Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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business insurance for catering companyBusiness insurance is an important piece of any viable long-term business plan, and this is especially true for catering companies. From there, the subject of exactly what kind of business insurance to purchase becomes primarily a matter of creating an appropriate fit.

If you are looking to find the best rates for your catering business then simply enter your zip code above to compare business insurance quotes and save money!

Some of the most important points to review are:

• Does the business insurance policy cover the most critical aspects of the catering company operations?

• What are the credentials of the business insurance provider?

• What is their payout history on claims made,  especially in the past five years?

Doing the Math

To provide adequate and relevant answers to these questions and more, it is imperative that the business be capable of doing a revenue analysis on its essential equipment and operations.

The analysis is usually only accurate and functional when the bookkeeping software is properly used. Enlisting the aid of a qualified professional can save the business money in the long run by ensuring that the books produce accurate financial statements.

These statements provide the decision-making information that is critical to the process of the business management’s ability to determine the most opportune month in which to purchase insurance, the type of business policy in which to invest, and, if appropriate, when to upgrade the policy.

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Critical Considerations

Every small business owner must face a series of decision dilemmas. Instead of being overwhelmed by the variety of choices available on the market, it is better to absorb the concept of strategically timing purchases within a given business cycle.

The information in this article is designed to help clarify the nature of this important decision; the actual fit, like any business suit, is usually a matter of customizing all of the variables involved to fit the business’ unique needs.

Different Policies, Different Needs

All policies are designed from basic assumptions. As a catering company, chances are that there will be different considerations for each type of catering business.

The general points of greatest interest for any business insurance policy usually cover:

• Food Safety and Liability
• Property, Equipment and Vehicle Coverage
• Workers’ Compensation Insurance

Always remember that only the business can determine which parts of an insurance policy covers the most critical areas.

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HACCP Plans and Insurance Premiums

The Hazard Analysis of Critical Control Points, or HACCP Plan, is sometimes used by some insurance companies to lower the risk rating of the potential hazard of food contamination. It is wise to investigate whether the insurance company offers reduced premiums for companies that have an HACCP Plan in place.

1. Umbrella Insurance: This type of insurance is also sometimes called Gap Insurance. These policies vary widely, depending on the insurance company, but they are designed to cover additional costs that do not fall within the perimeters of the normal insurance. The business should assess its size and total asset value to determine if this is a cost-effective option.

2. Commercial Vehicle Insurance: Generally, catering companies will invest in commercial vehicle insurance as soon as possible because of the inherent risk involved in transporting product and employees from one location to another.

3. General Liability, Business Property: A general liability policy may be appropriate for a standard brick-and-mortar catering company; however, the catering-van owner may get more value for their premium dollar by purchasing coverage that includes this specific kind of business vehicle. The equipment used inside a catering van is also significantly different than the equipment used in more traditional catering shops.

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Surviving Without Insurance?

Some businesses try to survive for a period of time without proper documentation. Although this is certainly a historical reality, the changing business environment has made it increasingly difficult to survive for extended periods of time without proper coverage.

So, is conducting catering operations without proper business insurance possible? Yes. However, it is not advisable to put off obtaining adequate insurance when the business can actually afford the extra expense. Not only does it improve the credibility of the business, but the policy can also be used to attract new clients when it is a respected logo used in the marketing materials.

Accounting for Business Insurance

Remember to speak with an accountant when unsure of whether to classify the business insurance as a capital expenditure or a category 179 deductible business expense. Never underestimate the power of proper accounting

techniques in adding value to the catering business.

This is especially relevant when engaging in tax planning activities. Once the classification of the insurance expenses has been appropriately assigned in the chart of accounts, ensuring that all relevant documents are kept safe and in an organized filing system is the key to surviving each annual tax season.

Business Insurance as a Long-Term Commitment

Deciding whether to get business insurance for a catering company is not as much a question of “if” as it is a matter of “when.” During the start-up years, many catering companies may have difficult choices to make as cash flows are normally very tight and revenue streams have not yet stabilized.

No one wants to confront decisions regarding whether to cover their employees or their vehicles. It can be difficult to determine where the premium expenditures are best spent. Should the business invest in covering business property with top-notch coverage or pay less in premium payments, at least during their most vulnerable years?

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Making Informed Decisions

During these formative years, normally the famous first five years, the added expense of business insurance could very well put the company into the red if it is already operating from a shoestring budget. It would hardly make sense to purchase a stellar insurance policy with premiums that undercut general operating cash flows.
With this in mind, there is always a way to balance these choices.

The best-case scenario is when the catering company conducts a thorough analysis of the company’s assets to determine not only what coverage to buy, but perhaps more importantly, when to purchase. When making critical business decisions, the fine skill of appropriate timing is often the key to the doorway of longevity.