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Legally required insurance for your food enterprise

You can be fined up to £2500 a day for not having the legally required minimum insurance for your business

Employer’s liability insurance :

This is an insurance policy which covers the cost of compensating (non-family member) employees (both paid employees and unpaid volunteers) who may be injured or fall ill at work.  A full description can be found here.

TIP: Check the details of your employer’s liability insurance to see if it covers both the cost of compensation (min level is £5 m, standard level £10 m) to employees and that of associated legal fees, or just the former.

Motor Insurance:

If you use vehicles (eg. cars/vans for food deliveries to customers or collections from suppliers) as part of your food hub operation then you will need at least Third Party Motor insurance. This insurance will cover damage or injury caused by a collision occurring while the car/van is being used for business purposes.

The different levels of motor insurance are defined as:

• Third party: This is the most basic level of vehicle insurance and covers the cost of damage to person or property caused by a vehicle collision. (Minimum cover is £1m for property damage and unlimited for personal injury.)

• Third party, fire and theft: In addition to third party cover, this insurance will compensate you if a vehicle is damaged or stolen while being used for business purposes.

• Comprehensive: In addition to third party, fire and theft this type of insurance policy will cover the cost of accidental damage. It is worth checking the specifics of what is included in a comprehensive package as it may also include compensation for goods or tools carried in the vehicle (eg. it may provide insurance cover against damage or theft of food in the van/car on it’s way to a customer).

Staff and volunteers who use their personal cars to make deliveries from your food hub to customers need to make sure their personal car insurance policy includes ‘business cover’. In most instances this can be added without charge but it may not be automatically included.

Commercial motor insurance is required for vans owned by a food hub and used to make deliveries to customers.

Optional insurance for your food enterprise

Public liability insurance

This is an insurance policy which will cover the cost of compensating any individual (other than an employee, temporary staff or work place student) for injury (or death) or loss/damage of property resulting from an incident which occurred either on your business premises or at an event that was organised by your food hub off site.  A full description can be found here.

As a food hub manager you may wish to consider taking out public liability insurance if:

• Your business owns the premises from which customers collect their shopping
• Your business attends events (such as a market)
• Customers come to your house to collect their shopping.

Product liability insurance

A food hub, even if they do not manufacture/grow/make the products they sell, may be held responsible for injury or damage to property caused by a faulty item supplied (sold or given away for free) to a customer.  A full description can be found here.

You will need Product liability insurance if your food hub stocks products which have been imported from outside the UK.

With the following good working practices, for most community food enterprises, the cost of customer compensation for a faulty product will lie with your food hub supplier (ie the person who actually baked the bread, grew the vegetables…) rather than the hub which distributed them.

1. You have proof that the products were faulty when they were supplied to you.

Key to this is having a robust system of quality control and record keeping when you check in items from your suppliers before repacking them for customer collection/delivery.

As well as quality control, the name and contact details of the supplier need to be on the product, otherwise your food hub is liable.

2. The name of your food hub is neither on any of the products you supply nor does your food hub change any of the products which it distributes.

If you repackage items from suppliers then it is wise to check if you need to take out product liability insurance to cover this.

For example, if your food hub buys rice by the sack of 20 kg but sells to the customer in 1 kg bags then it is wise to check that the supplier’s product liability insurance is still valid despite this ‘change’ to the product.

3. You have a contract between your food hub and its suppliers which covers product safety, quality control and returns.
4. Customers are supplied with the manufacturer’s safety instructions (eg. ‘keep refrigerated’).

Property insurance

A full description of property insurance can be found here.  There are two main categories of Commercial property insurance:

• Building Insurance

Unless a community food enterprise owns the building in which it operates then damage to the building (say from flooding, fire or vandalism) will be the responsibility of the landlord.

• Contents Insurance:

If a food hub holds stock (eg. you may get a bulk delivery of dried goods once a month and sell them gradually to customers each week) or owns equipment (eg. computer/office equipment, scales, tables for packing) then it might be valuable to take out a contents insurance policy to cover the cost of theft or damage.

When looking for contents insurance there are two policy types: 

1. ‘Replace as new’ This will cover the cost of replacing an item which is stolen or damaged with a new one.

2. ‘An indemnity policy’ In this case a contents insurance policy will reimburse your business for the current value of the item which has been stolen or damaged. This may be less than the amount you originally purchased the item for due to wear and tear (for equipment) or reduction in remaining shelf life (for products).

TIPS for calculating the ‘value’ of the stock your CFE holds:

• If stock fluctuates seasonally then take the maximum stock level (eg. if you hold more in December before Christmas, then calculate the value of your stock to insure based on this level)
• Use the cost price of stock and equipment rather than sale price.

Insurance for voluntary organisations.

If your community food hub operates as a not for profit voluntary organisation, then this is a link to some good advice on the type of insurance policy(s) you may need to protect you.

Running your food hub from your home

As a manager of a community food enterprise you may do a lot (if not all) of your admin work from home. Unless you are running your business from home (ie. the business is registered to your home address) then you will not need commercial buildings insurance for your house.

TIP: Inform your home insurance provider that you work from home. By doing so you will be protected in the case that you need to claim on your house insurance for an incident which occurs while you are working from home in the future.

(For example, if your home insurance provider knows you work from home then you will be protected for damages to your home if your business laptop causes a house fire.)

If you hold customer data in your home then you may need to take out an extra policy to cover against loss or damage of this data.

Recommended insurance providers

The following insurance providers have been recommended by OFN food hub managers:

• NFU Mutual
• Nature Save

Reference material

This is a very helpful, easy to read guide to insurance for small businesses which explains the different terms and policies you may find out there written by The Association of British Insurers (ABI).

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