Should I Carry Insurance?? What If Someone Gets Sick?
Business By Artsygurl Updated 10 Aug 2010 , 8:39pm by jason_kraft
My biggest worry of starting a business selling baked goods is "what if someone gets sick and they want to sue me?" I feel that no matter how careful you are, there's still that 1% chance someone might get sick.
Do you bakers, with a home based cupcake/cake business, carry insurance in case someone would get sick from eating your products?
P.S./FYI- If I would start a business, I would have my kitchen licensed.
Yes, part of the licensing process is to get insurance...for all sorts of reasons but food poisoning is one of them.
Like Cat said...it's part of the process. Not only do you "need" insurance...you "have to have" insurance.
Make sure your liability policy actually covers someone getting sick from your product and not just slip and fall type of situations. Most likely, you need to look for "products and completed operations" coverage.
good point, ziggy, in bringing up the slip and fall thing. When insurance is discussed on here, its usually in the theme of someone getting sick. As I mentioned in the insurance article (June 2010 issue of Cake Central magazine):
"The first coverage people think of when they contemplate starting a business is Liability Coverage. Brad explains it as covering injury or damage caused by you or your product. This is more than just worrying about someone getting sick from a cake. This covers such things as someone tripping on an extension cord at a bridal show, or breaking a tooth on a gumpaste flower, or having a reaction from an improperly labeled food product. It also covers on-premises mishaps such as people slipping and falling when picking up a cake."
The question is never "SHOULD I get insurance?" The question is "Why the heck don't you have it yet!?" 
I obtained it through my State Farm guy. Product liability insurance. Since I deliver my cakes and do not have a store front, this was enough coverage for me. Very cheap. Very worth it for the peace for the peace of mind.
Absolute Must!!! It is the second thing I did after the servsafe course.
Yep - I just picked up my insurance policy ($300k for now...I'll increase it if my annual revenue goes up). It was $222/year.
My first thought was the question should really be "Where do you get your insurance?" ... It's not a matter of "if" it's "where"... It's more important than purchasing pasteurized eggs...
Most homeowners insurance companies will cover you if you're legal to operate business... I believe it was around $300 for the add-on policy... WELL worth it!!
When I was getting my Food Handler's license in NYC (one of the first steps in a long list of requirements), the instructor said - most people usually never get sick from your cakes, but its most needed because your employees will fall and break something! Make sure Workmen's Comp is included there!
And my town is "kinda" expensive. I am amazed at the prices quoted here. Be happy because you would die if you knew how much I pay for mine! 
I obtained it through my State Farm guy. Product liability insurance.
You gotta love it - I just talked to State Farm today, and they told me they don't offer Product Liability Insurance. I had to pick up separate business insurance that covers $1 mil. plus other things ($5,000 equipment, etc). It costs $181/year.
I obtained it through my State Farm guy. Product liability insurance.
You gotta love it - I just talked to State Farm today, and they told me they don't offer Product Liability Insurance. I had to pick up separate business insurance that covers $1 mil. plus other things ($5,000 equipment, etc). It costs $181/year.
They don't offer it but you bought a policy ....... 
Do you mean they don't carry it at all and you had to go to another agent to buy this insurance? Or do you mean they don't offer it as part of a homeowners policy and you had to buy a separate business insurance policy thru State Farm?
Do you mean they don't carry it at all and you had to go to another agent to buy this insurance? Or do you mean they don't offer it as part of a homeowners policy and you had to buy a separate business insurance policy thru State Farm?
Sorry if it sounds confusing! They told me that they don't offer any policies called "Product Liability Insurance", and they also can't add it to my homeowners policy. Apparently, what they could offer me was some type of separate business insurance - I'm not sure what the exact name of it is yet (they are supposed to fax the paperwork to me tomorrow). All I know is what they told me it is NOT. Confused yet? I sure am. 
On a 'funny' note, the agent I spoke with says that she makes cakes herself, but just gives them away to friends and family for wedding gifts, etc. and believe it or not, she has never thought about it being a liability "because they are just gifts". Yikes.
OK, I'm confused. Im from Alberta Canada and my insurance lady said it was going to cost well over $2000/year just for insurance!! I quickly changed my mind on opening a business. Is there different types of insurance? I'm confused because all the responses I've seen have been cheap compared to what I was told.
Nope-definetly just me. It would be a home based business with no actual customers coming in. I did some phoning and found another company who said at the VERY most it would be $600-thats if I was pumping out cakes left right and center. I don't intend on being that busy-I work full time as it is, 45 minutes from home.
I'm in Toronto, Canada and my insurance costs about $800 for the year. Wow. I'm either getting ripped off or you guys are so lucky with the minimal insurance cost. I don't have a store front, but I had to rent a commercial kitchen so I had to get that under my coverage umbrella.
You might really want to consider becoming a corporation. There are several types of corporations including LLC, or S-corp.
Then if someone sues you for whatever reason they will be suing the corporation and not you and your family personally. I can't imagine the scenario that would require a pay-out of over a million dollars, but in this day and age, you never know. Lawyers love to go for the jugular--and they will look at assets beyond your insurance. Better to be protected. Plus there are some tax advantages to being a corporation as well..(although who knows how long those will last.) And yes, as small as you are, you can incorporate. I'd check out Legalzoom.com for info. We did a trust through a lawyer and we'd have saved a bundle if we'd done it through Legalzoom. Just an FYI! 
There are a lot of different types of liability insurance, so it's difficult to compare quotes without knowing what's covered. We pay ~$1K/year in CA (Western Heritage through Aegis Insurance), we have a licensed commercial kitchen but no retail storefront. This is in addition to $600/year for worker's comp to cover our intern. We also have an LLC to shield our personal assets from business liability.
Seems like a lot, but we specialize in baking for people with food allergies so it's a little more risky.
This is our business liability coverage:
SUBJECT OF INSURANCE, LIMITS
AGGREGATE LIMIT $2,000,000
OCCURRENCE LIMIT $1,000,000
PRODUCT & COMPLETED OPS $2,000,000
PERSONAL/ADVERTISING INJ $1,000,000
DAMAGE TO RENTED PREM $100,000
MEDICAL EXPENSE $5,000
DEDUCTIBLE: $500
TOTAL PREMIUM: $948.57
I can't imagine the scenario that would require a pay-out of over a million dollars, but in this day and age, you never know.
It's certainly not common, but wrongful death claims (due to salmonella poisoning, for example) could easily be greater than $1M.
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