Do you need to protect yourself from the risks of running a food truck? If YES, here are 7 best insurance policies for your food truck business and how much they cost.
Insurance is one of the most important things to consider when setting up a business, especially a business that is very prone to accidents like a food truck. Quite a lot of food truck owners have lost thousands of dollars over the years because they made the mistake of skimping on insurance coverage.
In order to purchase the best insurance coverage for your truck, the food truck owner has to take the time to find an agent that would help them obtain proper coverage and also help them understand their coverage limitations.
Most food truck businesses will need more than one type of insurance coverage, including commercial vehicle insurance and general liability because of the kind of food they sell and the routes they run.
This goes to show that it is not safe for a food truck to have just one type of insurance coverage, even if it is umbrella insurance. Listed below are very important insurance premiums that food trucks need to carry, their costs and how to get them.
Insurance Coverage Your Food Truck Must Have
1. Commercial vehicle insurance
The greatest risk for large liability claims do not come from the food you serve, but from the truck that moves on the road. You want to make sure you are covered for injury or property damage to others if you get into an accident while driving from spot to spot.
Commercial vehicle insurance is required to operate a food truck and the coverage is similar to personal auto insurance. There are some key differences, however in the areas of limits of coverage, exclusions, and eligibility. These differences are owed to the fact that commercial vehicles are exposed to more risk of damage and liability than personal vehicles.
A commercial vehicle insurance policy may include several types of coverages that can cover different types of risks and liabilities, including:
- Bodily Injury
- Property Damage
- Collision
- Medical Payments
- Personal Injury Protection
- Uninsured/Underinsured Motorist
- Comprehensive (Damage not caused by collision)
Navigating food trucks through traffic and parking lots can be challenging and accidents, from the minor fender bender to a major wreck, are common. Food truck repairs can also be costly, especially if they take a long time, and these are the kinds of expensive risks you need to get a good commercial vehicle insurance policy will cover.
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.
When your insurance provider is putting together your automotive insurance quote, he’ll require a list of your drivers so he can check each of their motor vehicle reports (MVRs) on his own. If you have an ineligible driver, most competitive insurance companies will pull their quote.
You will then be left with no option than to use an insurance company that charges you an arm and a leg to cover the driver.
To avoid this situation, be sure you always check a person’s MVR prior to hiring him or allowing him to drive your food truck. Require all potential drivers to go to the Department of Motor Vehicles or Secretary of State and get a copy of their MVR. Within the last 36 months, no prospective driver should have more than;
- One moving violation and two accidents
- Two moving violations and one accident
- Three moving violations and no accidents
- None of your drivers should have any serious moving violations (such as driving under the influence, a suspended license, or an auto felony conviction).
2. General liability
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 a good coverage to have in a world easily prone to litigation, 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 insurance on your policy.
Common coverage limits in the industry are $1 million per occurrence (per claim) and $2 million aggregate (total claims per year). Examples of risk exposures to a food truck business that general liability can cover include:
- Food Poisoning
- Allergy Illness
- Injury from Slips and Falls
- Legal Fees
General liability insurance for your food truck may be the most important coverage you’ll buy. Almost any activity that involves vehicles and human beings poses a risk of injury. Add food preparation and customers into the mix and you have a potential recipe for disaster.
3. Workers compensation
Workers compensation pays wage replacement and medical benefits to employees if they are injured. Many states require food trucks to carry workers comp. This insurance covers the financial risk arising from employee work-related injuries and illness.
Basic workers comp insurance will cover lost wages and medical costs. Some policies will even cover legal fees. Workers compensation covers a range of risks associated with your employees while driving the vehicle and while preparing and serving food, including:
- Vehicle-related injury
- Slips and falls
- Burns from equipment
- Smoke inhalation
This insurance is there to cover the costs of medical care and a portion of lost wages for employees. Workers Compensation Insurance can also cover death benefits if an employee is killed on the job and it can protect employers from lawsuits arising from workplace injuries
4. 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.
Property insurance coverage for your food truck will be needed for equipment attached to the truck, some of which may include:
- Oven
- Broiler Grill
- Fryer
- Refrigerator
- Freezer
- Exhaust Hood
The typical food truck can easily require more than $9,000 in equipment. But, in most cases, that equipment will not covered by a commercial vehicle policy. An unexpected bill to replace all of your essential equipment can put the brakes on your business suddenly. That’s why a good Property Insurance policy, though not required, is recommended.
5. 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. The coverage amount should cover the replacement cost of the vehicle, although most collision damages are not total losses. If you’re not familiar with the market cost of food trucks, you should expect to pay up to $50,000 for the truck and you’ll need to cover this cost with your collision insurance.
6. Contents Coverage
The equipment attached to your food truck can be expensive to replace but also integral to the ongoing operation and success of your food truck business. 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.
For property insurance coverage, you may also choose to insure the actual cash value of the equipment, which will be less than the replacement cost, depending upon the age and usage of your equipment.
7. Additional coverage
One insurance topic many new food truck owners are unfamiliar with is the need for additional insured certificates. An additional insured is a term for a person, firm, or other entity that’s afforded the same protection under the insurance policy as the insured (food truck).
Most property owners and event planners require this paperwork when they invite food trucks onto privately held property for a food truck event. In some cases, if you’ll be attending an event that’s held on city- or county-owned property, a government agency will also ask to be included as additional insured.
Essentially, the venue or event is protecting itself from any bodily injury or property damage your business may cause at its event. Some insurance carriers charge $25 to $100 per certificate, which can add up to a significant hidden cost if you attend multiple events throughout the year.
Others are:
- Health insurance
- Kitchen Insurance
- Overhead expense disability insurance
- Business owner’s policy group insurance
Cost of Insurance Coverage for a Typical Food Truck
- Commercial Vehicle insurance can cost anywhere from $1274-$3148. Its policy limit varies, depending upon vehicle and coverage.
- General liability can cost anywhere between $500 and $602, and its policy limit is $2 Million
- Business Owner’s (General & Property Coverage) are typically around $509-$1199. Its policy limit is $2 Million, and policy deductible is $250
- Workers Compensation is between $1436 and $2490. Its policy limit is around $1 Million
- Contents coverage is usually based on the value of the contents you carry on your truck. If all of your equipment will cost $20,000 to replace, you’ll need $20,000 in property insurance coverage.
Where to Get the Best Food Truck Insurance
Since food trucks have gained incredible popularity in recent years, many insurance companies now offer all the insurance options necessary to run a food truck. You may even receive discounts for having all of those policies with the same company just like insuring your auto and home together.
But it is important to understand that you don’t have to have these policies with the same company. To make the best decisions for your business, you may want better coverage that isn’t offered by the company carrying your other policies, or there may be a less expensive option with the same coverage amount through a different company.
The main thing to consider is that you have options, shopping around with as many companies as possible is the only way to find the best coverage at the lowest rates. There are two primary ways to buy food truck insurance and they include;
- Insurance Agent: You can contact an insurance agent directly. If you contact the insurance company directly, you’ll likely work with an agent that represents that one agency. Be sure to get quotes from at least three agencies before you settle with one.
- Insurance Broker: When you work with a broker, they will do most of the work for you. A broker can help you shop multiple national insurers and guide you toward the best coverage with the most competitive pricing. A lot of food truck owners prefer to utilize the services of brokers.
Be sure to do your homework and choose the provider that has the best combination of coverage and cost to suit your needs and not necessarily the lowest premiums. You need to focus on the value of the insurance more than the cost.
Also, insurance agents should be helpful and informational and not too eager to make a sale. Once you’ve purchased food truck insurance, make sure you have easy access to your certificate of liability insurance (proof of your insurance) which can be requested by venues, suppliers, and clients on short notice.
What Type of Businesses Need Food Truck Insurance
Most businesses that serve food or beverages from a mobile truck, cart, or trailer should consider getting food cart insurance. A few examples of businesses that might need this type of insurance include:
- Gourmet food trucks
- Ice cream trucks and bicycles
- Hot dog and hamburger carts
- Concessionaires who go to festivals, carnivals, and fairs
- Restaurants that have food trucks
Not only do these kinds of businesses frequently need a food truck policy to protect themselves from the risks they face, but they also often need coverage to get contracts. Without adequate coverage, vendors may have a hard time getting permits from municipal governments or spaces at festivals.
10 Factors That Can Affect Food Truck Insurance Premiums
- Your Location – Where you live plays a part in deciding the price of your insurance. Some states are safer to drive in and therefore more affordable.
- Your Driving Record – Your insurance agent will look at your driving record as he’s determining your price. Fewer accidents means cheaper insurance.
- Your Truck – The age, make, model, and overall value of your food vehicle will be factored into your cost.
- Your Food – The way you prepare your food also matters. Industrial Catering Vehicles (ICV), which sell only prepackaged foods are cheaper to insure than mobile food preparation vehicles (MFPV), which prepare the food as customers wait.
- Your Equipment – Your agent will also be interested in what cooking equipment you keep in your food truck. Some pieces of equipment are often stolen while others increase the odds of fires.
- Your Credit – Food truck owners with good credit will often be able to get cheap insurance.
- Your Area of Operation – How far you drive your food truck or food trailer will play into the actuary tables as well.
Others include;
- Number of Employees you have: This factor will directly impact your workers compensation premium.
- Deductibles: Higher deductibles translate into lower premiums. Just be sure you have sufficient cash available to cover the deductible.
- Coverage Amount: If you choose minimal coverage, premiums will generally be lower. Equal and opposite, higher coverage amounts translate to higher premiums.
How to Reduce the Cost of Food Truck Insurance
Starting up a food truck business can be quite expensive, and you really do not need added expenses, especially when they can be avoidable. This is the reason why you need to look for ways to cut down cost on your insurance premiums. Here are ways you can reduce the quotes insurance companies present to you.
Ask for bundled coverage: There are certain coverage that all food truck vendors need to have, like commercial auto liability for the vehicle, food liability for the restaurant liabilities, liquor liability if you serve alcohol. All these coverage should be bundled together through a single insurance agent.
Opt for high deductibles: One way to lower your premium is to go with high deductibles. This is one of the riskier ways to save money. If you find yourself in an accident, you could end up paying more in the long run than you would have in your pursuit to save money.
Pay yearly: Your insurance agent will give you the option of spacing out your payments month to month or paying a large deposit upfront. If you have the means, it’s usually best to pay upfront. This can cut as much as 20% off your overall bill.
Look around: Far and away the best way to save on food vehicle insurance is to compare several prices at once. After you have made your comparisons, you can now choose the least expensive company.