Bakery insurance is a simple combination of policies for your bakery that, when combined, provide all of the coverage you need against claims. Claims can come in all types of forms. Whether it is an allegation of food poisoning or a power outage damaging your oven, insurance for a bakery business is an important part of your overall business plan.
The most important types of policies are general liability and commercial property for your bakery. If you have any employees, then you’ll need to carry workers’ compensation, too. Bakery insurance costs will depend on the size of your operation, but you can expect to pay between $25 and $65 a month for general liability insurance.
Why Bakers Need Insurance
I get it—the cost of your supplies is volatile and subject to supply chain disruption. This can make it hard to develop a long-term financial plan for your bakery. While you may not want to pay for insurance, bakery insurance costs are far less than the risk of going uninsured.
A bakery needs insurance because, unfortunately, simply being prepared isn’t enough. You can take every precaution imaginable to make your business safe and still suffer a loss that is outside of your control. For example, recently, a bakery in Connecticut had a bear break into its facility, scare the staff, and eat 60 cupcakes before being chased away. This bear incident happened while they were loading their supplies into a delivery van—and the incident could have gone very differently.
If it had damaged any property, then you would need commercial property to cover the loss. Moreover, if the bear had injured any employee, then your workers’ comp would be needed to help them get better and return to work.
Bakery Insurance Requirements
Strictly speaking, there is no national requirement for business insurance. However, states do have some level of coverage requirements for businesses. If your bakery operates in a delivery space and has a dedicated vehicle, you will be required to carry commercial auto insurance. Depending on the state your bakery operates in and the number of employees, you may be required to offer workers’ comp to your employees.
Beyond those two, there aren’t any formal bakery insurance requirements. However, there are a number of coverages that you ‘knead’ to consider purchasing for your bakery.
Type of Bakery Business Insurance | What It Covers |
|---|---|
General Liability | Protects your business from claims involving bodily injury, property damage, or personal injury claims filed against your business |
Commercial Property | Helps repair or replace your equipment if it is stolen or damaged by a covered loss |
Workers’ Compensation | Takes care of employees injured on the job or who become ill because of their work |
Commercial Auto | Can cover your vehicle if it is damaged in an accident and help other vehicles or people if you are at fault for a loss |
Cyber Liability | First- and third-party help if your business suffers a cyber incident |
For a bakery, general liability is the most important type of coverage because it offers the broadest protection that touches on the most common risks your business will face. General liability offers coverage in three areas: property damage, bodily injury, and personal injury or reputational harm (think libel).
Every general liability policy I have encountered includes additional coverages. One of them is product liability, which is what you’d want for food poisoning. It also includes premise liability, which means if someone gets injured inside your bakery, this policy covers it. And if you rent our kitchen space, general liability will include coverage for damage to the rented premises, too.
After general liability, commercial property is going to be a key part of your bakery insurance suite. Commercial property is a first-party coverage, meaning it is for your equipment and business property.
If you own a brick-and-mortar building, then you will want commercial property insurance. If you rent but own some industrial mixers, bakery ovens, and proofing cabinets, you will want commercial property. However, if your business operates out of your home and you use your personal equipment, then check your homeowners policy to make sure you do not need a special endorsement for a home-based business.
If your business is a one-person operation, then you won’t need workers’ comp. However, if you have even one part-time employee, depending on the state, this coverage could become required. Workers’ comp helps employees who were injured on the job or became ill because of their work, assisting with medical bills, rehabilitation, lost wages, and programs to help them return to work. It is required in every state except for Texas and South Dakota, but every state has a different threshold for when it is required.
Workers’ comp is important for business owners because it offers liability to the employer when the employee becomes injured.
When it comes to bakery insurance requirements, commercial auto coverage is one of the few required types. Commercial auto is going to be necessary for the more niche type of bakery. If your bakery specializes as a supplier and delivers baked goods regularly, then you should look into commercial auto. If your bakery owns a dedicated delivery vehicle, then a commercial auto is required.
Commercial auto insurance is a bit like a BOP in that there are multiple types of coverage that all fall under the title “commercial auto insurance.” Some are first-party coverages for damage to your vehicle—these are collision and comprehensive coverage. Then, there is property damage, which is liability coverage. Beyond that, there are medical coverages: bodily injury (third-party), personal injury protection (first-party), and a host of other types of coverages.
If your bakery ships its goods, then that means you have a lot of important customer data (e.g., name, address, payment information) stored. You’ll definitely want to at least consider getting cyber liability insurance to protect your business from the growing threat of cyberattacks.
Cyber liability can be a single type of cyber insurance protection, like data breach coverage or ransomware insurance, or like commercial auto carry multiple levels of first-party and third-party protection. A good cyber liability policy for a bakery will include help retrieving hacked files and covering the costs of notifying impacted customers, along with some form of credit monitoring system for them if a breach happens.
Bakery Insurance Cost
It is difficult to accurately say how much bakery insurance costs. This is because there are different types of bakeries: a home baker, a traditional bakery, and a coffee shop will all have different types of risks, customers, business size, and types of insurance. There is also a supplier or a bakery that operates almost entirely online. However, many providers do share the average bakery insurance cost for their customers.
- The Hartford: Its bakery customers pay an average of about $85 a month for a BOP.
- Next Insurance: General liability costs between $25 and $27 a month for most of its customers and the median cost for workers’ comp is $155 a month. While most of its customers pay between $34 and $61 a month for commercial property insurance.
- Insureon: Customers of this online broker pay an average monthly cost of $37 for general liability, $145 for cyber insurance, and $150 for commercial auto coverage.
- Tivly: According to the commercial marketplace Tivly, the average cost for a BOP for a bakery is between $65 and $79, monthly.
- FLIP: Specializing in the food industry, FLIP’s general liability policies start at $25.92 a month.
As I alluded to above, when insurers calculate the premium of your bakery, one major data point will be what type of bakery you run. How large it is, whether items are, and the type of equipment will all factor into the cost. Beyond those things specific to your bakery, there are more general points of information insurers always rely on when calculating the cost of insurance. These are as follows:
- Yearly revenue: The yearly revenue, or projected revenue for your bakery, gives insurers an insight into the scope of your business and the likelihood of a lawsuit.
- Location: Whether your business is in a fire zone, flood zone, hurricane zone, or highly litigious zip code matters to an insurance company.
- Claims history: If your business has had a claim in the last few years, then you can expect your rates to be higher or even have a harder time finding insurance.
Frequently Asked Questions (FAQs)
A bakery should have general liability, commercial property, and workers’ comp. General liability will give your business premise liability and protection from food poisoning claims. Commercial property will help if your equipment gets damaged, and workers’ is there for your employees if they get injured or ill on the job.
Yes. Home-based businesses still need business insurance. So, a home baker will want a liability policy. However, you may be able to purchase an endorsement on your homeowner’s policy. If you are a home-based baker, start by speaking with your agent about options with your homeowner’s policy before purchasing more insurance elsewhere.
No. When a church or nonprofit organization, for instance, organizes a bake sale, the organizing group assumes the liability. Now, if you are selling baked goods as your own business at a farmer’s market, then you will need some form of bakery insurance.
Bottom Line
Your day starts before the sun has risen. It takes a lot of time and talent to make sure all of the baked goods are ready to be served to the morning crowd. It may not seem like it, but running your bakery is a pretty risky business. Thankfully, you have bakery insurance, so that is one less thing occupying your mind.
Bakery insurance is built on the combination of a few policies that protect your business from the allegations that your negligence caused harm and keep your business running when the storm knocks the power out. General liability, commercial property, and workers’ comp are the most important policies for your business.
Simply Business is an online digital broker specializing in small business insurance. In just minutes, you can get a quote online from multiple top-rated carriers and purchase bakery insurance online. All it takes is ten minutes. Get your free, no obligation quote today.
