurance Does a Catering Business Need?

What Types of Insurance Does a Catering Business Need?

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What Types of Insurance Does a Catering Business Need?

Catering Business Insurance Quotes

Costs for business insurance can vary greatly, and getting insurance quotes from multiple companies is recommended in order to get the best pricing.

Coverwallet and Hiscox offer easy business insurance quotes at affordable prices.

Catering is a growing industry where deliciously crafted food can be delivered to clients all around. Whether that be from catering a business lunch for five to catering a wedding of 200 guests, the need for good insurance is paramount to protect the business financially from liability and loss.

Related – Guide to starting a catering business

What Are Some of the Risks for a Catering Business?

A catering business can be exposed to several different types of risks, such as:

  • Guest intoxication when alcohol is served
  • Damage to automobiles during deliveries
  • Damage to property, like a cooking fire
  • Employee injury

Any business endeavor is not without its risks, and although this brief list tells of some possibilities, a good catering insurance policy will cover the business from financial harm due to a covered loss.

Guest Intoxication

Catering is a service provided at many functions and events, many of which may involve serving alcohol. This, in particular, is an area of high risk for a catering business because the laws for over-serving alcohol and serving alcohol to minors are very strict. A catering business and its employees can be put at great risk if a guest is injured or causes damage due to being over-served.

Damage to Automobiles

A considerable portion of a catering business is driving to and from locations. Food prepared in the kitchens is then packaged and delivered to the event and then back. Employees driving the vehicles are at risk of car accidents. As delivering food on time is especially important to the business operation, drivers may feel pressured to meet those time constraints and end up in an accident.

Damage to Property

As with other businesses that do food preparation, there is an increased risk of fires—particularly in regard to grease build-up in kitchens. Whether the caterer is preparing food on their own premises or at the client’s location, there are instances where ignition is used and may lead to accidental fires.

Does the caterer provide heating candles to keep food warm? Will faulty wiring lead to equipment failure at the client’s venue? Does the on-premise kitchen receive regular cleaning and maintenance? These are a few questions that arise when considering the risk of fire damage.

Employee Injury

Small catering companies may be run solely by the owner, but in other situations, there may be a need to hire additional help. Cooks, drivers, servers, and dishwashers are all examples of employees that a catering service. There is a level of the inherent risk associated with cooking, like cuts and burns or slips and trips.

Guest Injury

A guest may be injured while eating the food a catering business serves. Sometimes, the claims are as minor as having a foreign object in their food, but other times it can be a more serious claim, such as an illness from undercooked food or the improper introduction of a food allergen.

Hiscox.com

Types of Insurance Coverage Catering Businesses Should Consider

While business owners can never completely mitigate all the risks associated with running their business, they can help protect themselves in advance for when an accident happens. There are a variety of policies that offer protection for liability and loss. Here are a few that catering businesses should consider.

1. Liquor Liability Insurance

The ability to sell and provide alcoholic beverages is essential for some caterers and can be extremely profitable. However, liquor liability is considered one of the highest risks to a catering company. The insured may be held liable for damages due to over-serving alcohol and serving alcohol to a minor. Additionally, claims of bodily injury or property damage may occur if alcohol is over-served.

A liquor liability insurance policy provides coverage for legal fees, settlements, property damage, and medical bills associated with a claim. This type of policy will also help provide coverage if the caterer is sued for physical injury, drunk driving, and third-party injury claims.

How Much Does Liquor Liability Insurance Cost?

While the price of a policy varies depending on when and where the service is offered and the amount of liquor sales made, a liquor liability insurance policy may cost around $900 – $1,200 annually.

2. Commercial Auto Insurance

A catering business will need business vehicle insurance in addition to a personal auto policy because personal auto policies generally do not cover vehicles used for the business. As deliveries are being made and employees may be operating the vehicle, a business auto insurance policy is required.

A business auto policy will cover losses and medical expenses from:

  • Collision damage
  • Comprehensive damage (damage due to events like theft or fallen trees)
  • Liability coverage (bodily injury and property damage)

This type of auto policy covers cars, trucks, vans, and fleets of vehicles. Additionally, it covers owned or leased vehicles and employee-owned vehicles used for business operations.

How Much Does Business Automobile Insurance Cost?

A business auto policy fluctuates in cost in order to cover the catering business’s needs.

For instance:

  • How many vehicles need coverage?
  • How many drivers will be using the vehicles? How many are youthful drivers?
  • What types of vehicles are being insured? Passenger vehicles? Vans?

The average cost for a business auto policy with liability coverage set at $1 million typically ranges from $900 – $1200 annually.

3. Commercial Property Insurance

A commercial property insurance policy will cover damages to the premises owned by the business, including any business equipment or materials. For example, any items belonging to the business are insured in the event of a covered loss, such as equipment breakdown, vandalism, fire, or theft.

A catering business has a considerable amount of equipment and inventory to protect. Some equipment and materials that would be protected include:

  • Cooking equipment (bowls, utensils, electric mixers, etc.)
  • Food (meats, produce, ingredients, etc.)
  • Pot, pans, and bakeware
  • Freezers, refrigerators, dishwashers, ovens, and stoves

Fire is a significant hazard for a catering business simply due to the fact that cooking uses equipment that can start fires. A commercial property insurance policy is a fundamental policy to cover the cost of replacing items or rebuilding a structure lost to fire damage.

How Much Does Commercial Property Insurance Cost?

The cost of a commercial property insurance policy depends on factors like the value of the business property, the amount of inventory on hand, and what safety measures are in place to prevent fire and theft losses. That being said, a commercial property policy may cost anywhere from $500 – $3,000 annually.

Often a discount can be applied when a commercial property policy is bundled with a general liability policy for what’s called a business owner’s policy.

4. Workers’ Compensation

Certain catering businesses may not have employees, but those that do should consider a  workers’ compensation insurance policy. It is another one of those core policies that all business owners with employees should look into.

If an employee is injured on the job, the policy will cover lost wages, disability, and medical payments to the employee. This coverage helps lower the risk to the business in the event an injury does happen.

The need for this policy differs from state to state and is also determined by the number of employees, payroll amount, and the type of work the employee will be doing.

How Much Does Workers’ Compensation Cost?

Worker’s compensation coverage on average costs $40 per month, or $480 annually.

5. General Liability Insurance: Products – Completed Operations

A general liability policy covers court costs and settlement fees associated with lawsuits that may arise around bodily injury or property damage. In the case of a catering business, the lawsuits may be in regards to the product—i.e., the food or alcohol served.

For a caterer, these claims may arise if a patron sues over finding a foreign object in their food, or perhaps they became sick after eating the food. While these such claims may occur minimally, general liability coverage for products and completed operations is still a beneficial policy to round out the insurance coverage package.

How Much Does General Liability Insurance Cost?

The cost of a general liability policy at $1 million in coverage ranges from $300 – $1,000 annually.

The Bottom Line

A catering business has a great opportunity to bring their hand-crafted food to many customers in a wide variety of settings. A well-rounded caterer insurance package allows the catering business to provide their services confidently and without fear of any financial setbacks that an accident may cause.

Briefly, here is a quick look at the different costs of policies:

  • Liquor Liability – $900 – $1,200 annually
  • Business Auto –   $900 – $1,200 annually
  • Commercial Property – $500 – $3,000 annually
  • Workers’ Compensation – $480 annually
  • General Liability – $300 – $1,000 annually

In all, a catering business may expect to spend between $3,100 – $6,900 per year on business insurance. The cost is dependent on the size of the catering business, the number of employees, and the business’s sales. Although, on a final note, some policies can be bundled to consolidate costs.

What Types of Insurance Does a Catering Business Need?

What Types of Insurance Does a Catering Business Need?

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