What type of insurance do I need for my home-based hospitality business?
Because each business is different, there are different insurance policies for different scenarios. We will list the most common ones that you should have, but keep in mind that this list is very comprehensive and may not cover all the risks you face. For example, someone making food that involves raw chicken will have a higher exposure to risk than someone making bread. Make sure to do your research based on what type of food you will be selling, and how you will be selling it (ie pickup, delivery, shipping).
General Liability – When it comes to lawsuits General Liability is the first stop. It will provide coverage for bodily injury and property damage to third parties. For example, a customer slips in your kitchen while picking up their order because you forgot to clean up the water you spilled. Or you sit hot food one someone’s counter and it damages the surface and you have to pay to fix it. A big expense associated with lawsuits is defense costs and those will be covered as well. Most vendor contracts require this at a minimum for food and drink service.
Food Contamination/Poisoning – Probably the biggest risk you will face by cooking or baking and serving food to people is food poisoning. If a client gets sick because of your food, you can be sure that they will sue you and if it happens to multiple people you could be in huge financial trouble without insurance. Food contamination is another big issue for those in the foodservice industry. Even if it is not your fault, and a shipment arrives contaminated, you will have to throw all of those ingredients out and buy new. How will you pay for the replacement items?
Commercial Auto – Making food deliveries is a great service to offer your customers and can even earn you some tips. However, the moment you get in your personal vehicle for business it must be insured on a Commercial Auto insurance policy. Many contracts with vendors will require this as well.
Workers Compensation – If you decide to have employees than you will have to get Workers Compensation insurance to provide them with lost wages and medical expenses if they become ill or injured due to a work-related incident. While most home-based foodservice businesses might not have employees, it is worth mentioning. Many states require Workers Compensation insurance even if you have only one part-time employee. Make sure you know the law in the state you live when you start your business if you plan to hire any employees.
Cyber Liability – In today’s world it would be surprising if you didn’t take online payments, or payments with your phone using some kind of card reader. If this is the case, or you store any customer information online, you should have Cyber Liability insurance. With the number of data breaches that happen nearly almost every day, it is crucial coverage to have especially because most of the Cyber policies assist with public relations. We often don’t even know about a data breach when it happens because it is quickly resolved, and most of the time that is because of Cyber Liability insurance.
There are many other types of insurance policies that are available and that you might need to add to your insurance portfolio depending on your needs. You might want to also consider Employment Practices Liability, Umbrella Liability, and Professional Liability if you plan to offer any kind of cooking classes at any point.