You’ve thought about being self-employed for a long time, and you’re finally about to make it happen. You’ve got your sights set on a food truck and you've been perfecting a few dishes you could serve out of it.
But before you take the final plunge, it’s a good idea to look at what your insurance needs will be. What kinds of coverage will you need? How much will they cost you? In this article, we'll review the insurance options that are available and recommended for food truck operators.
Insuring Your Truck
As with any vehicle – car, truck, or otherwise – you'll need insurance for your truck. Since you'll be using your truck as part of a business, you'll need different insurance than the policy you have on your personal vehicle.
With a food truck, you'll need a commercial auto liability policy. As with the insurance for your personal vehicle, you'll need liability coverage, uninsured/underinsured motorist coverage, medical coverage, property damage coverage, and you will most likely want collision and comprehensive coverage as well.
When you discuss coverage with your broker or agent make sure to understand exactly what is and what is not covered under the policies. For example, equipment on the truck, like a microwave oven, might not be covered.
If any of your employees might drive the truck, you need to inform the insurer of this fact. Of course, even if they're covered by your insurance, an accident involving your food truck could put your ability to serve customers on hold, so it is highly recommended that you have a look at any potential employee's driving record before hiring them.
Insuring Your Business
Your food truck isn't just a vehicle; it's also your business establishment. That means you'll need some business insurance. Specifically, you'll need commercial property insurance and commercial general liability insurance.
Commercial Property Insurance
The property insurance will cover anything on the truck that is not covered by the auto policy; as mentioned above this would include equipment such as a microwave oven.
This insurance would also cover equipment that is not on the truck but is used in the business. This could include computers, kitchen equipment used to prepare food off-site, and in general any physical items as part of the business (apart from the truck itself). If you rent space where you have a kitchen to prepare food, it will be included, too.
Commercial General Liability Insurance
The liability insurance covers you for incidents such as someone getting sick from food you sold them, someone slipping on food or drinks spilled by your truck and falling, and alleged false advertising claims.
One of the most important parts of liability insurance is the duty to defend on the part of the insurer. This means that if you are sued by someone, the insurance company has to hire a lawyer to defend you even if the claim is frivolous. Lawsuits are all too common and simply defending yourself against a false claim can cost you more money than you care to spend, making commercial liability coverage is absolutely essential (see Insurance and Lawsuits: What Happens When You Are Sued to learn more).
Insuring Your Employees
We should also briefly touch on workers' compensation insurance. If you employ anyone at all, this coverage is a must have. It is required by law in most states, and if an employee is injured and you don't have it, you can not only be held liable for their injuries, but also incur further penalties (for a primer, see An Intro to Workers' Compensation).
How Much Coverage Should You Get?
How much coverage is appropriate for your business? In general, you ought to be thinking toward the high end. Your truck is your livelihood and you cannot afford to lose it. Understand that the biggest step price-wise is going from no insurance to a minimum policy; increasing your policy limits from the legal minimum to something higher is not so costly.
For the truck itself, I recommend the following:
- Liability and Uninsured/Underinsured Coverage: At least $1 million
- Medpay (Medical Payments Insurance): $100,000 is usually sufficient, assuming that you and your employees also have health insurance
- Property Damage Coverage: This covers damage to other people's property and it should also be at least $100,000
- Collision and Comprehensive: There is no exact number that will suit everyone here, but it should be enough for you to replace or repair the truck no matter what happens to it
Commercial Liability and Property Coverage
I strongly recommend a minimum of $1 million for each of these policies. The amount of property coverage (that is, for property other than your truck) will depend on the value of your equipment and whether you rent premises for food preparation.
Once again, $1 million is the magic number here. It sounds like a lot, but it really isn't too much. Just think about how high an employee's medical bills could be if they get in a serious collision while driving your truck. You need to make sure you have enough coverage to deal with bills of that scale.
A Few Final Considerations
If the first quote you get for the various coverages you need seems to high, don't get discouraged. Shop around to find the most competitive offers. And remember that you can reduce your premiums by increasing your deductibles. There's some risk involved in doing that, but it can sometimes be the smart choice (for more advice, see An Overview of Insurance Deductibles).
In some cases, you might feel that you want even more coverage than your primary insurer offers. If this is the case, consider getting umbrella insurance. An umbrella policy kicks in when your primary insurance runs out, effectively increasing your coverage limits substantially (learn more about Umbrella Insurance for Business).
Your Business = Your Life
There's nothing wrong with shopping around for a good deal, but don't scrimp on insurance for your food truck. This is your livelihood and you can't afford to lose it because you didn't have adequate coverage.
If you need more help deciding how much coverage is right for you, reach out to a knowledgeable broker or agent to get professional advice (check out these 5 Questions to Ask Before Choosing an Insurance Agent for help picking the right professional).
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Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.