Insurance 101 for Cottage Food Businesses

By: Jessica Glass

Before you look into purchasing a policy, you may want to ask yourself — where do you want your business to go? Is your budding business something that you are looking to keep within your neighborhood, family and friends? Have you envisioned selling your product to a larger audience, maybe through a festival, concert, or farmers market? Does the idea of partnering with a large outlet like Costco or Whole Foods excite you? All of these avenues require insurance, some just requiring more comprehensive policies than others.

Types of Insurance

To start, it’s important to know that for most bakers, insurance breaks down into two categories: General Liability and Worker’s Compensation.

A General Liability Policy protects you and your business from a lawsuit, an accident, or any other unexpected disruption to your business related to products or services.

A Worker’s Compensation Policy (Workman’s Comp) is an ADDITIONAL policy that may be added to your General Liability policy. If you have staff, this is very important in making sure that they are protected should something happen to them while they are working for you. It is not required if you do not employ a staff.

An agent/insurance company will present these to you as two separate quotes when you are ready to sign up: (1) for General Liability and (2) for Worker’s Comp.

Insurance Shopping and Terminology

Insurance costs can start as low as $300 for the year and can go up depending on business needs. They can be paid annually or monthly. If you are not familiar with insurance or policies, there’s some basic terminology that will help you in your search for a policy.

*Make sure that when you speak to an agent or purchase online, that one or all of the following terms are included in your coverage. Many organizers of markets, festivals, and shared kitchens will require you to submit a Certificate of Insurance (COI) and add them as an ‘Additional Insured.’ This is a very simple step that you can often do on the insurance company’s website, or with an agent. An additional page will be sent to you to then sent out to the organization.

Certificate of Insurance (COI): a copy of your policy, usually on one page, that lists all of the important components of your policy.

Product liability: coverage of claims related to product’s defects. May cause injury or destruction to someone else’s property. Example: Customer gets sick from consuming product, or presence of toxins in food.

Aggregate: A limit in the policy stating the most it will pay for all covered losses sustained during a specified period of time, usually a year.

Per-occurrence: the amount that the policy will pay for a single claim.

Aggregate limit: The maximum that a policy will pay over the length of coverage.
For example: A $1 million/$2 million aggregate means that the insurance will cover up to $1 million per claim, but will not exceed $2 million within the year.

Insurance Companies

Here are a few companies we recommend looking into!

1. FLIP Insurance
2. Hiscox
3. Liberty Mutual
4. Progressive
5. Nationwide
6. The Hartford


Jess hails from North Jersey. She is a karaoke maniac and owner of a personal chef/bakery business — In the Company of Yum. She absolutely loves being a foodpreneur and delights in a variety of noshes, most recently fostering a healthy relationship with fruit galettes.