About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A CATERING BUSINESS
Example 1: While making a delivery to your kitchen, a food vendor cuts his hand on a protruding countertop edge. Because his injury requires surgery and several weeks off work, the vendor sues your company. General liability insurance would cover the vendor’s medical bills and lost wages as well as your legal fees.
Example 2: While working an event in a local party space, one of your employees loses control of a handcart and it crashes into a wall. The building owner sues for damages, which include a large hole in the wall and some broken artwork. General liability insurance would cover the cost of repairing and/or replacing the damaged items.
Example 3: During an event, an employee leaves a drink spill unattended while retrieving equipment to clean the floor. A guest slips on the spilled wine, breaks her arm, and then sues your company and the building owner. General liability insurance would cover your legal fees and any damages awarded in a settlement.
Example 4: As part of an event contract agreement, your business must provide evidence of liability insurance for a minimum of $1 million.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
Cost of General Liability Insurance
On average, catering businesses in America spend between $500 - $1,200 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
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Other Types of Coverage catering businesses Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all catering businesses should obtain:
Commercial Property Insurance
If you own the kitchen from which you operate, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your building, expensive kitchen equipment, and party planning accessories after an accident so you can recover quickly.
You can typically purchase commercial property insurance as part of a business owners policy (BOP).
Commercial Auto Insurance
More time on the road traveling to and from event sites means greater risk for auto accidents. Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured, but also sufficient protection for any special equipment you carry in your vehicles. Also consider purchasing coverage higher than the state-mandated minimum coverage to safeguard your business from the unknown.
You can purchase commercial auto insurance as part of a business owners policy (BOP) or as a standalone policy.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.
While many states allow business owners to exempt themselves from coverage, skip this option if you plan to participate in the daily operations of your catering business.
Types of Coverage Some catering businesses May Need
In addition to the policies outlined above, there are a few other types of coverage your catering business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Liquor Liability Insurance
Unfortunately, incidents often occur with the presence of alcohol. Liquor liability insurance can protect your business in the event of alcohol-related incidents, including fights, accidents, and falls. It also covers your legal fees for any related lawsuits.
Product Liability Insurance
Your clients expect you to serve fresh, high-quality food at every catered event. Unfortunately, you may sometimes face an issue or situation out of your control. Product liability insurance covers your business should a product you serve lead to injury or illness.
Because insurers tailor product liability policies to individual businesses and the products they serve or sell, be sure to consult with an insurance professional for guidance on the right policy for your company.
Commercial Umbrella Insurance
The catering profession exposes business owners to a variety of liability risks. While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.
Additional Steps to Protect Your Business
Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
Frequently Asked Questions
What is included in a business owner’s policy?
A typical business owner's policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company's needs.
What is the difference between business insurance and general liability insurance?
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.