Finding the right insurance for your cafe or coffee shop is an important step in protecting your business and achieving long-term success.
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Cafes and coffee shops are a popular and fulfilling business to run, but it’s important to be aware of the various hazards that could affect your business, from unexpected disasters such as fires to accidental injuries or lawsuits. It’s wise to purchase a broad range of insurance policies to financially protect you from these risks.
What insurance coverage do I need for my cafe?
There are many types of insurance coverage to consider, but these policies are particularly relevant to cafes and coffee shops:
Cafes rely on their retail locations and valuable equipment to maintain their business. If a disaster strikes, recovering can be expensive and difficult. Commercial property insurance protects the value of your business’s property, providing funds for repairs, replacement, or rebuilding if property is damaged or destroyed by a covered peril.
Since cafes may cook food and use ovens and other equipment, they can have an elevated risk of fires and other sources of property damage. Taking steps to reduce your risk by frequently inspecting wiring, keeping your space clean, and having fire extinguishers on hand is important, but it’s impossible to completely eliminate every source of risk. 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
- Faulty refrigerator wiring causes a fire to break out in your coffee shop, damaging espresso machines, refrigerators, and other equipment. Your commercial property insurance would pay to replace your damaged equipment and repair the damage to the building.
When you run a cafe, a disaster that destroys your property could derail your business in multiple ways. Since customers often visit coffee shops as a matter of routine, it can take some time for clientele to return if a disaster prevents you from operating your business. This is why business interruption insurance is a key consideration for cafes and coffee shops.
Also called business income insurance, this coverage will reimburse your business for lost income and operating expenses if you are forced to temporarily close due to property damage from a covered peril. Commonly covered perils include fire, lightning, windstorm, hail, explosion, and vandalism. Business interruption insurance can be added to your commercial property or business owner’s policy.
- During a severe storm, a tree falls on your cafe and damages its roof and wall. 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.
Since cafes and coffee shops see many customers on a daily basis, it’s important to protect your business from the liabilities that can arise if someone is injured or their property is damaged on your premises. In these situations, general liability insurance can step in to cover incidents of third-party property damage, bodily injury, personal injury, and advertising injury. General liability insurance can provide funds for any medical costs, legal fees, or damages in the event of a third-party injury or lawsuit.
General liability insurance includes coverage for product liability, which is essential for cafes because it covers injuries caused by your products, such as the beverages or food you prepare. If a customer falls ill after eating or drinking at your coffee shop, general liability insurance may cover the claim. General liability insurance also includes a personal and advertising injury component, which can cover third-party non-physical injuries and reputational damage from libel, slander, copyright infringement, and more.
- Bodily injury: On a rainy day, a customer slips on a wet floor in your cafe. The customer suffers a fractured elbow. Your general liability insurance would pay for medical expenses and legal fees if the customer sues.
- Property damage: While walking past a table, your employee accidentally knocks into a customer’s expensive new laptop and it falls on the floor. The laptop is badly damaged. Your insurer would cover the damages.
- Products and completed operations: A customer breaks a tooth after eating a pastry that had a hard nutshell accidentally baked into it. The customer sues your business. General liability insurance would provide coverage.
Equipment such as espresso machines and refrigerators are critical for coffee shops. If your espresso machine breaks down, you would likely be unable to operate until it is repaired or replaced. It’s important to be aware that commercial property insurance typically covers only property damage from outside sources, rather than internal breakdowns.
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.
- Your espresso machine develops a mechanical problem and you are unable to operate your espresso bar for several days while you wait for repair service. Your equipment breakdown insurance would cover the income you lost as well as the cost of repairs.
Cafes regularly see large numbers of customers, handle cash payments, and have many employees, sometimes with a high employee turnover. They may also use expensive equipment that could be a target for theft. This makes cafes vulnerable to crime-related losses.
Commercial crime insurance can give you financial protection if theft or robbery occurs. This coverage provides funds to reimburse you for losses caused by theft, robbery, fraud, forgery, burglary, and other crimes, whether they are committed by outside parties or by your own employees.
- You discover that one of your employees has stolen several thousand dollars from a cash register before disappearing. Your insurer would cover the loss.
Workers at cafes could be injured by slips and falls, burns, and strains or sprains caused by heavy lifting, among other risks. This is why it’s important to make sure you have sufficient workers’ compensation insurance.
Workers’ comp covers medical expenses and lost income of employees who are injured or fall ill while working and is legally required for companies with employees in most states. Workers’ comp also provides financial benefits for an employee’s dependents in the case of a work-related employee death.
- An espresso machine malfunctions and explodes while a barista is using it, severely burning her. Workers’ comp would pay for her medical bills and a portion of lost income while she recovers and is unable to work.
- For many small cafes and coffee shops, a business owner’s policy (BOP) could be the simplest way to obtain a wide range of coverage. A BOP combines general liability, property, business income, and extra expense coverage into a single convenient package. 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.
- If your cafe serves alcohol, you will need liquor liability insurance. This coverage will protect your cafe if you are held liable after a customer becomes intoxicated and causes bodily injury or property damage.
Pricing and Quotes
Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:
- Business size
- Number of employees
- Claims history
Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a coffee shop 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 cafes and coffee shops:
|Provider||Business Interruption||Business Owner's Policy||Commercial Auto||Commercial Crime||Commercial Property||Cyber Liability||Employment Practices Liability||General Liability||Product Liability||Professional Liability||Workers' Compensation|
Business Insurance and Coronavirus
COVID-19 has had a major impact on cafes and coffee shops, causing many businesses to close. It’s unclear when the business environment will return to normal. 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. Although there are court cases in progress, it’s uncertain whether courts will rule in favor of small businesses over the insurers. In general, 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.
When you prepare to open your cafe, it’s crucial to consider the liabilities you will be exposed to. If you’re hit with a lawsuit brought by an injured customer or an unexpected disaster that damages your property, it could be difficult to continue operating your business. Ensuring that your company has a wide range of business insurance can help you cope with unforeseen events and give you peace of mind, knowing that if a catastrophe occurs, your business will be financially protected.