Coffee shop insurance could arguably be called one of the most important types of coverage when you consider how essential coffee—and therefore, the shops that serve it—are to society.
All joking aside, while running a coffee shop can be lucrative, you can also face many risks. Your risk management plan should be a big part of your overall business strategy, with business insurance as the underpinning.
Whether you’re operating a mobile cart, kiosk, taking over an existing shop, starting your own shop from scratch, or simply trying to streamline costs by price shopping your current coffee shop insurance, understanding some of the types of coverages and why they’re important can help you get the best value for your money.
Why Do Coffee Shops Need Insurance?
Your coffee shop business is your passion—you need the right insurance to protect it. It’s hard to imagine something could go wrong until it does. Even a small incident can financially ruin you. How?
- A woman ordered a coffee from the McDonald’s drive-through and it was spilled on her. She was awarded $3 million in damages for the resulting burns.
- A Florida woman sustained first and second-degree burns after her Starbucks coffee lid came off, spilling hot coffee on her. She was awarded $100,000 for the medical bills.
- A Portland man sued Starbucks after he was served the wrong drink. He ordered soy milk and was given almond milk—and he had a life-threatening nut allergy.
These are all actual incidents where a customer was harmed inadvertently when visiting a coffee shop. Everyone knows that accidents happen. But sometimes accidents have horrible consequences and someone is held responsible. If you accidentally harm a customer, you want to make sure you don’t lose your business and way of making a living.
What Insurance Do Coffee Shop Owners Need?
Here are some of the basic types of business insurance you should consider for your coffee shop.
General Liability Insurance
General Liability Insurance will protect your coffee shop from claims of third-party bodily injury, third-party property damage, and libel or slander. The insurance company can cover medical bills and legal expenses. General liability insurance is the most basic coverage you can get to protect your business—don’t skip it.
Let's say a customer is going through your drive-through and it's storming outside. While getting their order from you at the pickup window, the awning snaps under the pressure from the wind. The awning falls, shattering their windshield and severely injuring your customer. Your general liability insurance will pay to replace their windshield, cover their medical bills, and pay the settlement cost because they used you for negligence.
Commercial Property Insurance
Your building, equipment, furniture, computer, and even the actual coffee and cups are only part of what makes your coffee shop a business. But you still want to protect your business property with commercial property insurance. The awning that was damaged by a storm in the previous example? Property insurance can pay to repair or replace the awning on your coffee shop.
Business Owners' Policy
As a small coffee shop business, a Business Owners’ Policy (BOP) can be an affordable way to get important coverage that insurance companies often offer at a discounted rate. A business owners' policy is a special insurance package that typically includes general liability insurance, commercial property insurance, and business interruption insurance.
Business interruption insurance—often referred to as business income insurance—comes into play if your coffee shop is damaged and needs repairs. Business income insurance coverage can help cover lost income, payroll, operating expenses, taxes, and even debt. Some insurance policies will also cover the cost of a temporary location to operate your business. An insurance agent can help you save money and while offering protection for your small business.
Workers' Compensation Insurance
Another business insurance that you'll need is worker’s compensation insurance. You'll need this if you have part or full-time employees because it's legally required in most states. Workers' comp protects your employees if they are injured on the job by covering their lost wages and medical bills. The last thing you want is for an employee to sue you for an injury.
What if one of your employees slips and falls on a wet floor during a rush and breaks their arm? If you don't have workers' compensation insurance, you'll be left paying their medical expenses. The costs can add up quickly.
Liquor Liability Insurance
Do you also offer wine or cocktails at your coffee shop/cafe? If so, you may be required to get liquor liability insurance. Why would you need it? Did you know if a customer becomes inebriated and commits a crime you may be held responsible? Liquor liability insurance helps protect your coffee shop if you're accused of being negligent and over-serving a customer.
Product Liability Insurance
You should consider product liability insurance for your coffee shop. Why? If you accidentally use spoiled milk or accidentally sell a customer expired food, they may get ill. Product liability coverage can pay their medical expenses and your legal expenses if you’re sued.
Other Coffee Shop Business Insurance Coverage to Consider
What other types of business insurance policies should coffee shops consider?
- Equipment Breakdown Coverage: You use expensive equipment running your business, right? Consider protecting your specialized equipment with a policy designed just for them.
- Contamination and Spoilage Coverage: Contamination and spoilage coverage can help replace lost inventory (such as milk, frozen food, etc.) if you suffer a loss of electricity or your fridge or freezer breaks down. You want to make sure your expensive inventory is covered.
- Employee Dishonesty Coverage: Also referred to as crime coverage, this insurance covers your losses if an employee steals from you.
- Commercial Auto Insurance: Do you use vehicles for delivery or other business purposes? Or is your coffee shop in a food truck? You might need commercial auto insurance to protect your vehicle, drivers, and other people and property.
- Cyber Liability Insurance: If you offer a rewards program for your customers and take some of their personal information such as name and phone number, you need to protect it. If you’re the object of a data breach and their information is stolen, they can hold you liable. That's why you need cyber liability coverage.
- Employment Practices Liability Insurance: Employment practices liability insurance or EPLI protects your business if a former employee accuses you of wrongful termination, sexual harassment, or discrimination.
Make sure you discuss the distinct aspects of your business with your licensed insurance agent so they can help you determine the appropriate coverage you may need.
How Much Does Coffee Shop Insurance Cost?
The average cost of general liability insurance for coffee shops falls between $35 and $60 a month for $1,000,000/$2,000,000 in coverage. Factors that can influence the cost include:
- The location of your business
- The size/age of your property
- Estimated yearly payroll
- Estimated yearly sales and experience
- The types of coverage you choose
- The deductibles and coverage limits you choose
- The insurance company you choose
A coffee house insurance policy needs to provide coverage for a variety of risks. There are several coverage options with varying limits and deductibles. Talk to your licensed insurance professional to review what is available.
Get a Free Commercial Insurance Quote for Your Coffee Shop
Having a good commercial coffee insurance policy in place for your small business will reduce stress and worry, knowing that your every risk is covered. You should spend your time creating new and exciting coffees and lattes for your clients and not worrying about what-ifs.
There’s no doubt that running a successful coffee shop is a challenge, but your contribution to helping the world wake up and get about the business of living is important. Your coffee shop insurance could make or break your effort to caffeinate lives—be sure it’s doing everything it should!
If you're ready to take the next step to protect your business and your customers, complete the form at the top of the page or give us a call at 877-907-5267 for a free quote.
Related Articles: Product Liability Insurance, Liquor Liability Insurance
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