Thanks to our fast-paced modern society, it’s never been easier for entrepreneurs to help out people by providing them with snacks, magazines, health products, and more with a snack bar.
And while the business doesn’t face the same risks as restaurants or bakeries, a concession stand can still be susceptible to a mishap that leads to a hefty liability claim. Have you considered what happens to your snack bar and concession stand if:
- A lightning storm causes a lengthy power outage, ruining your inventory.
- A customer has an allergic reaction to ingredients that were accidentally mixed into a smoothie.
- An employee burns themselves on an oven.
These are just some of the many scenarios that could affect your snack bar, leading to a significant loss to your business revenue and possibly your personal assets.
The answer to avoiding significant losses is insuring your snack bar with adequate policies. However, most owners don’t have a thorough understanding of how insuring a snack bar works and what is involved. Read on to learn about the coverages you should have for your snack bar and a number of insurance considerations you should be aware of when it comes to insuring your snack bar.
Of course, finding the right insurance policy can be a complicated process, especially when your snack bar may have a unique set-up, specialty products, and more. An independent insurance agent can answer your questions, explain the fine print, and recommend the best insurance policies for your snack bar.
Determining the Right Insurance Coverage for Your Snack Bar
To begin with, every snack bar needs to be insured. Considering that the average insurance claim is $15,000, you’ll want to have insurance in place to avoid draining a significant amount of money from your snack bar - or having it closed completely. By comparison, monthly premiums can shield you from outside claims while also safeguarding your assets, such as lost inventory from theft.
Now that you understand the importance of insurance, which type of snack bar do you operate? Does your snack bar deal exclusively with products that are shipped in and are sealed, or are there some food items that are made on-site, such as pretzels, hot dogs, and so forth? These two models affect which types of insurance coverage you should have and the amount you need.
Sealed food products typically shift the liability onto the manufacturer; conversely, prepared foods take on more liability due to all of the risks that come from contamination, allergic reactions, and so forth.
Of course, there are many other variables when it comes to properly insuring a snack bar. Read on to learn about them.
What Types of Insurance Does a Snack Bar Need?
General Liability and Property Insurance
As is the case with most small businesses like concession stands and snack bars, general liability and property insurance are basic insurance coverages that provide protection against common mishaps. General liability and property insurance will cover your snack bar for a variety of claims, including:
- Property damage
- Example: A leaking refrigerator damages the flooring of your rented premises.
- Bodily/personal injury
- Example: A customer chokes on a food item.
- Damage from fire and storm-related damage
- Other related claims that can arise from your snack bar’s operations
Workers’ Compensation Insurance
It’s more than likely that you have employees who are working in your snack bar. That’s why you’ll need workers’ compensation Insurance, which is mandatory in most states. Workers' compensation insurance provides benefits to your employees for work-related injuries or illnesses, including:
- Wages from lost work time
- Medical care for on-the-job injuries
- And more
Even if it is not required by your state, you may still want to have a comprehensive workers' comp policy in place so your employees won't incur a significant financial burden before returning to work.
Commercial Auto Insurance
If you or any of your employees use a vehicle in any capacity for your snack bar, such as a mobile food truck at events or to deliver inventory, you’ll want some form of commercial auto insurance. Considering how dangerous driving can be in both urban and rural areas, having commercial auto insurance in place protects your business against liability if an accident should occur. Your company vehicle(s) should at the very least be insured against third-party injury. However, a comprehensive auto insurance policy will also cover damage to the insured vehicle in an accident.
Bear in mind that 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. Speaking with an independent insurance agent can clear up any misunderstandings and clearly define just what type of insurance you need for your snack bar.
Additional Insurance Policies for Your Snack Bar
Once you have these primary coverages in place, it’s important to consider the risks that are unique to your snack bar. Consider the following types of insurance policies and how they may apply to your snack bar:
- Commercial umbrellaiInsurance: Extends the limits of your liability insurance policies, acting as a financial safety net for excessive claims made against your business.
- Business income insurance: Replaces lost income if you have to temporarily shut down your snack bar because of a covered event.
- 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 snack bars are alike. That’s why it's important to speak with an independent insurance agent to go over the details of how you plan to grow your business with minimal risk. You may want to adequately insure your snack bar while participating at high school sports events in your area. Independent insurance agents can give you unbiased advice about what the potential risk factors are and what you need for peace of mind.
How Much Does It Cost to Insure Your Snack Bar?
The short answer? It varies depending on your situation.
A small business insurance policy for a snack bar usually includes a number of different coverages, so it’s important to understand each cost factor that affects common types of business insurance.
Cost Factors for Most Types of Insurance
- Condition of the property: Newer buildings will often draw lower costs because updated facilities are often safer and generally in better shape. Conversely, older buildings are more likely to be susceptible to deterioration or create unwanted hazards, which can result in more claims.
- Size of premises: The larger your snack bar, the more opportunities there are for claims to be made. Thus, it’s likely you will end up paying more for insurance premiums.
- Claims history: Snack bars with few claims in their history will typically receive a discount on premiums due to the likelihood that fewer claims will be filed in the future. Locations with more claims than are typical will have higher premiums.
- Business hazards: The more hazardous the operations of your snack bar, the higher the premium costs. If your business has a number of appliances, like a cappuccino machine or an oven, you can expect premiums to be higher.
- Payroll size: Because workers’ compensation insurance pays benefits to employees based on a percentage of their salary, the larger your overall payroll, the more you’ll pay in premiums.
- Employment status of employees: Full-time employees cost more to insure, since they spend more time directly involved at your snack bar and are exposed to more risks in the workplace.
- Number of employees: The more employees your snack bar has, the greater the premiums you’ll have to pay.
- Severity potential: If your snack bar generates lots of revenue or has substantial assets, such as inventory, expect higher premiums to cover the replacement cost. This can be compounded by other factors, such as crime demographics and how many people visit your snack bar daily.
Cost Factors for Commercial Auto Insurance
- Driving record: The better the driving habits of you and your employees, the lower your commercial auto premiums may be.
- Driver demographics: Younger drivers, particularly those under 25 and male drivers, will result in higher premiums.
- How and where your vehicle is driven: 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 vehicle: Insurance rates differ depending on the type, make and model of the vehicle used for your snack bar. Generally speaking, more expensive vehicles draw higher premium rates.
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 other financially related purposes, such as qualifying for business loans and taxes.
A business may often have a primary NAICS code and a secondary code, if it business has other elements of a second industry.Most snack bars are classified under the primary code of 72, which stands for ‘Accommodation and Food Services.’ However, if your snack bar is engaged in other forms of retai,l like selling magazines and other items, it 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 snack bar is classified under.
If you’ve read up to this point, you now have a basic understanding of what it takes to insure your snack bar venture. However, there’s a vast number of considerations that are unique to your situation that can’t be answered without expert knowledge.
That’s why smart entrepreneurs consult independent insurance agents to assess their potential risk factors, find out the differences between different insurance policies, and much more.