Do you run a cookie shop? It can be one of the sweetest and most rewarding businesses to run, producing batch after batch of confectionary goodness. After all, whoever said no to a tasty treat?
Despite all of this, sometimes bad things can happen during the course of running your business. Whether you lose inventory due to a power outage, an employee gets burned on an oven, or a customer claims that your cookies made them sick, any incident can end up costing you serious dough.
Of course, that’s just the way the cookie crumbles, but with adequate insurance coverage in place, you can keep your business fresh and worry-free.
Before we begin, be sure to consult an expert who can guide you through the complicated world of small business insurance. Independent insurance agents are trained to help reduce your exposure to financial risk while explaining the fine print in an easy-to-understand manner.
Which Cookie Shops Need to Be Insured?
The short answer is that every cookie shop needs insurance.
Generally speaking, cookies rank pretty low on the dangers of life. But whenever you’re conducting a business and engaging with the public, there are simply too many risks that can sink your business. These risks are applicable to brick-and-mortar shops in a busy downtown area or pop-up business where you sell your home-baked goods at a concession stand once a month.
Furthermore, if you lease or rent a location for your cookie shop, your landlord’s contract may require you to have adequate business insurance in place to do business. This helps reduce the landlord’s risk and shields them from lawsuits and financial loss due to things like fire damage.
What Types of Insurance Does a Cookie Shop Need?
If your cookie shop is up and running, you probably have a good idea of what you need to run your day-to-day operations. However, insurance tends to be a mystery for most small- to medium-sized business owners. This includes not only how much coverage you’ll need for your cookie shop, but also which types are appropriate for your business.
General Liability and Property Insurance
As is the case with most small businesses, having general liability and property insurance can provide basic protection against common mishaps. General liability and property insurance will cover your cookie shop for a variety of claims including:
- Property damage
- Example: Your oven overheats and the smoke damages the HVAC system.
- Bodily/personal injury
- Example: A customer has an allergic reaction to a nut accidentally mixed in an unrelated batch of cookies.
- Advertising claims
- Example: An ad campaign slanders a competitor.
- Other related claims that can arise from your business operations
Workers’ Compensation Insurance
If you have employees working in your cookie shop, you’ll need workers' compensation insurance, since it is required in most states. Workers' comp provides benefits to your employees for work-related injuries or illnesses, including wages from lost work time, medical care, and more. Even if it is not required by your state, you may still want to have it in place as a way for your employees to not incur a significant financial burden while being out of work.
Commercial Auto Insurance
Commercial auto insurance is also important if you or your employees drive for your cookie shop business. This can be a bit complicated if you use your personal vehicle for your business or allow a worker to use theirs, since a regular auto insurance policy may not be entirely adequate.
If company vehicles will be used for your cookie business, those vehicles should be insured to protect your business against liability if an accident should occur. Your company vehicles should at the very least be insured against third-party injury, but a comprehensive insurance policy will also cover damage to that vehicle in an accident.
Additional Insurance Coverages for Your Cookie Shop
Once you have these primary coverages in place, it’s important to consider the risks that are unique to your business. For these risks and peace of mind, consider the following types of insurance policies and how they may apply to your cookie shop:
- Business income insurance: Replaces lost income if you must temporarily shut down your cookie shop because of a covered event.
- Commercial umbrella insurance: Extends the limits of your liability insurance policies, acting as a financial safety net for excessive claims made against your business.
- Professional liability insurance: Also known as errors and omissions (E&O) insurance, these policies cover your business against negligence claims due to harm that results from mistakes or failure to perform.
- Product liability insurance: Protects your business in the event that a product your shop or another retailer sells results in a claim.
- Commercial flood insurance: Covers the cost of flood-related damage to your business property, which is not covered by most property insurance policies.
- Commercial earthquake insurance: Covers the cost of earthquake-related damage to your business property, which is not covered by most property insurance policies.
Of course, no two cookie shop businesses are alike or have the same insurance needs. That’s why it is important to speak with an independent insurance agents to go over the details of how you plan to grow your business with minimal risk. You may want to adequately insure your business while participating in a weekly farmers market in your area. For this and many other concerns, agents are here to help you.
How Much Does It Cost to Insure My Cookie Shop?
The cost of insuring your cookie shop is significantly less than the cost of the average small business claim without an insurance policy in place. Without insurance, you will have to pay those costs with your own business assets and, in some cases, with your personal assets. And if you believe you can handle the expenses on your own, you should know that the cost of an average paid-out liability claim is $15,000.
A small business insurance policy for a cookie shop typically includes a number of different coverages, so it’s important to understand the things that affect the costs of common types of business insurance.
Cost Factors for Most Types of Insurance
- Size of premises: The larger your business location(s) , the more opportunities there are for claims to be made. Therefore, you’ll end up paying more on insurance premiums
- Condition of the property: Newer buildings will often draw lower costs because updated facilities are often safer and generally in better shape.
- Business hazards:The more hazardous the operations of your cookie shop, the higher the premium costs. If your business has heavy machinery, like a forklift or heavy-duty mixers, you can expect premiums to be higher.
- Payroll size: Because workers’ compensation insurance pays benefits to employees based on a percentage of their salary, payroll size directly influences premium costs for workers’ compensation insurance.
- Claims history: Businesses with few claims in their history will often get a discount, and those with more claims than are typical will have higher premiums.
- Employment status of employee: Full-time employees cost more to insure, since they spend more time directly involved in your workplace and are exposed to more potential accidents.
- Number of employees: The more employees your cookie shop has, the greater the premiums.
- Severity potential: If your cookie shop generates lots of revenue or has substantial assets, such as inventory, expect higher premiums to cover the replacement cost.
Cost Factors for Commercial Auto Insurance
- Driver demographics: Younger drivers, particularly those under 25 and male drivers, will result in higher premiums.
- How and where you drive: Businesses that do a lot of driving in urban areas typically pay more for commercial auto insurance than those in rural areas, where driving-related risk factors are lessened.
- Type of driving and vehicles: Insurance rates differ depending on the type, make and model of the vehicles used for your cookie shop. Generally speaking, more expensive vehicles draw higher premium rates.
- Driving record: The better the driving habits of you and your employees, the lower your commercial auto premiums may be.
NAICS Code for Insurance Costs
Your insurance premiums are directly tied to how the government classifies your business according to industry. Every industry in the US has a North American Industry Classification System (NAICS) code, which is used for insurance and a variety of other financially related purposes, such as qualifying for business loans and taxation. Consequently, the NAICS code system is used by your insurance company to compute premiums and risk.
A business may often have a primary NAICS code (the code that best fits your business) and a secondary code (if your business has other elements of a second industry). Most cookie shops are classified under the primary code of 72, which stands for ‘Accommodation and Food Services.’ However, if your cookie shop is engaged in other forms of retail, your business may have a secondary code of 44 or 45, designated under ‘Retail Trade.’
If you don’t know what your company’s NAICS codes are, an independent insurance agent can help you determine which NAICS code your cookie shop is classified under.
How Can I Lower the Cost of Business Insurance?
No two cookies are the same, just as no two cookie shops are the same. The following are some general rules to follow to reduce the cost of business insurance:
- Be responsible and minimize the risks associated with your business. Actively work to reduce the likelihood of accidents at your cookie shop, at job sites such as catering gigs, and while on the road.
- Consider changing your policy’s deductible amount, which is the amount you pay out of pocket before the insurance policy begins to pay out on a covered claim. In most cases, you can lower your premium costs by choosing a higher deductible amount.
- Bundle essential coverages into one policy. For a cookie shop, a business owners policy (BOP) combines general liability, commercial property and business income insurance all in one package. Insurers typically reduce the cost of bundled policies, which also has the benefit of being easier to manage than three separate ones.
Benefits of an Independent Insurance Agent
Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility and competitive pricing while working for you. Find an independent insurance agent in your community here.