Running a bakery means juggling flour-dusted mornings, temperamental ovens, and customers who expect perfection in every bite. The last thing you want to think about is insurance paperwork. But here's the reality: one customer slip-and-fall, one equipment breakdown, or one allergic reaction claim could put your business on the line. This checklist breaks down exactly what coverage you need, what's optional, and when to add protection as your bakery grows.
Essential Coverage: Your Non-Negotiables
General liability insurance is your first line of defense. This covers third-party claims when customers get hurt at your bakery or get sick from your products. Think about it: wet floors near your display case, a customer who doesn't tell you about their nut allergy, or damage you accidentally cause while delivering a wedding cake. You need at least $1 million per occurrence, with $2 million aggregate coverage for most bakeries. If you do wholesale distribution or large catering events, bump that to $2-5 million.
Product liability insurance is specifically for when someone claims your baked goods made them sick. This isn't the same as general liability—it's focused on food poisoning, allergic reactions, foreign objects in products, or labeling errors that don't disclose allergens. In 2026, with food allergy awareness at an all-time high, this coverage is absolutely critical. Most retail bakeries carry $1 million minimum, but if you sell to restaurants or grocery stores, you'll want higher limits.
Workers' compensation insurance isn't optional if you have employees—it's the law in almost every state. Your staff faces real risks: burns from 500-degree ovens, repetitive strain injuries from decorating cakes for hours, cuts from slicers, and back injuries from lifting 50-pound flour sacks. Workers' comp pays their medical bills and lost wages if they get hurt on the job. In 2026, expect to pay around $54 per month per employee, though costs vary widely by state.
Commercial property insurance protects your physical assets—your building (if you own it), equipment, inventory, furniture, and fixtures. A fire, theft, vandalism, or severe weather event could wipe out everything you've built. Your property policy covers the cost to repair or replace what's damaged. This includes that $15,000 commercial oven, your display cases, all your ingredients, and finished products ready for sale.
Optional Coverage Worth Considering
A Business Owner's Policy (BOP) bundles general liability and commercial property insurance into one package. Here's why it matters: buying these separately might cost you $91 for general liability plus another chunk for property coverage. A BOP averages $134 per month total in 2026—you're saving money and simplifying your paperwork. Most BOPs also include business interruption coverage, which replaces lost income if you can't operate because of covered property damage.
Equipment breakdown coverage handles mechanical or electrical failures that property insurance won't cover. Your mixer motor burns out, your proofer stops working, or your refrigeration system fails—these aren't fire or theft events, so your standard property policy won't help. This coverage pays to repair or replace failed equipment and can even cover the income you lose while waiting for repairs. Given that commercial bakery equipment costs thousands to replace, this is money well spent.
Food spoilage insurance (sometimes called utility services coverage) reimburses you for lost inventory when your refrigeration fails, you lose power, or contamination makes products unsalable. This is separate from contamination coverage, which deals with liability when customers get sick. Spoilage coverage is about your financial loss when ingredients and finished goods go bad before you can use or sell them. If you stock expensive specialty ingredients or keep significant inventory of finished products, add this to your policy.
Commercial auto insurance is required if you own a vehicle for deliveries or catering. Your personal auto policy won't cover business use. If you deliver cakes, supply wholesale customers, or cater events, you need commercial auto. This covers vehicle damage, injuries to others, and liability if you cause an accident while making business deliveries. If employees use their own cars for business purposes, look into hired and non-owned auto coverage instead.
Cyber liability insurance protects you if you take online orders, store customer payment information, or maintain email lists. A data breach exposing customer credit cards or personal information could cost you tens of thousands in notification costs, credit monitoring, legal fees, and regulatory fines. Even small bakeries face this risk in 2026. If you process any transactions online or keep digital customer records, cyber coverage is worth adding.
When to Add Coverage
Add workers' compensation the moment you hire your first employee. This is legally required and protects both your employee and your business from devastating costs if someone gets hurt. When you sign your first wholesale contract or venue agreement, check what they require. Many venues demand proof of $1 million in general liability coverage before you can deliver a wedding cake. Your landlord might require specific coverage amounts in your lease. These aren't suggestions—you won't get the contract or lease without meeting their insurance requirements.
As your business grows, revisit your coverage limits. If you started with $1 million in general liability when you were doing small custom orders, but now you're supplying five restaurants and doing corporate catering, your risk exposure has increased significantly. Add equipment breakdown coverage when you invest in expensive commercial equipment. Consider cyber liability when you launch online ordering. Add spoilage coverage when you start keeping larger inventories or working with perishable specialty ingredients that cost serious money to replace.
Annual Review Items
Set a calendar reminder to review your insurance every year. Your business changes, and your coverage should change with it. Check whether your revenue has increased significantly—this might mean you need higher liability limits. Review your equipment values to make sure your property coverage reflects what it would actually cost to replace everything if disaster strikes. In 2026, with inflation affecting replacement costs, many bakeries discovered they were underinsured when equipment that cost $10,000 three years ago now costs $13,000 to replace.
Pull out all your contracts—venue agreements, wholesale contracts, your lease—and verify your coverage meets their requirements. Contracts change, requirements increase, and you need to stay compliant. Review your certificates of insurance (COIs) to confirm your policy limits match what clients demand. Update your agent about any new services you're offering, new equipment you've purchased, or additional employees you've hired. These changes affect your risk profile and might require coverage adjustments.
Look at your claims history, even if you haven't filed any claims. If you've had multiple equipment breakdowns, that's a sign you need equipment breakdown coverage or better maintenance protocols. If you've had customer complaints about allergic reactions, make absolutely certain your product liability coverage is adequate and your allergen labeling is bulletproof. Prevention is cheaper than claims, but proper insurance is your safety net when prevention fails.
Getting Started with the Right Coverage
Start with the essentials: general liability, product liability, workers' comp if you have employees, and commercial property insurance. Bundle the first two into a BOP if you can—you'll save money. From there, add coverage based on your specific operations. Deliveries? Get commercial auto. Online orders? Add cyber liability. Expensive equipment? Add equipment breakdown. The goal isn't to buy every coverage that exists. The goal is to protect your business from the risks you actually face. Talk to an agent who understands food service businesses, walk through this checklist with them, and build a policy that fits your bakery's unique needs and budget.
