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What Types of Insurance Does a Food Truck Business Need?

What Types of Insurance Does a Food Truck Business Need?

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What Types of Insurance Does a Food Truck Business Need?

Food Truck 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.

What Types of Insurance Does a Food Truck Business Need?

Food trucks offer a unique way to bring crafted and specialized food to a wide range of customers. In addition, the mobility of the food trucks allows the business to cater to many customers, join fairs and festivals, and keep operating costs low.

Food trucks and mobile food vendors improve their success with a detailed business plan that includes insurance coverage. Even with loss prevention measures, unfortunately, accidents can still occur. However, insurance protects the business from financial hardships that follow accidents and losses.

What Are Some Risks for a Food Truck Business?

Since food trucks are mobile businesses that cater to many people, there is an increased risk of hazards. Some of those risk factors include:

  • Robberies
  • Car accidents
  • Sudden loss of business
  • Employee injuries
  • Customer illnesses or injuries

Robberies

Robberies are problematic for food truck businesses. Several factors increase the risk of robberies, but the main reason is that food trucks primarily operate on a cash basis. Cash is commonly a target for robbery in many settings. In addition, food trucks are generally low-security vehicles that are easy to enter; and many trucks are open at late hours, increasing the risk of robbery. Also, employee dishonesty is another problem that the business may encounter.

Car Accidents

Car accidents can lead to expensive third-party injuries and damages. In addition to liability risks, physical damage to the food trucks is sometimes a more significant risk. The food trucks are a large asset, and when they are unusable, the business cannot generate income. Damage not only reduces revenue but also leads to expensive repairs. For example, food trucks often have custom-built parts, meaning repairs take longer and cost more.

Aside from collision damage, physical damage can also occur from fires, theft, vandalism, wind, and hail. Poor maintenance can also lead to damage; for example, old equipment may fail, worn tires may blow, and grease-covered exhaust fans may catch fire.

Sudden Loss of Business

Most times, a loss in business occurs when the food truck is inoperable. Vehicle damage is a common reason for lost business since a damaged food truck cannot transport, cook, or serve food.

In addition, a loss of business can also occur from losing access to locations. Although food trucks are mobile, many food trucks rotate between the same areas, drawing repeat clientele. A loss in location availability may result in lost customers and the need to apply for permits or licenses in new jurisdictions.

Employee Injuries

A food truck business’s office workers and truck workers alike may suffer injuries from slips, trips, and falls. Although, workers inside the food truck have additional risks. For example, employees could be injured in car accidents or while cooking. Injuries while cooking includes cuts, burns, lacerations, and back strains. Additionally, the propane tank used to fuel the cooking appliances may explode in extreme scenarios, causing severe injuries.

Customer Illnesses or Injuries

Since food trucks sell food and drink, there is a risk of customer illness or injury from consuming contaminated food or spoiled products. Customer injuries can also occur from allergens, improper storage, and foreign objects found in the food. In addition, bacteria, such as E. coli and salmonella, are foodborne illnesses that can cause severe illness and may result in a lawsuit.

Some causes of food spoilage or contamination include:

  • Poor cleaning procedures
  • Mechanical failure of refrigeration equipment
  • Ill employees who work while they are contagious

Hiscox.com

What Types of Insurance Policies Should a Food Truck Business Consider?

Although many types of hazards risk the business’s financial well-being, there are also many types of coverage that protect the business. Some of the insurance policies that a food truck business should consider include:

  • Crime insurance
  • Commercial automobile insurance
  • Business interruption insurance
  • Workers’ compensation insurance
  • General liability insurance

Crime Insurance

Crime insurance insures a business’s money against cases such as fraud, embezzlement, and theft. For example, a crime insurance policy will not cover thefts by owners, partners, or executives but does protect against employee theft.

Other insurance policies cover the physical damage that thefts cause, but typically, lost cash is not covered without a crime insurance policy. Businesses that deal with cash transactions or have cash that passes between employees benefit from crime insurance since cash is a common target for theft and fraud. 

Commercial Auto Insurance

A standard commercial automobile insurance policy includes two primary coverages: liability insurance and physical damage insurance. A food truck business is exposed to both risks and needs a policy that covers both exposures.

First, the liability coverage insures the business for claims of bodily injury and property damage that result from at-fault car accidents. A commercial automobile policy covers claim expenses up to an agreed policy limit. Policy limits are variable but should be adequate to protect the business’s assets. Usually, the per-incident coverage limit starts at $500,000 or $1 million of coverage.

Next, the physical damage coverage insures the business’s vehicles and/or food trailers for collision and non-collision damage. This line of coverage is essential for food trucks since the trucks are a significant company asset.

Physical damage insurance covers hazards up to an agreed policy limit, typically determined by the vehicle’s value, including any customization. In addition, physical damage coverage usually has a collision deductible and a second deductible for non-collision damages (i.e., hail, falling objects, theft, and vandalism).

Business Interruption Insurance

Business interruption insurance offers financial coverage for periods when food trucks unexpectedly close. For example, a fire may close the food truck until repairs are complete, resulting in a loss of income, or your kitchen is closed due to broken plumbing. An interruption in everyday business operations can be especially hard on small businesses during a busy season. Food truck businesses that depend on regular operations need a business interruption policy to cover this exposure.

Business interruption covers several expenses during a closure, such as:

  • Lost income coverage
  • Payment on regular bills and loans
  • Employee wage coverage
  • Temporary relocation costs

Workers’ Compensation Insurance

A workers’ compensation policy covers an injured employee’s expenses, including the following costs:

  • Medical payments
  • Lost income
  • Ongoing rehabilitation care
  • Disability income
  • Funeral expenses

Many states require that businesses with employees carry workers’ compensation policies; however, regardless of the state’s requirements, a business with employees benefits from this policy. The policy covers the employee’s expenses, but it also protects the business from expensive lawsuits.

General Liability Insurance

General liability coverage is a core business owner’s policy because it protects against many liabilities. For example, general liability for products and completed operations insures the business against claims of bodily injury or property damage that occur from the business’s products or actions.

Food trucks benefit from this line of coverage because it covers potential injury or illness claims resulting from the food. More importantly, some vendors, landlords, and commercial kitchens require food truck owners to have general liability protection before signing any agreements.  Personal injury, employee negligence, and customer illnesses can result in insurance claims, regardless of how it occurs. 

Fortunately, a general liability policy covers claim expenses, including:

  • Medical benefits
  • Property damage repairs
  • Legal fees
  • Settlements

How Much Does Food Truck Insurance Cost?

The insurance costs for food truck businesses depend on their size and scope of operations. For example, a food truck business with a fleet of trucks, multiple employees, and many customers will need higher coverage amounts than an owner-operated, single food truck business that operates seasonally.

When an insurance carrier writes an insurance policy (meaning, the policy contract is customized specifically to the business), the insurance company will consider many factors. For instance, an insurance company may consider the following elements:
– The number of business-owned food trucks
– Any customization of the food truck
– The types of products sold
– The number of employees on the payroll
– The loss prevention measures in place
– Any past or current lawsuits or insurance claims

As coverage amounts and rates vary between insurance companies, the best way to determine costs is by contacting multiple companies for a quote. This way, quotes can be compared and selected based on the best coverage limits and pricing.

What Types of Insurance Does a Food Truck Business Need?

What Types of Insurance Does a Food Truck Business Need?

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