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Michael Adams Green Mountain Mustard and Gredio

Michael Adams, Owner
Green Mountain Mustard & Gredio

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Insurance for Your Food Business

How to get insurance for your food business

food product liability insurancePhoto courtesy of justmakeit.

There are a lot of reasons companies need insurance. They’ve got to protect their logo or company name, make sure they’re computers are covered, and don’t forget workman’s compensation.

But, for food producers, you’ve got to protect something way more important than logos and computers.

You need to protect your customers. Yep – the people who enjoy your products every day. This is why product liability insurance is so important. I recommend getting it before approaching retailers to carry your product.

Why you need insurance:

1. Bad ingredients

If you’ve got recalled ingredients or spoiled ingredients that were used in production, your customers may be calling you complaining of their upset stomachs. Not good.

2. Allergen statements

Forget to put an allergen statement on your label? Peanuts, soy, wheat, etc. – it’s important to communicate allergens to customers  (and in some cases, you’re legally required). Get your allergen statement done before you send your labels to the printer.

What kind of insurance do you need (and how much):

Product liability insurance ($1 million):

This insurance does exactly what it describes – protects you from people who have a bad experience with your product. That could be food poisoning or even a shard of glass or metal in your product.

General aggregate insurance ($2 million):

General aggregate insurance is for everything that doesn’t pertain to a specific case. This could be property loss, advertising damage, or bodily injury (hopefully that doesn’t happen!).

Office insurance (optional):

If you don’t run your food business out of your house, you likely have an office. Your office has assets like laptops, office furniture, etc. What if your office gets burned down or flooded? Insurance would protect your tech which means you’d be able to produce

How much does it cost?

Product liability insurance shouldn’t cost you more than $300-$700 annually. This depends on your sales volume. If you’re starting out, it’s going to take some time to reach the revenue limit that increases your premium.

Besides a revenue increase, you may need more coverage. Here’s a couple of reasons:

1. Large distributors

Distributors handle thousands of products. They get your products to retailers and want to focus on that – not your affected product.

2. Big co-packers

Co-packers make your product for you. They don’t want to be responsible for your product recall or have any of the liability. After all, they’ve got their own to worry about.

3. Popular retailers

Large retailers may require a higher amount of product liability insurance. There’s more risk if more people are buying your product.

4. Fairs & festivals (where certificates of liability are needed)

When you’re sampling food products at an event, the last thing the organizer wants is to be held responsible if a festival goer complains about your food product.

This means you’ll need to purchase certificates of liability insurance holding the event as additionally insured. For me, these have cost $25/event, but your agent may charge more.

How to find your insurance provider:

Get national quotes (but buy locally).

One of the best places to find quotes for product liability insurance is national insurance providers like AIG and eInsurance.com – and they might be cheaper than working with a local agent. However, you’ll have a much more pleasant experience with a local insurance agency.

Why work with a local insurance agent

I’ve only purchased insurance from a local insurance agent (who may work for a larger firm) for several reasons:

You get almost instant support

When you work with a large internet-based agency, you probably call a call center to get support. Just navigating through the phone tree is a pain. With local providers, you get a real person on the phone. And you can’t replace a real person with a robot, right?

Work gets done faster

Need a certificate of insurance for your farmer’s market or event? Or how about advice on moving to a new plan? Getting work done from your local agent is dramatically faster than a large firm – often less than 24 hours. With a big company, you’re lucky if it takes two days.

Partner with a local firm. You won’t regret it. They’ve got the support (and sometimes better quotes), plus, you’re supporting a local business.

But some of you may be questioning whether product liability insurance is needed when you’re just starting out. I think you know the answer.

Do you really need insurance?

Yes! Product liability insurance is necessary. If you’re sued over bad product, your company might have to shut its doors. There’s no one there to back you or your company up.

It’s a start-up cost. You need to sell enough of your product to cover the expenses of running a business. And one of those expenses is liability insurance.

Believe me, you’ll be glad you have it when you actually need it.

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38 Comments on this post

  1. AUTHORAndrew

    on May 13, 2015 at 3:26 pm - Reply

    Hi Michael,

    This is great information. I have been researching a lot, since I would like to start my catering business in the next couple month (wedding season is already here). I found food liability insurance through http://www.fliprogram.com and they seem to have good review. Any insight on these or other carriers? I know you said go local, but this would be more convenient for me, I think.

    Thanks in advance!

    • AUTHORmichael

      on May 19, 2015 at 4:38 pm - Reply

      Hi Andrew – yep, you can buy product liability insurance online. That’s not a problem. I just go locally because I like knowing who I’m doing business with. Good luck with your catering business.

      Michael

    • AUTHORRoss Graham

      on February 6, 2017 at 10:52 pm - Reply

      Andrew,

      Thanks for the referral! I am a marketing manager with FLIP and really appreciate the word of mouth exposure. We are 100% online but also take pride in being extremely responsive to questions or policy help that our clients need by phone, chat or email. Once purchased, you’ll also have 24/7 access to your policy documents and to add additional insureds (for free!) on your online portal.

      Thanks for this great blog Michael. Let me know if you’d like to borrow any of our content or if you have any questions.

      • AUTHORmichael

        on February 7, 2017 at 10:23 pm - Reply

        Thanks, Ross – appreciate it!

      • AUTHORAma Agyapong

        on August 21, 2019 at 6:22 pm - Reply

        Hello
        Any suggestions on an insurance company that will cover baby food manufacturing? FLIP doesnt

        • AUTHORmichael

          on August 30, 2019 at 8:58 pm - Reply

          Hi Ama – Contact Jamieson Insurance in Vermont – they should be able to help you out.

    • AUTHORbabs

      on July 10, 2017 at 7:08 pm - Reply

      Would it be better to get an insurance policy under your own business name and not a group’s policy?
      i was just refered to Eastern Classic Coverage (www.classiccoverage.com)
      pleasant and very helpful

      • AUTHORmichael

        on July 11, 2017 at 12:38 am - Reply

        Hi Babs – I’d get it through a broker. The policy will be in your name, however.

  2. AUTHORJim

    on July 22, 2015 at 3:47 pm - Reply

    Hi Andrew –

    Great perspective and good information. One coverage that was not mentioned that should be considered by every business (especially caterers) is Auto Liability. A General Liability policy does not provide any coverage for operation of a vehicle. Let’s use a caterer as an example because they have obvious exposures on the road. Let’s say an employee of a catering company is transporting product to an event and on the way they are at-fault in an accident that severely injures two people. The personal auto policy the employee has will provide personal liability protection, but will not provide any protection or coverage for the business. With a claim that severe, the injured party, their family members and/or attorney may argue that the business is liable as well because the employee was on company time. These types of claims can end a business but can be minimized by obtaining auto liability insurance. If your business does not have any company owned autos, businesses can get Hired & Non-Owned Auto Liability to cover liability assumed by the business while their employees are driving vehicles that are not owned by the business (ex. personal vehicles). This coverage can be surprisingly inexpensive and can protect your business against a potential catastrophic loss.

    Thanks,

    Jim

    • AUTHORmichael

      on July 22, 2015 at 4:24 pm - Reply

      Great points, Jim — appreciate you pointing out how affordable and necessary auto insurance is.

  3. AUTHORCeleste

    on February 1, 2016 at 8:37 pm - Reply

    Hi there- I’m starting a small food-based business where children are the primary target. I’m having a really difficult time finding a policy premium under $5000. Any suggestions? I’ve reached out to about 2 dozen companies.

    Thanks!

    • AUTHORmichael

      on February 10, 2016 at 11:50 am - Reply

      Hey Celeste — sorry for for the late reply. I’ve been slammed at the kitchen. I work with Jamieson Insurance out of Waistfield, VT — and pay about $1000 a year for a good policy. This may be different for you depending on your product. Good luck in your search!

    • AUTHORLuciana

      on July 26, 2016 at 2:01 pm - Reply

      Hi Celeste, I am finding the same problem. Nothing under 5k. Did you get a better quote? Thanks

      • AUTHORmichael

        on July 26, 2016 at 9:20 pm - Reply

        Hi Luciana,

        Are you using national brokers or local brokers? Often times you can get better rates with the local guys. And you may be getting a quote on too much insurance. Good luck in your search!

        — Michael

  4. AUTHORHeather Smith

    on February 2, 2016 at 5:37 pm - Reply

    If I am selling produce from my aquaponic greenhouse, do I need product liability insurance?

    • AUTHORmichael

      on February 10, 2016 at 11:48 am - Reply

      Yep! Any time a person is consuming a product, you should have insurance. Good luck!

    • AUTHORMarissa Madding

      on April 17, 2017 at 4:49 pm - Reply

      Did you end up getting insured? What type of policy did you get if so?

  5. AUTHORTom

    on April 6, 2016 at 1:09 pm - Reply

    Whats the average price for a years coverage of General aggregate insurance?

    • AUTHORmichael

      on April 8, 2016 at 11:42 am - Reply

      Hi Tom,

      When we first started, we paid about $500-$600 annually. We’ve since increased our policy for a couple retailers, so it’s closer to $900 or so. As for food delivery, you’d have to talk to your insurance agent. Your premium depends on the type of business you’re running. Good luck and thanks for reading the blog!

      — Michael

  6. AUTHORTom

    on April 6, 2016 at 1:10 pm - Reply

    If the delivery of food is also part of the business, is insurance required for this?

    • AUTHORJohn

      on April 21, 2016 at 2:43 pm - Reply

      Same liability applies if you handle the food, certainly if you create the food. Read the comment above about “Hired & Non-owned Auto” endorsements, unless your company owns its own vehicles (i.e. the company is listed as owner on the vehicles’ titles).

  7. AUTHORCorey

    on June 12, 2016 at 4:59 pm - Reply

    I am in the beginning stages of bottling and selling a BBQ rub (spice mix). I have having another company do all the mixing and bottling for me so I receive the product completely finished and sealed. Do I still need to carry insurance on this? The company that creates the product for me tells me they are ultimately responsible and therefore I shouldn’t need insurance myself. Do you agree with this?

    Thank you in advance for your guidance…also, love the site and articles, they’ve been a lot of help in these beginning stages.

    • AUTHORmichael

      on June 21, 2016 at 5:19 pm - Reply

      Hi Corey,

      They are ultimately responsible, however it doesn’t hurt to have a small amount of product liability insurance for your company also in case someone really goes after you — knock on wood. I’m glad you enjoy the articles – working on a couple more this month!

      Michael

  8. AUTHORLucy

    on July 15, 2016 at 2:18 pm - Reply

    Hi Michael
    I am struggling to find an affordable insurance for baby food. Any sugestions?
    Thanks
    Lucy

    • AUTHORmichael

      on July 15, 2016 at 3:34 pm - Reply

      Hi Lucy,

      We work through Jon Jamieson at Jamieson Insurance Agency in Richmond, VT — he should be able to help you out. It also may be because of the liability with baby food.

  9. AUTHORMarie McCoy

    on July 23, 2016 at 11:43 pm - Reply

    Hi Michael,
    I’m taking over the contract catering business at a local squash club two nights per week and they’re asking me to take out “relevant liability insurance”. Are you able to advise why and what sort would I look at purchasing. Thanks Marie

    • AUTHORmichael

      on July 25, 2016 at 10:03 pm - Reply

      Hi Marie,

      Congrats on the contract! You want product liability insurance at the very least to protect you from potential problems with your food. You may also want some kind of protection if the building burns down and you’re out of a contract. This is all stuff that can be figured out when you meet with your insurance broker.

      Hope that helps — good luck!

      Michael

  10. AUTHORAisha hayes

    on July 28, 2016 at 2:14 am - Reply

    Hi! When you say local agents do you mean like our regular car/ home insurance agents? I never knew we could purchase ins. Locally. Thanks

    • AUTHORmichael

      on July 28, 2016 at 11:39 pm - Reply

      Hi Aisha,

      Yes – your local insurance agent should be able to provide you with coverage. If they can’t, then I’m sure they can point you in the right direction. Thanks for your comment!

      Michael

  11. AUTHORMichael Choi

    on December 7, 2016 at 10:51 pm - Reply

    Great post Michael, have you heard of FLIP Program? https://www.fliprogram.com/food-manufacturers-insurance

    I too started calling both local and large companies like you suggested and got quotes between $600 to 700 range.
    FLIP on the other hand is starting at $299 for $0-50k annual sales, this seems pretty reasonable for startup companies but could this be “too good to be true” Insurance scam?

    • AUTHORmichael

      on December 29, 2016 at 11:30 am - Reply

      Hi Michael,

      I haven’t heard of that. The quotes aren’t awful, but it does sound too good to be true. This is liability insurance we’re talking about. Not to be taken lightly, but if you find some companies who have it, I guess it’s worth a shot.

      Good luck!

      Michael

    • AUTHORRoss Graham

      on February 6, 2017 at 11:00 pm - Reply

      Hi Michael,

      My name is Ross and I’m a marketing manager for FLIP. You can be 100% confident in FLIP as an insurance provider. We have great reviews from our clients on Facebook, https://www.facebook.com/FLIProgram, and more importantly our insurance carrier is A+ rated with AM Best. If you have more questions please contact our licensed insurance agents here. https://www.fliprogram.com/contact_us

  12. AUTHORRayshaun Williams

    on January 15, 2017 at 12:25 pm - Reply

    I’m starting a spice, company and initially will be working from home. What do you think insurance cost would be for me as a brand new company. I guess I’m struggling where type of policy should I get.

    Rayshaun

    • AUTHORmichael

      on January 15, 2017 at 1:25 pm - Reply

      Hi Rayshaun — congrats on starting your spice company. I would talk with an insurance agent, but you’d most likely need basic product liability insurance to start out — $1M liability and $2M general aggregate. Again, I’m not an insurance agent, so it’s best to speak with them first.

  13. AUTHORkath

    on May 6, 2017 at 3:04 pm - Reply

    HI
    I found that a Broker has programs in New York that is also very good in other states too. Their programs are exactly what I needed and now even other people I know love them and their prices is good along with what they give you – very responsive and knowledgeable – Eastern Classic Coverage http://www.classiccoverage.com

  14. AUTHORMark Finch

    on October 18, 2017 at 3:33 am - Reply

    Great article! I just started a restaurant a few months back. After testing the waters, I have decided that I really need an insurance. I love how you explained the different kinds of insurance and how they differ from each other. I have decided to get just what I need for my business.

  15. AUTHORAlexandria Martinez

    on December 13, 2017 at 11:32 pm - Reply

    I had no idea that national food insurance was a necessity. It makes sense since it makes or breaks a company’s produce and food content. This would be really helpful information for a friend of mine that was looking into something similar.

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