What insurance coverage do you need for your food truck?
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When you start your mobile food business, one of the most important decisions you make is the insurance you purchase to protect your business. From our experience working with more than 2,000 food truck operators, we have seen people lose thousands of dollars (and oftentimes, their whole business) because they did not take the time to find an agent that helped them obtain proper coverage and fully understand their coverage limitations.
Due to the mobility of your business, finding an appropriate policy (or policies) can sometimes be a bit of a challenge, so let's break your risks down below.
General liability protects you from lawsuits brought against you for injury or property damage to third parties. It's important to remember this does not cover auto related or employee injuries. This coverage includes protecting you from your products (food), your premise (slip and fall), personal injury/advertising injury (libel and slander), and property damage to others.
The best part about general liability insurance is that it also covers the legal fees to defend against claims mentioned above, even if it's found you were not at fault. Not only is it smart coverage to have in a sue crazy world, it is often required to do business with most landlords, vendors and commissary kitchens as they will require you to list them as an additional insured on your policy. Common coverage limits in the industry are $1 million per occurrence (per claim) and $2 million aggregate (total claims per year).
Workers compensation pays wage replacement and medical benefits to employees if they are injured. Many states require food trucks to carry workers comp. Visit our website to learn what the laws are in your state under the blog, "Food Truck Employee Guide Part 2."
Property damage insurance
Property damage insurance protects the business from collision, theft, fire and vandalism. Coverage for assets is separated into two categories in the insurance world, the truck and the attached equipment, and everything else not attached to the truck.
Truck or trailer coverage
Property coverage for the truck or trailer can come from comprehensive, collision and/or inland marine policies. These policies are designed to provide protection for your food truck and attached equipment (attached is defined to mean attached by bolt, plumbing or gas line). The coverage includes property damage losses due from a collision, vandalism, theft or other covered losses.
Contents coverage protects the items that are not attached to your food truck or food trailer. These are all the items that would fall if you flipped your truck upside down, or items not kept in the truck. Since auto policies do not cover equipment that is not attached (by bolt, plumbing or gas line) to the food truck or trailer, a separate coverage is needed to insure these items.
This often overlooked coverage can be added using inland marine insurance or property in transit coverage. The coverage includes property damage losses due from a collision, vandalism, theft or other covered losses.
A lot of people make the mistake of assuming their auto policy automatically covers the equipment not permanently attached to the truck.
The greatest risk for large liability claims do not come from the food you serve, but the truck you drive on the road. You want to make sure you are covered for injury or property damage to others if there is an accident while driving from spot to spot. It is important to remember that the auto liability applies once you start moving. Once you are parked and you open for business, your general liability coverage takes over.
Other coverage options are also available as add-ons. For example, umbrella insurance is excess coverage above and beyond your limits of general liability or auto liability insurance. This coverage is often required by large contracts.
Food spoilage is another optional coverage that can pay for your spoiled food.
Speaking from personal experience insuring mobile food vendors, I can say one of the best additional coverages is loss of business income due to an insurance loss. A lot of times, even when you suffer a covered claim from an insurance loss, the resulting loss of income while you repair or replace your food truck can quickly climb to the thousands. This could put you out of business without coverage for loss of business income.
Joel Paprocki Joel Paprocki, CIC, CPCU, is the owner of Paprocki Insurance Agency in Austin, Texas, insuremyfood.com www