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Peter C. Young is a professor at the University of St. Thomas Opus College of Business. Contact him at www.stthomas.edu/business/ faculty/directory/ Young_Peter.html

Ask the consultant: What insurance is needed for new coffee shop?

  • August 5, 2012 - 1:24 PM

question

I'm starting a coffee shop. What type of insurance and coverage is mandatory for me to have before opening my doors?

RANDY GANTHER

RANDYGANTHER.COM

123POSITIVEG@CHARTER.NET

answer

A technical answer would identify workers' compensation and automobile liability as primary required insurance coverage -- that is, insurance required by state law. Other coverage may be an obligation as a term or condition of a contract, property insurance as a requirement of a mortgage or rental agreement, performance bonds as a component of a vendor agreement and so on.

If we slightly relax the question to ask, "What insurance coverage is necessary?" the answer will -- not surprisingly -- include additional insurance recommendations.

Beyond complying with state law and contractual requirements, I think the primary coverage is general liability insurance, which not only provides protection for things like customer slip-and-fall injuries, but also provides coverage against claims rising from food-borne illness and injury.

The liability costs associated with food-related incidents are quite high (largely because claims for such things are rarely confined to a single injured customer), and thus I would listen carefully to your agent or broker in terms of selecting coverage limits.

I would advise you purchase an umbrella liability policy, which can extend the amount of coverage and offer the additional benefit of sitting atop your various liability coverages -- including automobile liability. That may or may not be an issue for you; for example, it could be useful if you have a delivery van.

I would encourage you to think seriously about property insurance, as this is often an area where new businesses cut corners.

Things like sewer backups, thefts, robberies and malicious damage can be vexing. Purchasing property insurance allows you to get in the door to discuss purchase of ''business interruption'' insurance, an often-overlooked part of a risk management plan.

Workers' compensation may or may not be an issue depending on the number of employees you have. Talk to your agent/broker about that, too.

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