If you are interested in starting a bakery business from home, it is important to obtain the proper insurance. Failure to have the proper types of insurance coverage could expose you to serious financial risk. Before starting a home-based bakery, you should carefully consider the various types of insurance you may need to reduce these risks.
Perhaps the most important type of insurance coverage needed for a bakery business from home is product liability insurance. As the cost of medical treatment is very high, just making one customer sick from an improperly prepared food item could result in a significant financial loss. Product liability insurance will help to reduce the amount of financial damages you will be responsible for in the case of a claim. If you plan to sell baked goods to a retailer or wholesale distributor, the retailer or distributor may require proof of product liability insurance before buying your products.
If customers will come to your house for any business purpose, you will need to obtain accident insurance to cover this risk. While your current homeowner's insurance policy likely covers accidents that occur on your property, standard homeowner's insurance policies will not cover losses related to a home-based business. Many insurance companies will allow you to add additional coverage to your existing homeowner's policy to cover your home business risks. Even if customers will never visit your home, you should notify your homeowner's insurance of the home-based business; failure to do so may cause the insurer to cancel your coverage.
You may need to purchase commercial vehicle insurance if using your personal vehicle for deliveries or other business-related travel.
If you plan on hiring employees, you will need to obtain workers' compensation insurance to cover any injury to the employees. In most states, you can choose to purchase workers' compensation through a private insurance agent or through a government insurance program.
Business-interruption insurance can help to limit your losses if you are unable to work due to a covered event. For example, if a fire destroys your baking equipment, business-interruption insurance will help to cover your lost income.
State and local jurisdictions may require you to have certain types of insurance or levels of insurance coverage when operating a home bakery business. Contact your local agency that issues business licenses for more information on any insurance requirements that may apply to home-based food businesses. In general, the costs of any insurance required for the business will create a tax deduction that will help to offset the expense of the insurance.
- Massachusetts Department of Agricultural Resources: The Massachusetts Food Processors Resource Manual
- Bankrate.com; Working at Home? Get Home Business Insurance; Jennie L. Phipps; July 2010
- Maine Bureau of Insurance; Insuring Your Home Business; April 2009
- U.S. Small Business Administration: Types of Business Insurance
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