When you starting a food truck business, it is easy to get caught up in the excitement of buying a food truck, branding your business and creating a menu. But have you budgeted for food truck insurance premiums once your mobile business is on the road?
Why Do I Need Food Truck Insurance?
No matter how well you plan for your food truck business, things can and do go wrong. Vehicle collisions, cooking fires, employee injuries, and accidental food poisoning lawsuits are real threats to a food truck business without insurance. The cost of resolving issues these issues without insurance could result in stress, fines and potentially paying out huge sums that bankrupt your new business.
Also, many venues and event organizers will require you to carry insurance to protect their business… That means if you want to earn money doing events or catering, proof of these insurance policies will be a requirement to participate.
In order to reduce stress and keep your business afloat, you should invest in business insurance. There are ways that you can cut corners when it comes to starting a food truck on a budget, but food truck insurance is just not one of those things.
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Essential Food Truck Insurance Policies
No one likes paying monthly premiums, but Insurance protects you, your employees, and your business. Sure, not all of these insurances may be required by your local laws. But for a monthly premium they provide peace of mind that your business won’t be bankrupted in the event of an accident. Whether you buy an “Umbrella policy” that bundles all these insurances together or purchase them separately through difference insurers, here’s what you need:
Commercial Auto Insurance
You have a food truck or food trailer so that means you’re driving on public roads. Commercial auto insurance covers property damage caused by auto accidents, harsh weather, falling objects, vandalism and theft as well as injuries to your employees and other drivers.
It’s important to note that personal auto insurance policies typically don’t cover commercial use, so it’s essential to have a separate commercial auto policy in place to protect your food truck. As tempting as it might be to claim a food truck or food trailer as a personal vehicle, don’t do it!
General Liability protects your business from a wide range of customer claims against your business operations. General liability would insulate you from a customer claiming they got food poisoning or a customer slips and falls while getting food from your truck. Liability insurance could also be used to cover small incidents (like a customer cuts themselves on a sharp edge on your food truck). However, many businesses try to avoid claims that drive up their insurance premiums if possible.
Liability insurance typically includes both property damage and bodily injury coverage, and can also cover medical expenses and legal fees. It’s important to have this coverage in place so that you’re protected from financial losses in the event of an unexpected accident or incident.
Worker’s Compensation Insurance
If you have employees working on your food truck, look into getting Workers Comp insurance. This covers workplace accidents that incur medical expenses, disability or death benefits and is a legal requirement in most states. A mobile kitchen comes with risks including injuries from driving accidents, burns, slip and falls, and even explosion.
In the event that the unthinkable happens and an employee is badly hurt, the last thing you want to worry about is paying out of pocket for their medical care. It’s important to have this coverage in place, as it protects your employees and also shields you from lawsuits and financial losses that may result from on-the-job injuries.
Optional Food Truck Insurance Policies
Here are some other optional insurance policies you may want to consider as your company grows or if you are more risk-averse:
Business Owners Policy
If you have personal assets to lose, you may want to also consider buying a Business Owners Policy. This type of policy shields you personally from general liability and property damage claims resulting from your business. Sometimes a Business Owners Policy will often include other policies listed like General Liability, Commercial Property or Business Income, so make sure you’re not paying for the same thing twice.
Commercial Property Insurance
Unfortunately food truck equipment theft can and does happen. Generators are one of the most common items to be stolen out of a food truck as they are valuable, portable and accessible from the exterior of your food truck. Parking your food truck or food trailer inside a gated facility helps, but it’s no guarantee.
A typical commercial property insurance covers physical assets like tools, equipment and buildings against fire, wind, hail, lightning, explosions, theft and vandalism. It’s possible that your auto policy may cover some of these circumstances as well. But if your operations extend beyond the food truck or trailer to a building full of equipment that you rent or own, you’ll definitely want to buy Commercial Property Insurance.
Business Income Insurance
Also called Business Interruption Insurance, this policy pays for lost revenue when a business shuts down due to fire, theft or wind.
Let’s say your food truck catches on fire and you have to shut down until your food truck is repaired. Business income insurance will pay you any income that your food truck would have made during that down time.
Of course, you will probably have to provide your insurance carrier with verifiable documentation in the form of bank statements, IRS tax returns, customer invoices, POS system printouts, etc. in order to receive any compensation.
Professional Liability Insurance
Also called Errors and Omissions Insurance or Professional Indemnity, this insurance protects you from claims of negligence, unfulfilled promises, misrepresentation, errors or inaccurate advice that cost your customer.
This type of insurance is more commonly associated with service industries like attorneys, real estate brokers or financial planners so it may not be relevant to your business. However, if your business offers any aspect of consultation, such as event coordination, you may want to consider purchasing Professional Liability Insurance.
Starting a food truck business?
With 35,000 on the road today, the most common type of mobile business in the US is a food truck or food trailer. Use Firefly’s complete guide to starting a mobile business to estimate costs, get links to financing, and learn about permits for your new food truck business.
How Much Does Food Truck Insurance Cost?
The total cost of essential food truck insurance is between $250-$800 per month depending on your business needs. However, driving records, location, food truck value, and policy payouts will be factors in determining the actual cost. Make sure to shop around and compare policy coverage to get the best prices.
Also, not all insurance policies are created equal. Many insurers will charge higher premiums to cover an industry that they don’t specialize in. This can lead to the policy vastly undervaluing how much your food truck is worth. For instance, some auto insurance companies will simply assign your food truck the value of the empty vehicle without the kitchen buildout. It’s better to pay a higher premium for a policy that provides more comprehensive coverage, rather than choosing a lower-priced policy that may not provide the coverage you need in the event of an accident or incident.
It’s important to remember that insurance requirements can vary from state to state, so it’s essential to consult with a licensed insurance agent to determine the specific insurance requirements for your food truck business. An insurance agent can help you understand the different types of insurance coverage that are available and provide guidance on which policies will best meet the needs of your business.
Try using an insurance broker or comparing a variety of insurers who understand your industry. For instance, The Food Truck Liability Insurance Program (FLIP) offers mobile food businesses robust liability insurance coverage at low rates. FLIP also adds clients or catering venues as “additional insured” to your policy for free – a frequent request that adds up when other insurers charge $100 per request.
Update Your Food Truck Insurance Often
In addition, it’s important to regularly review your insurance coverage to ensure that your policies are up-to-date and adequately cover your business. Make sure to review your policies at least once per year, however you should review them more often if there are any changes in your business. For example, if you purchase new equipment or hire additional employees, you may need to update your insurance coverage to reflect these changes.
Food Truck Insurance Bottom Line
In conclusion, while it may be tempting to skimp on insurance, especially as a bootstrapped startup, don’t do it! Starting a food truck business requires a significant investment of time and resources, and it’s important to protect your investment with the proper insurance coverage.
By having liability insurance, commercial auto insurance and workers’ compensation insurance in place, you can protect your business from financial losses and ensure that your business is protected from a wide range of risks.
Remember, the more business you do, the more likely it is that something bad will eventually happen. When it does, you and your business need to be protected… and you’ll sleep so much better.
For more personalized advice on how to go about starting a food truck business and finding the best food truck insurance companies, contact Firefly. As a professional food truck manufacturer, we are the best people to make sure you are fully covered and your business starts off on the right foot.