Why Food Truck Insurance Is Important For You?

TLTR: This article discusses food truck insurance, its costs, requirements, and insurance eligibility criteria. It also explains where you can purchase the insurance and the kinds of risks that are covered under the policy.  

Food trucks are becoming more and more common. You’ve no doubt at least seen them parked downtown on the street, or outside convenience stores or breweries, if you haven’t already patronized a few. They have become an important part of many cities by providing quick and convenient culinary options for residents and visitors alike.  

Despite the COVID-19 pandemic, the industry has managed to grow. According to IBIS World, there are 26,228 food truck businesses in the U.S.  

If you are part of this growing field or plan to be, you should know that an important step in managing a successful food truck business is investing in the right type of insurance.

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What is Food Truck Insurance?

Food truck insurance is a type of commercial truck insurance that is usually used to insure food businesses that operate on vehicles. There are many policies that cover food trucks but you can also get a separate policy for just the food truck.

In order to ensure your business runs smoothly, it’s important that you have a good understanding of which type of food truck insurance policy is right for you.

Is Food Truck Insurance Essential?

If you are a food truck owner or thinking of starting a food truck business then yes, the policy is essential for you. In fact, Food Truck Operator states that food truck insurance is one of the most important business steps for running a food truck business.  

A standard food truck insurance policy covers:  

  • Mobile Food Trucks 
  • Lunch Trucks 
  • Catering Trucks 
  • Concession Trucks 
  • Vending Trucks 
  • Ice-cream trucks 

    Food truck owners often believe that their businesses are too small to face legal liabilities. Unfortunately, this is not true. According to the SBA Office of Advocacy, 36% to 53% of small businesses have to deal with a lawsuit every year. The costs for these lawsuits commonly range between $3,000 to $150,000.  

    Having comprehensive food truck insurance can save you from the serious financial burdens that arise from such lawsuits.

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      How to Buy Food Truck Insurance?

      Buying insurance can be a tedious task. However, buying food truck insurance can be simple. Here’s how:  

      Assess Your Risk

      According to Prestige Food Trucks, the most common hazards in food truck businesses are burns, cuts, slips, falls, and car accidents.  

      Other common risks for food truck owners include: 

      • Food spoilage 
      • Fire hazards 
      • Smoke inhalation 
      • Food poisoning 
      • Equipment damage 
      • Injuries to workers 
      • Theft 

      You will need to find a food truck insurance policy that will help you cover most of these risks.  

      Research

      There are many companies that specialize in food truck insurance, so you’ll need to spend a little time looking for and deciding on the right carrier. You can Google company names on the internet. You can also ask other food truck owners for referrals.  

      Make sure that you take your time looking for the best policy for you. 

      Negotiate On Prices

      The prices you get for a food truck insurance policy can vary significantly based on many factors. Make sure you know the average cost. If you’re running on a tight budget, be sure to let your insurance agent know.  

      It’s important that you get cheap full coverage insurance for your business.  

      Re-assessment

      As a business owner, you understand that your business is likely to change (and hopefully grow) with time. Even after you’ve bought food truck insurance, be sure to reassess your business growth every year so you can determine whether or not you have additional liabilities that require coverage.

      where-to-get-food-truck-insurance

      How Much Does Food Truck Insurance Cost?

      At the low end of prices, you’re likely to spend up to $50,000 to start a food truck business. When buying insurance for a food truck, your average cost can be between $2,000 to $4,000 a year. 

      Here are some factors that determine food truck insurance costs 

      Location

      The location you operate your food truck in is likely to make a difference in your premium cost. If you choose to operate on a busy street with a lot of traffic, then your food truck insurance cost will be higher. If you choose to operate from a park, then the insurance cost is likely to be on the lower side.  

      Your location determines many risks you are likely to face as a food truck owner. Make sure you serve your customers from a secure location.

      Driving Record

      Trucks are relatively difficult to drive in comparison to other vehicles. Your insurance company will want to see your driving record before you get a quote.  

      If you have speeding tickets, DUIs or accidents in your record, your premiums may be much higher. On the other hand, if you have had previous experience driving trucks, your premium cost can go down significantly.

      The Condition of Your Truck

      Many food truck owners start with a low budget. It’s also fairly common to buy a truck that has already been used or is quite old. While you may be able to kickstart your business with a smaller budget and an old truck, you will have to pay a heftier premium.  

      Insurance companies inspect the truck before giving you a deal. They check everything from the model number, previous owners (if any), vehicle loan, the engine, and even the paint job. If your truck requires a lot of repairs and is barely working, your food truck insurance cost will go up.

      Equipment Used in Your Truck

      You’ll of course have cooking equipment in your food truck. If you invest in more costly equipment for your business then your food truck insurance premium may be higher. For example, if you use an air frier (ranges between $100-$200) instead of a regular frier ($50-$100) then you may have to invest more in insurance.  

      Credit Score

      If you are a food truck owner who has a solid credit score, you’re likely to get cheaper premiums. Credit scores make a huge difference in the quotes you’ll get from insurance providers. 

      Note: The average food truck equipment can cost you between $1,000 to $2,500. However, you can invest on the higher ends as well. The price of your premium is going to go up as you invest more in your food truck.

      Ways To Reduce The Cost Of Insurance For Food Truck

      Ask for Bundled Coverage

      As a business owner, you may need more than just one policy. For example, if your truck sells liquor, you may need to purchase liquor liability insurance along with your food truck insurance. Buying these policies as a bundle from the same agent may help you reduce costs of your premiums.

      Opt For High Deductibles

      Higher deductibles can help you get lower premium rates. But this can be quite risky. For example, if you face legal action from a customer, you may have to bear the financial brunt on your own.

      Pay Yearly

      If you have the means to pay off the deposit on your premium up front it can potentially save you up to 20% on your total insurance costs. Paying yearly may look like a lot, but in the long run it works out to be cheaper than a monthly premium.

      Shop Around

      One of the best ways to save on policies is to know the prices. When you compare prices via an insurance directory the chances are that you can land yourself the best deal on food truck insurance.

      What Policies Cover Food Truck Insurance?

      The type of coverage that your business needs will depend on the risks and types of operations that you engage in. There are four main types of coverage for food trucks:

      Business Owners Policy

      business owners policy (BOP) combines commercial property, business interruption insurance, and general liability insurance in one plan. The combination of the three allows a BOP to cover different claims against liabilities such as property damage, customer injuries, theft, and vandalism. A BOP is often more affordable than buying each policy separately. 

      Yearly Cost  Policy Limit  Deductibles 
      $1,260  $1 million per occurrence  $1,000 

      Workers Compensation Insurance

      Workers compensation insurance covers employee claims for injuries and illnesses due to their job, such as lost wages and medical bills. Except for Texas, this policy is mandatory coverage in all states. 

      When it comes to the food industry, tiny mishaps are unavoidable. For example, in a rush to serve a dish, a hot pot falls from a stove and burns your employee’s leg. As a result, your workers compensation insurance will kick in and help cover any medical bills. 

      Yearly Cost  Policy Limit  Deductibles 
      $1,270  N/A  N/A 

      Commercial Auto Insurance

      Commercial auto insurance will cover the medical bills, cost of property damage, and possible lawsuits caused during an accident.

      Yearly Cost 

      Policy Limit 

      Deductibles 

      $1,620 

      $1 million in general 

      N/A 

      Commercial General Liability Insurance

      Commercial general liability insurance covers property damage or bodily injury claims that arise because of accidents. 

      As reported on CNBC, an elderly woman sued McDonald’s in 1992 after spilling hot coffee on herself. The coffee caused third-degree burns and she needed numerous operations. If you want to avoid covering for such third-party claims out of your own pocket, you need to opt for a CGL policy. You can even add commercial cyber liability insurance as an endorsement to your CGL policy to protect sensitive customer information, such as credit card details.

      Yearly Cost 

      Policy Limit 

      Deductibles 

      $560 

      $1 million per occurrence 

      None 

      Note: The average cost for the above-mentioned policies is taken from Insureon. The prices may vary based on the carrier you choose for your food truck insurance.  

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      Some Carriers That Are Well Known for Selling Food Truck Insurance

      There has never been a better time to own a food truck. According to Forbes, food trucks provide a good alternative for people who want to dine out post-pandemic.  

      According to Investopedia, insurance companies that sell food truck insurance include:

      Insurance Companies 

      Known For 

      Food Liability Insurance Program 

      Best overall 

      Progressive Insurance 

      Best bundling discounts 

      GEICO 

      Best for large fleets 

      Hiscox 

      Best for general liability coverage 

      Farmers 

      Best policy options 

      Insure My Food Truck  

      Best for first-time food truck operators 

      Conclusion

      If you own a food truck business, it’s important to have the right food truck insurance coverage for your assets and employees.  

      There are several types of policies available with varying levels of protection, so make sure to do your research before deciding on one option. With all these considerations in mind, feel free to reach out to a local insurance agent and get more information on food truck insurance.

      Frequently Asked Questions (FAQs)

      Do I need a business license for my food truck?

      Yes, every food truck owner must have a business license to operate a food truck. However, the charge to get licensed may vary depending on the state you are in.

      When should I buy a policy - when I launch or after it's running?

      Many people purchase food truck insurance policies before starting their business. However, it is advisable to purchase the policy after you have finalized your business plan.

      What are the most common food truck insurance claims?

      The most common food truck insurance claims are theft, fire, and equipment breakdown.

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