When you are in the process of creating a food startup, it is important to take insurance into consideration, as it can allow you to manage the numerous risks involved in launching your food business and servicing your customers. Preparing in advance for potentially difficult scenarios is a reliable process to ensure future success. Without insurance, you face many financial risks, when you should be focused on great food ideas.
Here are the top 3 areas of risk that insurance could protect you from when creating your food startup:
When starting a food business, it’s important to protect yourself against third party claims given the high number of interaction points with customers. Perhaps you have cooks on staff at your food startup and one accidentally cross-contaminates ingredients. If this happens, customers who consume your food may become severely sick and require medical attention. If someone believes the cuisine you served has negatively impacted their lives, they may decide to sue your business.
Given the near constant interaction with customers on a daily basis, “third party claims” are very common in the food industry. Aside from food complaints, slip and fall cases are one of the most common claims food-businesses will face. General Liability Insurance can protect your food startup in the event of third party claims, such as bodily injury or damage to property of customers and non-employees. By investing in this insurance, you help protect yourself in the event of a customer incident.
Location is Everything.
Property coverage is critical given the high potential cost to the business and common ways in which accidents occur. For example, in 2002 restaurant structure fires caused $116M in damages, and 65% of those incidents were caused by cooking accidents.
Say your food startup is a lasagna-delivery service (which, let’s be honest, it should be), you likely need to find a location with a commercial oven or invest in one for your space. Without this oven, your ability to produce and deliver lasagna would be impaired, meaning lost income. Restaurant equipment may break down occasionally, or the restaurant itself may have to go through repairs, for example in the case of a fire. If your food startup has essential equipment or machinery, it is wise to protect them and the property they are operated within through Commercial Property Insurance.
Commercial Property Insurance protects your business property, both the location and property in it, from theft, fire, natural disasters and other risks, depending on your policy. Additionally, it provides business income protection in the case that you’re not able to operate due to a covered event. With this coverage, you can ensure that if you suddenly find yourself without an functioning oven, insurance will help you get back up and running in no time without severe financial hardship.
As a note, always take the time to read and understand what are covered events in your policy. Some people fail to realize that damages related to flood, earthquake, loss of electricity and subsequent spoilage of goods are usually not covered. As a result, your amazing lasagna delivery service would not only have to halt production due to loss of power, but could also lose money on the expensive cheeses spoiling.
Employees and Safety.
Having a safe and healthy staff is essential to operating your food business, and Workers Compensation coverage will cover the costs in the case there are accidents. If your food startup staff are operating dangerous equipment, there is the likely possibility that someone will be injured, require medical attention or take time off of work. If you are a new business owner, considering current health care costs, you are at risk in the event a staff member files a claim against you to recompense them for time away from work due to injury.
Workers Compensation is an insurance coverage which will pay for employees’ care and lost wages in the case of a work-related injury. Without this type of insurance, you may find yourself facing significant financial consequences and running afoul of state law. Depending on which state your business operates in, Workers Compensation coverage may be mandated even if you have no employees, so it’s crucial for you to check.
When you are starting a food business, considering the different risks involved is a crucial step towards securing your financial and reputational future. Having the foresight to manage these risks by purchasing the correct coverage can provide you with peace of mind knowing that you have the necessary safeguards and a plan of action regardless of what lies ahead.
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