How Insuring A Food Trailer Is Different From Insuring A Food Truck

Due to low inventories of food trucks, lower barrier to entry or just pure preference, food trailers are often a great option for people looking to get in the industry. However, you need to be aware of some pitfalls from an insurance perspective.

With a food truck, the kitchen and vehicle is combined to create a single vehicle exposure. However, a food trailer has the mobile kitchen exposure (trailer + kitchen) and a vehicle that is needed to tow the trailer to venues. Usually that tow vehicle is a truck they personally own or a vehicle they plan to  purchase. This is where most people think they can just get General Liability and Mobile Property coverage for the trailer and be done. Perhaps they are under the impression that the trailer is covered automatically under their personal auto insurance policy. Think again!

Many personal insurance policies have exclusions pertaining to business use and operation of the insured vehicle. They also have length limitations on trailers being towed by the insured vehicle. Most personal policies extend liability for the boat/motorcycle/etc trailers. However, carriers don't intend to automatically cover business trailers for liability or property coverage. This means that you need to call your personal insurance carrier and tell them what you are doing.

Some personal insurance carriers have the ability to add a business use type endorsement to your personal policy. Despite this potential endorsement on the personal policy, you still need to purchase liability and mobile property coverage for your trailer. It is also possible that the insurance carrier may not be able to provide insurance based on it being a business vehicle or business trailer.

The safe way of protecting your business is purchasing a commercial auto policy for the tow vehicle and registered it under the business. This will help ensure that you will have coverage after a claim. If you are dead set on using your personal vehicle, you should add the business use endorsement and increase your liability limits. Don't think that $50,000, $250,000 or $500,000 auto liability limits will cut it. All business vehicles should have at least a $1,000,000 liability limit.

One last advantage of having a commercial auto policy is that you can purchase an Excess Liability policy to provide additional limits. A commercial Excess Liability policy can provide extra coverage over your Auto Liability (and General Liability). Unfortunately, that will not be the case if you have the tow vehicle under a personal auto policy.

Hopefully this article prompted some questions in your mind. Perhaps it made you realize your planned or current insurance structure may not be the best way to protect your food trailer business. If so, make the changes sooner than later.

Workers' Compensation Guide for Food Trucks

Catering food trucks have a unique insurance coverage exposure that most insurance carriers do not want to insure. Workers’ Compensation is one of the most important insurance coverages that a food truck owner must purchase for his or her employees. Workers’ Compensation is administered on a state-by-state basis and is required in most states to replace wages and medical benefits for employees that were injured on the job or in the course of employment.

As an owner/officer of your business, you can choose to be included or excluded in your Workers’ Compensation policy. However, you must provide coverage for all part-time and full-time employees. If you have a 1099 Independent Contractor Employee, the contractor must purchase their own Workers’ Compensation insurance which must be included in their contract requirements. Most food truck employees do not qualify as a 1099 employee, but consult your attorney or accountant to clarify. Miscoding an employee as an independent contractor can lead to penalties for non-Workers’ Compensation coverage and non-paid payroll taxes. Failing to provide Workers’ Compensation insurance in most states is a criminal offense that can lead to expensive fines and or imprisonment. California employers can study this site for further information: http://www.dir.ca.gov/dwc/faqs.html. Employers in states outside of California can turn to their official state’s website.

Workers’ Compensation premiums are calculated by the class code rate (per $100 of payroll) and the amount of gross wages paid to the employee. As a business owner, you must provide an estimated annual wage amount at the beginning of a policy. At the end of a policy, an audit will be performed to determine the actual premium due based on actual wages paid. In order to perform this audit, a business owner is required to provide names of the partners and ownerships, their employees’ names, titles, job duties, actual gross wages and quarterly IRS 941 reports for all four quarters during the coverage period. All employees on the policy must be on payroll and reported on the 941 report.

Paychex provides payroll and human resources services to food trucks that need assistance in calculating, paying and filing payroll taxes. Paychex works with CateringTruckInsurance.com to prepare 941 quarterly reports to carriers and monitor Workers’ Compensation premiums throughout a policy. CateringTruckInsurance.com has developed a strong relationship with payroll consultant Grace Ogata from Paychex, Inc. Grace has experience in working with food trucks and is ready to help you.

Grace Ogata - Paychex Consultant

Phone (626) 551-8634 Email: gogata@paychex.com

What Is Mobile Business Income and Why Isn't Everyone Talking About It?

Mobile Business Income is one of the most important, but least discussed or known insurance coverage. Business Income is a standard coverage on a brick and mortar restaurant, but often not available for a mobile food truck business.

You may ask, what does Mobile Business Income cover? Let's give a real life example...while driving through a parking lot you hit a building concrete awning and heavily damage the top half of your truck. Now your Auto Liability will pay to fix the building damage you caused and Auto Collision coverage will fix your truck. However, it will take 30-60 days to fix. That means you will not be on the road selling for 30-60 days. Meanwhile you still owe the bank truck payments along with any other bills. This is where Mobile Business Income will get triggered upon an auto claim. Mobile Business Income will supplement the income you are losing for not being on the road. Please be aware, coverage is only triggered for a covered claim. Therefore, a blown tire, engine trouble, etc. would not be considered a covered claim.

The likelihood of a business shutting down after a major loss is greater if they do not have Business Income coverage. So unless you have emergency savings or are prepared to shut down, this is a coverage you can not operate without. If anything, it will help sustain your business and help you sleep at night.

At CateringTruckInsurance.com we can offer this unique and critical insurance coverage. Coverage is provide in 30-60-90 day increments and provide $100-$1,000 a day in coverage. You select how many months and the amount of coverage needed. Mobile Business Income can only be purchased when you have your General Liability and Auto coverage with Lexington (AIG). Coverage is currently offered in 25+ states (other states pending). We insure over 100+ food trucks across the country and are the first to offer this coverage.

Hand Over Those Food Truck Keys If An Employee Gets Injured

Let's start with the definition of Workers' Compensation insurance...

Workers' Compensation - provides protection to the employer against liability imposed by law to pay benefits to any worker injured in the course of and arising out of employment, without regard to fault or negligence on the employer's part or any other person.  

Workers' Compensation insurance is usually the last thing a food truck client purchases from me. You need Auto insurance to register the truck or to pick up the truck from the manufacturer. You need General Liability if you plan on showing up to a private lot or food truck event. You may ask yourself when is Workers' Compensation required? Most new food trucks start out with just the owners operating the truck and are not required to have Workers' Compensation. However, from the moment you hire that first employee...you are required by law in almost all states (check laws in your particular state) to have Workers' Compensation coverage.

Now before there were gourmet food trucks, traditional catering trucks would go around town serving food to construction and industrial workers. It was a white catering truck with with no signage, no brand, no website, no  following and standard food offerings. If an employee got badly injured and there was no Workers' Compensation...well then you just fold up shop and start a new entity. Plus the truck was likely leased so there was no real asset tied to the business. So imagine you fail to purchase Workers' Compensation for your food truck employees in today's gourmet food truck age. You have spent a ton of time creating a concept, building a website, creating a menu, getting permits, tweeting and building a solid customer base. If your employee gets injured, can you really afford to just fold the business?? If you said no, then you need to purchase Workers' Compensation insurance.

I recommend looking up in your specific state what the fines are for not having Workers' Compensation in place. In California, there is a $1,500 penalty per employee without Workers' Compensation and other applicable fines. http://www.dir.ca.gov/dwc/dwc_home_page.htm

Perhaps you will try to make your employees independent contractors. In almost all instances there is no such thing as an independent contractor on a food truck. So that isn't a way out. Perhaps your family or friends are helping, well they are still considered employees. An employee is defined as someone you engage or permit to work. Plus if a friend or family member seriously gets injured and racks up medical bills from helping out on the truck...do you think they won't sue you?

Now that you realized you may need to purchase Workers' Compensation, I want to inform you about some things you should know before you get a policy started. Workers' Compensation premiums are calculated by the class code rate and the amount of gross wages paid to the employee. Premium costs range (as of 8/2011) from 4.5%-8% of total payroll. As a business owner, you must provide an estimated annual wage amount at the beginning of a policy. At the end of a policy, an audit will be performed to determine the actual premium due based on actual wages paid. In order to perform this audit, a business owner is required to provide the owners names, employees' names, actual gross wages and likely quarterly IRS 941 reports for all four quarters during the coverage period. 

IF you pay your employees under the table, that IRS 941 form will likely be an issue. You can't just report only some employees payroll to the state. If you aren't reporting all payroll to the state or insurance carrier, well then that is fraud and we all know what that could mean.

I hope this helps every food truck operator realize the need to get a Workers' Compensation policy in place. I encourage you to reach out to me if you want to discuss the topic in more detail or need a quote.

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My Insurance Journal Radio Interview - Mobile Food Vendor Insurance Market Trucking at High Speed

Insurance experts hungry for new business have found the mobile food truck business to be one of the healthier growth markets in the past few years. Technology can help to service these mobile customers quickly and efficiently. Yet to be really successful in this program business, Matt Carlson, vice president of Risk Strategies Co., says agents and brokers need to provide a lot of education up front to clients not familiar with their insurance requirements.

Why You Should Always Ask For The Insurance Requirements FIRST!

Congratulations...you just landed a great opportunity to serve food at a large office building lot, college campus, festival or movie studio. In the beginning, they may have asked if you had insurance and of course you said yes. You put a ton of work into planning, organizing and promoting...then they say "oh by the way...here are our insurance requirements".  Suddenly you see the nitty gritty details of what they consider "adequate" insurance to serve food at their property/event. Too often I see building management or property owners using the same contract for a general contractor as they would for a food truck. A food truck should not be required to purchase $1,000+ of extra premium for an event they are profiting $1,000 on. I get it, the location/venue/event is protecting themselves. However, don't hand a food truck the same contract as you would a plumbing/electrical/etc contractor. So I advise all you food trucks out there to get the insurance requirements up front before you are knee deep in the process. Also don't be afraid to negotiate some the of coverages and limits down. Good luck out there!