How to Insure Your Bakery
Lawsuits can spoil your bakery’s business and could even put it out of business. Does your bakery have enough business liability to protect it from lawsuits related to your products or an injury on your premises.
Liability insurance is the key to your bakery insurance package. It helps protects you financially if your bakery is faced with a lawsuit. You can customize your liability business insurance to meet your bakery business’s needs.
Western Financial Group, a 100% Canadian company, can help you navigate your business, car, home, and boat insurance during this period of economic uncertainty.
What is bakery insurance?
Bakery business insurance protects you from risks associated with your baking shop and its operations, such as third-party bodily injury or property damage lawsuits involving customers or suppliers, or damage from a fire. Commercial insurance for bakers can also cover the cost of a claim by a customer who alleges the food you made caused them to get sick.
What bakers need an insurance package to protect their business?
You need a bakery insurance package if you own:
- Bakery
- Pastry shop
- Cake-making business
- Cookie-making business
- Cupcake shop
- Donut shop
- Bagel shop
- Pie shop
- Wedding cake maker
What if I run a home bakery?
If you own a home-based bakery, you need baker’s business insurance to protect you from third-party liability lawsuits, or a fire or flood.
Your homeowner’s policy is not designed to protect a commercial operation running out of where you live. You will need commercial insurance with liability coverages.
How will a bakery insurance package protect my business?
Bakery insurance will protect your bakery or cake-making business from the potential risks associated with its daily operations, such as customer/supplier injuries or property damage. It will also protect you financially if you are sued.
Without insurance, you would have to cover these costs out of your own pocket.
How much does bakery insurance cost?
There isn’t a set price to insure a bakery. Where are you located? What is your experience, number of employees, size of your business, annual revenue, and claims history? Are you an industrial operation or a retail bake shop?
A baking insurance package can help protect you from these 3 common claims
1. A customer slips and falls at your bakery shop, injures their back, and sues you.
2. A customer says your baked goods made them with food poisoning.
3. Cyberthieves hack your computer system and steal all your customer data.
Liability is the cornerstone of your bakery insurance. What liability insurance do you need?
Product liability insurance
Your cakes and bread could get contaminated and make a customer ill. When this happens, you could be held liable for any damages.
Product liability insurance helps protect you against liability claims and lawsuits stemming from the products you sell and distribute.
If a baked product makes a customer sick, this type of insurance can help cover costs from a potential lawsuit.
It also protects your bake shop from damages from design, manufacturing, or marketing defects, such as incorrect labelling and safety warnings.
Product recall insurance: This type of coverage reimburses you from financial losses sustained when a product is recalled whether the government or a manufacturer orders the recall. The costs can include the recall expense, replacement costs, lost profits, and brand rehabilitation expense.
A bakery store owner can face financial ruin without product recall insurance because you would have to absorb the losses yourself. This can be financially damaging, especially if you are named in a third-party personal injury or property damage lawsuit.
Commercial general liability (CGL) insurance
It’s not impossible that a customer or supplier could be injured at your store or their property damaged at your bakery shop. You could be sued as a result.
If you were sued, CGL insurance would help cover the legal costs to defend the claim against your bakery business in court, as well as costs to cover damages to compensate third parties whether you win or lose your case.
What does CGL insurance help cover?
- Injury to a third party who is not your employee
- Damage to someone’s property
- Damage to rented property
- Medical bills if someone is injured
- Legal costs and settlement costs of liability lawsuits filed against you
- Liability lawsuits related to slander and libel
Cyber insurance
If you store online financial data for your bakery business or you take credit card or debit payments, you must protect this information and can be held liable if you don’t.
If your computer system is hacked, cybercriminals can sell the information. Without cyber insurance, you will have to pay out of your pocket for the cost of restoring your computer system. You may also be liable for damages to third parties whose information has been stolen and you may have to pay for notification expenses to inform customers affected by a breach.
What other insurance is needed for bake shops?
Equipment breakdown insurance
Your bakery likely has expensive electrical and mechanical equipment to keep your frozen and fresh baked goods fresh and safe for consumption.
Equipment breakdown insurance provides coverage for property damage from the sudden and accidental breakdown of insured equipment not automatically covered by a standard commercial property policy. You’ll need to have a list of the equipment at your retail store and how much it’s worth.
Commercial property insurance
Whether you rent or own your location for your bakery business, commercial property insurance can provide financial coverage in the case of a fire that destroys or damages your business property and its contents.
Commercial property insurance also protects your place of business or office and its contents from damage or loss related to severe weather, theft, and vandalism.
You should consider adding sewer backup or overland flood coverages, which standard business insurance policies typically don’t include. Sewer backup and flood cleanups can be costly to get your bakery back in business.
Business interruption insurance
Business interruption insurance supports you when your bakery can’t operate due to a covered loss. This type of insurance can be the difference between recovering from a loss and closing permanently.
There are many losses that can force your business to shut down, including:
- Damage to your equipment from fire or vandalism
- A major reduction in revenue due to a client/supplier facing losses of their own
- A disruption in your supply chain
Business interruption insurance can help with expenses such as:
- Payroll
- Rent
- Utilities
- Property taxes
- Alarm monitoring
- Relocation of your business
Commercial auto insurance
If you have a business car that you use for your bakery, it won’t be covered by your personal car insurance policy.
Crime insurance
It should be part of your bakery/cake making insurance package.
Crime insurance can protect you against theft, credit card fraud, forgery, counterfeit, and other types of fraud that employees sometimes commit.
5 FAQs about bakery insurance
Why do bakeries need liability insurance coverage?
Bakeries need liability insurance to protect themselves financially from risks that can lead to lawsuits, third-party property damage and third-party injury involving a customer or supplier, and business interruptions such as a fire that forces your bakery to temporarily shut down.
Does home insurance cover home bakeries?
Home bakeries need business insurance because standard homeowner’s policies typically do not cover business-related risks or losses associated with running a bakery from your home. Operating a home-based bakery exposes you to a variety of risks, including client injury, product liability and fire.
Why do bakeries need product recall insurance?
Product liability insurance protects bakers from financial and reputational risks associated with their products causing harm to customers. Bakeries face the possibility of food poisoning and contamination.
Do bakers need to insure their equipment?
Bakeries have specialized equipment. Equipment breakdown insurance provides coverage for property damage from the sudden and accidental breakdown of insured equipment that’s not automatically covered by a standard commercial property policy.
What is product liability insurance for bakers?
Product liability insurance helps protect bakers against lawsuits related to the baked products you sell and distribute. If a baked product makes a customer sick, this type of insurance can help cover costs from a potential lawsuit.
