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Why do bakeries need insurance?
Your bakery may be small, but it faces big risks. A fire could shut down your kitchen, or a delivery van could get into an accident. Those costs could force your bakery to close despite loyal clientele. Bakery insurance coverage protects against financial losses to help keep your business afloat.
Find the right coverage
Insureon helps business owners find baker insurance quotes that match their unique risks.
Get free expert advice and peace of mind knowing you have the right property and liability coverage for your bakery.
What types of business insurance do bakeries need?
These insurance policies cover the most common risks of running a bakery.
Business owner’s policy
This policy bundles commercial property insurance and general liability insurance under one plan. A BOP is one of the most economical options for small business owners.
BEST FOR
- Customer bodily injuries
- Damaged business property
- Business interruption incidents
Workers’ compensation insurance
Most states require workers' comp for bakeries that have employees. It also protects sole proprietors from work injury medical bills that health insurance might deny.
BEST FOR
- Employee medical expenses
- Disability benefits
- Legal costs from employee injuries
General liability insurance
A general liability insurance policy covers common third-party claims, including customer injuries at your bakery, customer property damage, and advertising injuries. It’s required for most commercial leases.
BEST FOR
- Slip-and-fall accidents
- Third-party property damage
- Product liability insurance
Commercial auto insurance
This policy covers lawsuits, legal fees, and property damage in an accident involving your bakery’s vehicle. It also covers vehicle theft and damage caused by weather or vandalism.
BEST FOR
- Physical damage and collision coverage
- Injuries caused to another person
- Repairs due to vandalism or weather
Cyber insurance
This policy helps bakeries and other food service businesses recover from cyberattacks and data breaches. It's recommended for any business that stores customer information.
BEST FOR
- Data breach notification costs
- Fraud monitoring services
- Cyber extortion payments
Looking for different coverage? See more policies.
How much does bakery insurance cost?
A small home baker will pay less for business insurance than a larger commercial bakery.
Average bakery insurance costs include:
- General liability: $39 per month
- Workers' comp: $130 per month
- Commercial auto: $222 per month
An affordable insurance option for low-risk bakeries is a business owner's policy (BOP), which bundles liability and property coverage for less than separate policies. On average, Insureon's bakery customers pay $102 per month for a BOP.
What factors affect bakery business insurance costs?
Insurers evaluate your level of risk during underwriting, and consider several factors when calculating the cost of your premiums, such as:
- Products and services offered: Bakeries that sell specialty items, such as custom wedding cakes or catered desserts, may face different risks than those that primarily sell standard baked goods, bread, or donuts.
- Business property and equipment: The value of your ovens, mixers, refrigeration units, display cases, and other equipment can affect the cost of commercial property coverage.
- Annual income: Businesses with higher revenue often pay more for insurance because they typically serve more customers and have greater exposure to potential claims.
- Where you operate: Insurance costs vary by location based on factors such as local property values, crime rates, weather risks, and state insurance requirements.
- Business operations: Your day-to-day activities can impact premiums. For example, bakeries that offer delivery services, catering, or food truck operations may face additional risks compared to storefront-only businesses.
- Number of employees: Businesses with more employees generally pay higher workers' compensation premiums and may have greater exposure to workplace accidents.
- Policy limits and deductibles: Choosing higher coverage limits typically increases premiums, while selecting a higher deductible can lower your insurance costs.
- Claims history: A history of filing insurance claims may lead to higher premiums, while a clean claims record can help reduce costs.
- Risk management and safety practices: Insurers may offer better rates to bakeries that maintain food safety procedures, employee training programs, kitchen fire prevention measures, and well-maintained equipment.
How do I get bakery insurance?
It's easy to get bakery insurance policies if you have your company information on hand. Our application will ask for basic facts about your business, such as revenue and number of employees. You can buy a policy online and get a certificate of insurance (COI) with Insureon in three easy steps:
- Complete a free online application.
- Compare insurance quotes and choose policies.
- Pay for your policy and download a certificate.
Insureon's licensed insurance agents work with top-rated U.S. providers to find the right insurance coverage for your bakery, whether you work independently or hire employees.
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FAQs about insurance for bakery businesses
Take a look at answers to common questions about insurance for bakers and more.
What licenses do I need to open a bakery?
The licenses and permits required to open a retail bakery vary by state, county, and city. In most cases, bakery owners need a combination of business, tax, and food-related licenses before they can legally operate.
Common requirements often include:
- A business license
- A sales tax permit or seller's permit
- A food handler's permit or food safety certification
- Health department permits and inspections
- Zoning permits, depending on your location
- A catering permit or food service license if you provide catering services
Additional requirements may apply if you sell alcohol, operate multiple locations, or manufacture food products for wholesale distribution. It's important to check with your state and local government agencies to determine which licenses and permits your bakery needs.
Do I need a license to operate a home bakery?
Many home-based bakeries are allowed to operate under cottage food laws, but requirements vary by state and municipality. Depending on where you live, you may need:
- A cottage food permit or registration
- A business license
- Food safety training or certification
- Health department approval
- Home bakery insurance coverage
Some states limit the types of food that can be prepared in a home kitchen or restrict where products can be sold.
For example, you may be allowed to sell directly to consumers at farmers markets, online, or at community events but not through grocery stores or other retailers. If you plan to wholesale products or expand your distribution, you may need additional licenses and a commercial kitchen.
Why do bakeries need product liability insurance?
Product liability insurance, also called products-completed operations coverage, helps protect bakeries if a customer claims one of your products caused a bodily injury or illness. For example, this coverage can help pay for legal expenses if a customer alleges:
- Food poisoning from contaminated or spoiled baked goods
- Illness or allergic reaction caused by an undeclared allergen
- Injury from a foreign object found in a product
Product liability coverage is typically included in a general liability insurance policy. Because bakeries sell products that customers consume, this coverage is one of the most important protections for the business.
Does bakery insurance cover equipment breakdowns?
Not always. While commercial property insurance can help cover damage to bakery equipment caused by covered events such as fire, theft, or certain types of severe weather, it generally doesn't cover mechanical or electrical failures.
To protect equipment such as ovens, mixers, refrigerators, freezers, and proofing equipment, bakeries may need equipment breakdown coverage. This policy can help pay for repair or replacement costs when essential equipment stops working because of a covered mechanical, electrical, or pressure-system failure.
Equipment breakdown coverage may also help cover related losses, such as spoiled inventory or lost income resulting from a covered equipment failure.
What other kinds of insurance does a bakery need?
In addition to general liability insurance, many bakeries benefit from several other types of business insurance:
- Commercial property insurance: Covers bakery equipment, furniture, inventory, and other business property from covered losses. Home-based bakeries without a dedicated commercial location should consider business personal property (BPP) coverage to help protect business assets.
- Business interruption insurance: Also called business income coverage, this policy helps replace lost wages and pay ongoing expenses if your bakery must temporarily close due to a covered property claim.
- Tools and equipment coverage: Protects portable equipment used while transporting goods to catering jobs, food festivals, farmers markets, and off-site events. This coverage is also called inland marine insurance.
- Food spoilage coverage: Helps cover the cost of perishable inventory that spoils because of a covered event, such as a power outage.
- Food contamination coverage: Helps with expenses related to contaminated products, including disposal costs and certain business recovery expenses.
- Professional liability insurance: Sometimes called errors and omissions insurance or E&O, this insurance covers claims involving professional mistakes, such as errors with custom orders, ingredient specifications, or contractual obligations.
- Hired and non-owned auto (HNOA) insurance: Provides liability protection when you or your employees use rented, leased, or personal vehicles for bakery business activities, such as deliveries or catering services.
How do I find affordable insurance for bakeries?
There are many steps you can take to get cheap business insurance for bakeries.
Start by comparing free business insurance quotes from leading insurance companies through Insureon’s online application. If you're unsure what types of bakery insurance policies you need, our licensed insurance agents can help make sure you get the right, affordable coverage for your insurance needs and peace of mind.
You may also be able to reduce your insurance costs by:
- Implementing food safety and sanitation procedures
- Providing employee safety training
- Maintaining equipment
- Installing fire prevention and security systems
- Maintaining a claims-free history
- Bundling policies
Most bakeries can get a certificate of insurance (COI) within 24 hours after submitting an application, offering instant peace of mind.
The average costs on this page were derived from our data on small business owners in the bakery field who purchased policies through Insureon. Most of our customers have less than five employees, annual revenue ranging from around $50,000 to more than $200,000, and five years or less in business.