Whether you run a large commercial bakery or a small retail location, there are many risks that could affect your business, including fires, theft, equipment breakdowns, and more. Purchasing a broad range of insurance coverages can financially protect you from these and many other common hazards.

What insurance coverage do I need for my bakery?

There are many types of insurance coverages to consider, but these policies are particularly relevant to bakeries:

Commercial Property Insurance

Commercial property insurance protects the value of your business’s property, providing funds for repairs, replacement, or rebuilding if property is damaged or destroyed. Since bakeries rely on equipment such as ovens, stoves, and deep fryers, they have high exposure to fires and other sources of property damage. Although you can reduce your risk by frequently inspecting wiring, keeping kitchens clean, and ensuring that you have adequate fire protection equipment, there is still always a possibility that a fire could occur.

Recovering after a disaster can be costly and difficult. Commercial property insurance can provide financial support to help you replace or repair business property that is damaged by common perils, including windstorms, hail, fire, vandalism, and water damage.

Commercial property insurance covers the following:

• Buildings belonging to or leased by your company
• Contents of the building, including furniture, equipment, and inventory
• Property of others while it is under your care, custody, or control

Example: 

• Due to an electrical malfunction, a fire starts in an oven and spreads throughout your bakery’s kitchen. Your commercial property insurance would cover the costs of repairing or replacing damaged items and making repairs to the building.

Equipment Breakdown Insurance

Bakeries rely heavily on their baking equipment, including commercial ovens, refrigerators, mixers, stoves, and more. Large commercial bakeries may also have automated cooking machinery. If key equipment breaks down, it can severely slow down or halt your business operations. 

If your equipment breaks down due to an internal or mechanical malfunction, equipment breakdown insurance can provide funds to repair or replace damaged equipment. This insurance can also cover lost business income while your equipment is out of commission, and pay to replace food or inventory that spoils as a result of the breakdown.

Example: 

• One of your bakery’s commercial refrigerators fails overnight and you must throw out hundreds of spoiled food items. Your equipment breakdown insurance would pay for repairs to the refrigerator and reimburse you for the cost of the lost food.

Business Interruption Insurance

If property damage forces you to temporarily close your bakery, recovery can be very difficult. In addition to losing income, you may still be required to pay ongoing expenses such as rent and employee payroll. Business interruption insurance can step in to reimburse you for lost income and operating expenses if your bakery is forced to close due to a covered peril, such as fire or storm damage. This coverage is typically available as an addition to your commercial property insurance and covers the same perils.

Example: 

• A severe storm damages your bakery’s roof and you are unable to operate for several weeks while repairs are made. Business interruption coverage would pay for your rent and other expenses until you are able to reopen.

General Liability Insurance

General liability insurance covers incidents of third-party property damage, bodily injury, personal injury, and advertising injury. This coverage is particularly important for bakeries with retail locations, as you likely have customers frequently visiting your business premises. 

No matter how careful you are, accidents happen, and incidents involving customers or other third parties tripping or slipping and falling are quite common. General liability insurance will pay for medical bills and lawsuits if a third party is injured or has their property damaged at your bakery. 

General liability insurance also includes coverage for product liability, which is critical for bakeries because it covers injuries caused by your products, such as the baked goods you prepare. If a customer falls ill or suffers an allergic reaction after eating your bakery’s food, general liability insurance may cover the claim.

Examples: 

• Bodily injury: A customer trips over a broom that was accidentally left on the floor of your bakery. The customer suffers a sprained ankle. Your general liability insurance would pay for medical expenses and legal fees if the customer sues.
• Property damage: One of your employees accidentally spills hot tea onto a customer’s expensive purse, damaging it. Your insurer would cover the damages.
• Products and completed operations: A customer cracks a tooth after biting down on a piece of metal that was inadvertently baked into one of your bakery’s pies. He sues your business. General liability insurance would provide coverage.

Commercial Crime Insurance

Commercial crime insurance provides financial protection from losses caused by theft, fraud, robbery, burglary, forgery, or other crimes. Coverage applies both to crimes committed by outside parties and crimes committed by your own employees. Bakeries often have many employees and may have expensive equipment on hand or handle large amounts of cash, particularly if they run a retail location. Commercial crime insurance can protect bakeries from the risks of employee dishonesty or third-party crime.

Example: 

• One of your employees steals $2,000 from your bakery’s cash register at the end of a shift. Your insurer would cover the loss.

Commercial Auto Insurance

Many bakeries rely on vehicles to transport baked goods to stores, restaurants, and customers’ homes. If your business owns or leases vehicles or if your employees use their own personal vehicles for business purposes, commercial auto insurance is a key coverage that is legally required in most states. 

If your employees are involved in a car crash, commercial auto insurance can provide coverage for physical damage to vehicles, third-party bodily injury, and property damage. Commercial auto insurance can also provide coverage for damage to your vehicles caused by covered perils, including theft, falling objects, fire, and more.

Example: 

• While driving a company van to deliver bread to a local farmers market, one of your employees accidentally runs a stop sign and collides with another car. Your commercial auto insurance would cover the damages to both vehicles.

Workers’ Compensation Insurance

Workers’ compensation insurance covers employees’ medical expenses and lost income if they suffer an injury or illness because of their work. Workers’ comp also provides financial benefits for an employee’s dependents in the case of a work-related employee death.

Workers’ compensation is a crucial coverage for bakeries, as commercial kitchens often bring a high risk of injury. Employees could suffer cuts and burns while baking, or they could injure themselves while lifting heavy items. In almost every state, workers’ compensation insurance is required for employers, and there may be serious fines and penalties for companies that do not secure adequate coverage.

Example: 

• An employee in your kitchen accidentally burns himself with hot oil while making doughnuts. Your workers’ compensation insurance would pay for his medical expenses and a portion of his lost income if he is unable to work for a time.

Additional Coverages

• A business owner’s policy (BOP) combines general liability, property, business interruption, and extra expense coverage into a single package. For small or midsize bakeries, this is a convenient insurance product that could help you obtain a wide range of coverage. Premiums for a business owner’s policy are typically cheaper than the cost of buying each coverage separately.
• Employment practices liability insurance (EPLI) protects your business against lawsuits by prospective, current, or former employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
• Cyber liability insurance can cover financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is an important consideration for bakeries that take a high volume of credit card transactions or accept online orders.
• Pollution liability insurance could be necessary for commercial bakeries if cooking oil or oil and fuel for vehicles or equipment is stored in tanks onsite. Pollution liability insurance will cover bodily injury, property damage, and cleanup costs if pollutants are released.

Pricing and Quotes

Pricing for bakery insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a bakery with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for bakeries:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Business Insurance and Coronavirus

COVID-19 has had a major impact on bakeries, as many food establishments have been forced to close during the pandemic, and even those that have been able to remain open have suffered significant declines in business. It’s still unclear when the business environment will return to normal, and in the meantime, business owners may be wondering how insurance can provide coverage during the pandemic.

It’s important to understand that you cannot purchase a new policy to cover coronavirus-related losses that have already occurred; insurance policies will not cover losses that have already been discovered. 

In the majority of cases, business interruption insurance policies you have in effect will not cover losses caused by coronavirus. These policies typically only cover losses caused by a direct physical loss or damage, like a fire or theft. Some business interruption policies will include coverage for losses caused by “communicable or infectious diseases,” but this is rare.

How workers’ compensation insurance handles coronavirus cases varies widely depending on the state. If you have employees who contract coronavirus on the job, they may be eligible for workers’ compensation payments in some states. 

If your business continues operating and a client or other third party sues you claiming that they contracted coronavirus from your business, some commercial general liability policies will provide coverage, depending on your individual policy and the laws of your state. 

Consult our FAQ on coronavirus and business insurance for more information.

Final Word

When purchasing insurance coverage, it’s important to be aware of the hazards that your bakery could face, from fires to client injuries. If your company must cope with an expensive accident or lawsuit, it could consume a large portion of your resources. With the financial support insurance can provide, you can feel confident that your bakery will survive any unexpected catastrophes that may arise.