Insurance for Small Bakeries: What You Need to Know

Q: Is product liability insurance required for a bakery?

While not legally required, product liability insurance is highly recommended for bakeries to protect against claims related to foodborne illnesses, allergic reactions, or other issues arising from the products sold. This coverage ensures financial protection in case a customer is harmed by your products.

Key Takeaways

Small bakeries face unique risks such as property damage, liability claims, and workplace injuries, requiring tailored insurance solutions.
General liability insurance protects against third-party claims, including injuries or property damage on the premises.
Commercial property insurance covers damages to bakery equipment, inventory, and the physical location.
Product liability insurance safeguards against claims related to foodborne illnesses or defective products, ensuring financial security and legal compliance.

Similar to other businesses, small bakeries require the right protection through insurance. This guide explores why insurance plans are important for bakeries and what coverage is required.

If you are setting up a small bakery business, it is essential that you explore the insurance options available. Having the right insurance in place will protect your business and keep your financial assets secure.

Why Do Small Bakeries Require Insurance?

Bakeries are often high-risk work environments. Expensive equipment is often used to produce the goods in bakeries and this requires the support of various staff members. In addition to this, food from a bakery is consumed by general members of the public. Both these factors create risk in your business model.

You need to consider the various risks that can impact your bakery’s business. This includes injuries that your team members could suffer as well as scenarios that will impact your customers. It is also important to consider how disaster scenarios could impact your business and the finances of your company.

Regardless of whether you are running a small independent bakery or your bakery is part of a franchise like Nothing Bundt Cake, you must consider the level of insurance required to keep your bakery business safe.

The right insurance plan will help provide protection for:

You
Your premises
Your customers
Your equipment

What Insurance Does A Small Bakery Need?

Your bakery business could require various forms of insurance coverage. The most common and critical type of insurance for bakeries and other businesses is general liability insurance. General liability insurance provides coverage for various risks, including:

Medical payments
Legal defense
Property damage
Bodily injury

Operating a business like a bakery without this type of coverage comes with a lot of risks. Lawsuits where someone is injured because of the action or inaction of your company could cost you hundreds of thousands in legal fees. With the right general liability insurance in place, you can protect your business from some of the more extreme effects of this type of lawsuit on your business.

There are other types of insurance that could also be beneficial to you if you are running a small bakery. For instance, you may want to explore commercial property insurance. As mentioned, the equipment used for baking can be expensive. This includes ovens and various other pieces of equipment for the kitchen.

If these pieces of equipment were lost, you might struggle to pay the cost of replacements. This could even lead to downtime for your business, resulting in thousands of dollars in losses each day.

With commercial property insurance, it is possible to get support replacing or repairing property that has been lost or stolen. Be aware, one of the major risks for a bakery business is a fire. If there is a fire in your bakery, you could lose a lot of equipment.

You also need to consider what will happen if someone claims one of your products gave them food poisoning. They might claim the cream you used was out of date. Even if you did nothing wrong and followed all the right health and safety requirements, they could still take you to court. This type of legal case can be expensive.

If you have product liability insurance, then you can cover the cost of legal expenses and get the right protection in court.

Businesses in New Jersey and various other states are required to carry worker’s compensation insurance. If you have hired employees to work in your bakery, you are legally obligated to have this coverage in place. It will provide financial support for employees who are injured while completing work-related duties. It will also cover any losses of wages during recovery from injury.

Other Coverage Your Bakery Could Benefit From

There are various other forms of coverage that may help protect your business. For instance, you could explore business interruption insurance. This will protect your bakery if you are forced to temporarily close. It helps you manage your losses so that you can eventually reopen the doors of your company.

Some bakeries may also need van insurance. This will be necessary if you are using a vehicle to deliver orders or pick up ingredients for your business. If your business is reliant on transportation, then you need to make sure that this is covered. This form of coverage can also help protect you from losses due to stock that has been stolen or damaged during delivery.

Cyber Insurance

You might think it’s unlikely that a small bakery will be hit by a cyber attack. However, it’s certainly a strong possibility. Businesses that take card payments or store any customer data should consider cyber insurance. Hacks and data leaks are far more common these days, and small businesses like bakeries are often targeted because criminals know they don’t have the highest standard of security in place.

Umbrella Insurance

Umbrella insurance will provide an additional layer of coverage and support that goes beyond what you receive from general liability. This is an option that a lot of small business owners consider these days to ensure that they are not leaving their businesses vulnerable.

Scenarios Where Bakery Insurance Will Be Important

There are lots of scenarios where insurance for small bakeries can help manage risk. One of your employees might work in the kitchen and get burned because of a faulty piece of PPE. If this is the case, then they might need to take time off work and they could sue you for an unsafe work environment.

It’s possible a customer could slip on a wet floor in your bakery. If you didn’t put up a sign showing the floor is wet, then you may be found liable in a case like this.

Alternatively, a customer could bite into a hard cake and damage a tooth. Again, they could choose to sue you for damages because a product they bought from you caused them harm.

In all these scenarios, the right insurance coverage can protect your small bakery.

Conclusion

We hope this helps you understand the key factors to consider when insuring a small bakery. You can find more information about different types of insurance in our blog or contact us directly to learn how the right insurance can provide the protection that your small business needs.

FAQs

1. What types of insurance do small bakeries need?

Small bakeries typically need general liability insurance, commercial property insurance, and workers’ compensation if they have employees. Additional coverage like product liability, business interruption, and equipment breakdown insurance may also be necessary depending on the bakery’s operations and risk factors.

2. Is product liability insurance required for a bakery?

3. How much does bakery insurance cost?

The cost of bakery insurance depends on factors such as the bakery’s size, location, revenue, number of employees, and the types of coverage selected. On average, small bakeries can expect to pay anywhere from a few hundred to a few thousand dollars annually for a comprehensive insurance policy.