It sometimes amazes me to hear some of the reasons food truck owners provide about why they don't have insurance or only purchase minimal coverage. Mobile food vendors know they need appropriate coverage, yet they too can fall victim to believing some of the common myths about why insurance is not necessary. Here are five of those myths followed by facts that may help expel some misconceptions:
- Insurance is TOO EXPENSIVE... While no one enjoys paying for insurance the cost to protect your food truck business (likely your most valuable asset) is relatively small compared to your overall expenses. In fact, we have done the math... Between the hundreds of food trucks we insure, the average premium equals approximately 2% of gross revenue. That means that if your business generates $200,000 in revenue, your premium is likely $4,000 per year. Keep in mind that most of our clients have more than one policy, The premium typically includes general liability, auto liability, property coverage and workers' compensation insurance if there are employees. For more about the different types of insurance and the relative cost click here.
- I don't need insurance because carriers deny most claims anyway... I'll admit that insurance polices can be painful to read and do have many exclusions. You are extremely busy business owners and may not have the time to read through 120 pages of your insurance policies but, many exclusions are are added simply because coverage is afforded on alternate policies. For example a general liability policy will exclude workers' compensation related losses while a workers' compensation policy will have a general liability exclusion. A good insurance company and broker will help you look for coverage, not look to deny coverage. A professional insurance brokerage that knows your business will guide you on what coverage you should consider so that when you have a claim you hopefully will have selected the appropriate coverage.
- A loss will never happen to me... You got this far in business because you are smart, not frugal. No one is immune to a loss. Whether it's an auto accident or someone claims they were sick from your food, chances are that you will have a loss. Whether you have coverage or not is up to you. You could do nothing wrong and still get sued. The cost to defend yourself alone could put you out of business. Protecting your business, your employees and everyone else that depends on you is just being smart. Remember, like mentioned above, your premium could be less that 2% of your revenue.
- Insurance brokers will gouge me with fees... It's common thought that insurance brokers add exorbitant fees. There is a misconception about brokers vs. agents. Brokers work on their client's behalf while agents work on their carrier's behalf. Most brokers (like us) have access to several standard insurance carriers. We are appointed as agents and cannot charge a fee when we are directly appointed and paid by that carrier. 90% of the time we do not charge a broker fee. The only time we do is when we have to go to a non-standard market that pays reduced commissions or no commissions at all. By working with an independent insurance brokerage/agency like us, you benefit by gaining access to our programs and expertise and probably won't get that mythical fee.
- I don't need insurance because I can negotiate out of contract requirements... Good for you! We often encourage our clients to try to negotiate insurance requirements down that may be too high. However, even if you are able to get out of insurance requirements that does not mean the exposure is not there. You may have won the contract battle, but if you get sued and don't have protection you can lose everything.
Now that these myths are busted, please share them with other food truckers out there that may be at risk of losing their business because they believe some or all of the myths above. If you are starting a food truck or already overate one and need guidance, please contact us anytime. Maybe there are other myths of there that we can help bust...