If you have a flair for cooking and an entrepreneurial spirit, starting a catering business is an ideal endeavor. Caterers are needed for everything from wedding receptions to family reunions, and those who are good at their jobs rarely have trouble finding work. Getting started in this business usually requires a large financial investment, but the rewards can be outstanding. Be sure to protect your catering business with the appropriate insurance coverage.
The Catering Business in America: A Snapshot
- There are currently more than 11,000 catering business in the U.S.
- These catering businesses employ more than 137,000 people
- The catering industry sees annual revenue of about $8 billion
- From 2008 to 2013, the catering industry saw an annual growth rate of 0.9%
What Risks Does Catering Insurance Cover?
Small catering companies are often home-based. Larger catering companies may rent out large kitchens or may work out of a banquet hall or restaurant. The size and location of your privately-owned catering company will affect some of the risks you face, as will the type of catering you do.
For example, some of the risks caterers need to cover include:
- Liability: Caterers face a number of liability risks, depending upon the types of food and drink served, and other concerns. If you set up on someone else's banquet hall, backyard or kitchen, there's always a chance that property damage at the host site could happen - which you could be held liable for. If you serve alcohol, you will be concerned with liquor liability. And of course you will also be concerned with food-borne illness due to contamination or food not kept at the correct temperature. You also need to be concerned about liability related to driving delivery vehicles. Catering liability insurance can protect you from possible lawsuits that may be filed against you.
- Damage to business property: If your catering business is based out of your home, you can add an endorsement for your business equipment and materials to your home insurance policy. However, you may be limited to coverage up to $2,500. If the value of your catering business equipment exceeds that amount or if your business is located outside your home, you may want to purchase property insurance through your catering insurance policy. You can purchase insurance that provides coverage for loss or damage caused by fire, weather, vandalism and theft.
- Food spoilage: Caterers often keep a lot of food in their freezers and refrigerators. If an extended power outage or mechanical failure results in the disposal of a lot of food, this insurance coverage will provide you with compensation so that you can restock without taking a large financial hit.
- Equipment breakdown: This coverage is best suited to large catering companies that use industrial-sized kitchen equipment. If a power surge or mechanical failure results in your inability to do your catering work, this insurance can assist you with repair costs and resulting loss of income.
What Kinds of Insurance Does Your Catering Business Need?
Whether you own a small two-person catering business or a large multi-employee company that caters large corporate events, you will need to have appropriate insurance coverage. Some insurance policies are mandatory, while others are optional but very important for protecting your business finances.
Insurance policies you may need depending upon your specific catering business include the following:
- Catering insurance: Catering insurance is a specific form of business insurance. It includes the coverage options necessary to protect your business from the inherent risks in the catering industry. Policies can be built specifically for your catering business so that you are not purchasing any coverage options that you do not need.
- General liability insurance: This type of liability covers a range of risks that all businesses face. If for any reason a patron files a lawsuit against your business for injury or wrongdoing, this coverage can provide financial protection. For example, if you work at your client's home, and you or one of your employees accidently damages expensive personal property, you may be held liable and sued for damages. General liability will shield you from these expenses.
- Product liability insurance: This coverage provides protection to companies that sell or manufacture products. Whether this type of insurance is appropriate for your catering business will likely depend upon the nature of the services you provide. Talk with an agent to learn more.
- Liquor liability insurance: If you serve alcohol at weddings and other functions as a part of your services, this important coverage can provide financial protection in the event that a guest is injured as a result of intoxication.
- Workers compensation insurance: Burns, falls and other work-related injuries are not uncommon in the catering industry. Workers compensation is required by law for any company that has employees, although the specific requirements vary by state. Workers comp provides medical coverage for employees who are injured or become ill as a result of the work they perform.
- Unemployment insurance: This coverage is included as part of your state taxes. Once you establish and register your catering business with your state’s workforce agency and begin paying taxes, your business will be covered.
- Disability insurance: This coverage is required by law only if your catering business is located in California, Hawaii, New Jersey, New York, Rhode Island or Puerto Rico. Otherwise, it is optional.
- Medical insurance: Most catering companies employ fewer than 50 people and are therefore exempt from the requirement to provide health insurance for their employees. If you employ more than 50 people, the Affordable Healthcare Act may eventually require you to subsidize their health insurance. A Trusted Choice member agent can help you find insurance providers that offer affordable rates through group insurance for small business plans.
- Commercial vehicle insurance: Your catering business likely uses a delivery van or has a fleet of company owned vehicles. You will need to insure them with a commercial vehicle insurance policy that meets your state’s minimum liability coverage requirements.
- Hired or non-owned vehicle insurance: If your employees use their own vehicles in the course of doing the job, you are responsible for covering any liability expenses they incur while transporting goods or materials to and from job sites. This insurance will provide that coverage.
Find the Right Catering Insurance for You
For help finding the right catering insurance policy for your unique business, turn to a qualified insurance agent. You have several options when it comes to agents. You can choose to work with a big-brand insurance company, which will employ a "captive agent." Captive agents work only with a single company and sell the products that a single company provides. This can make your insurance search a little tedious, as you may have to work with up to 3 captive agents to get a good sampling of the coverage rates for your business before you buy.
On the other hand, you can choose to work with an independent agent. Independent agents work without ties to any particular insurance company, and can collect several quotes for you to compare before you buy. Consider your needs and your time when shopping for catering insurance so you get the coverage you need at a price you can afford.