by Maxime Rieman, Director of Online Channel Product Marketing at CoverWallet
When you are in the process of launching a food startup, it is important to take insurance into consideration, as it can enable you to mitigate the plethora of risks involved in starting your business and working with customers. Preparing ahead of time for potentially difficult scenarios is a great way to ensure future success. Without insurance, you face a variety of financial risks, when you should be focused on amazing food ideas.
Here are the top 3 areas of risk that insurance could protect you from when launching your food startup:
1. Customer Incidents.
When starting a food business, it’s critical 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, someone who eats your food may become severely sick and need medical treatment. If someone believes the food you served has negatively impacted them, they may elect 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.
2. Location, Location, Location!
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 these 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 space with a commercial oven or invest in one for your space. Without this oven, your ability to create and deliver lasagna would be impaired, meaning lost income. Restaurant equipment may break down, 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 also the property they are operated within through Commercial Property Insurance.
Commercial Property Insurance protects your business property, both the location and objects 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 make sure that if suddenly find yourself without an operational oven, insurance will help you get back up and running in no time without severe financial damage.
As a note, always take the time to understand what are considered to be covered events in your policy. Some people don’t realize that damages related to flood, earthquake, loss of electricity and subsequent spoilage are usually not covered. As a result, your amazing lasagna delivery service would not only have to pause due to loss of power, but could also lose money on the extra-fancy cheeses going bad.
3. Employees.
Having a safe and healthy staff is necessary 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 unfortunate 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 imperative 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 mitigate these risks by purchasing the proper insurance can provide you with peace of mind knowing that you have the necessary safeguards and a plan of action regardless of what lies ahead.
Educating and assisting shoppers about financial products has been Maxime Rieman’s focus, which led her to joining CoverWallet, a startup dedicated to simplifying insurance for small businesses. Previously, she launched the personal insurance team at NerdWallet, and helped create an innovative brokerage comparison product.
