Starting a bakery in Texas? Whether you're launching a cottage food business from your home kitchen or opening a commercial storefront, understanding your insurance requirements can feel overwhelming. Here's the thing that surprises most new bakery owners: Texas gives you more flexibility than almost any other state when it comes to insurance. But that flexibility comes with serious responsibilities you need to understand before your first customer walks through the door.
The Texas insurance landscape for bakeries is unique. Unlike most states, Texas doesn't force you to buy workers' compensation insurance. There's no state-mandated minimum for general liability coverage either. But before you celebrate those cost savings, you need to know what you're actually risking—and what your landlord, customers, and common sense will require anyway.
Workers' Compensation: Optional But Risky to Skip
Texas stands alone with South Dakota as the only states where private employers can legally skip workers' compensation insurance. For your bakery, this means you have a choice—but it's not as simple as just saying no to the expense.
If you decide not to carry workers' compensation (called being a "non-subscriber"), you'll need to file Form DWC-005 with the Division of Workers' Compensation every year between February 1 and April 30. You're also required to report any workplace injury that results in more than one day of lost time, plus all work-related illnesses and deaths. Missing these deadlines can trigger penalties and investigations.
But here's the catch that makes most bakery owners reconsider: when you don't carry workers' comp, you lose the lawsuit protection it provides. If an employee slips on a wet floor, gets burned by an oven, or develops carpal tunnel from repetitive decorating work, they can sue you directly. You won't have the legal shield that workers' compensation normally provides. For most Texas bakeries, the cost of coverage—averaging around $22 per month per employee, or about $0.45 per $100 in payroll—is far cheaper than a single lawsuit.
One exception where workers' compensation becomes mandatory: if you contract with any government entity in Texas, you must provide coverage for employees working on that project. So if you're supplying baked goods to a school district or catering a city event, you'll need that policy in place.
General Liability: Not Required by Law, But Required by Reality
Texas law doesn't mandate general liability insurance for bakeries. But try signing a commercial lease without it. Nearly every landlord in Texas requires proof of general liability coverage before you can move in, and they'll want to see a certificate of insurance listing them as an additional insured party.
The industry standard for bakeries is $1 million per occurrence and $2 million aggregate coverage. This protects you when a customer slips on your freshly mopped floor, when a display shelf collapses and injures someone, or when you're accused of copyright infringement for using a copyrighted image in your marketing materials. General liability covers bodily injury, property damage, and personal and advertising injury claims from third parties.
What general liability doesn't always cover comprehensively is product liability—and this is crucial for bakeries. If someone has an allergic reaction to your peanut butter cookies or gets food poisoning from your cream-filled pastries, you need product liability coverage. Some general liability policies include this; others require a separate endorsement. Make absolutely certain your policy explicitly covers foodborne illness and allergic reactions, because those are among the highest-risk claims for any bakery.
The Cottage Food Advantage: Lower Barriers for Home Bakers
If you're running a home-based bakery in Texas, the cottage food law offers remarkable freedom. As of September 1, 2025, Texas expanded what you can sell and raised the annual sales cap to $150,000. You can sell any homemade food items directly to consumers except meat, poultry, seafood, ice products, and raw milk. No permits, no licenses, no fees, no inspections required. Local governments can't force you to get permits or pay fees either.
But you do have responsibilities. You must complete a food safety training program accredited by the Texas Department of State Health Services. This certification lasts two years, then you'll need to renew it. You're also required to label your products with specific disclosure language: "THIS PRODUCT WAS PRODUCED IN A PRIVATE RESIDENCE THAT IS NOT SUBJECT TO GOVERNMENTAL LICENSING OR INSPECTION."
Starting in 2025, you may need to register with DSHS if you're selling time/temperature control for safety (TCS) foods—think cheesecakes, cream pies, or anything that requires refrigeration. Registration is optional for other cottage food producers, but it lets you use a registration number on your label instead of your home address, which many bakers prefer for privacy reasons.
Even under cottage food rules, insurance isn't legally required, but it's smart. Homeowners insurance typically excludes business activities, meaning if someone gets sick from your products or gets injured picking up an order at your home, your homeowners policy likely won't cover it. A small business insurance policy designed for cottage food operations can fill this gap affordably.
Additional Coverage Worth Considering
Beyond the basics, several other insurance types make sense for Texas bakeries depending on your situation. Commercial property insurance protects your equipment, ingredients, and finished goods from fire, theft, or weather damage. If a pipe bursts overnight and ruins $5,000 worth of custom wedding cakes in your cooler, you'll want this coverage.
Equipment breakdown coverage is especially valuable for bakeries because you depend on expensive, specialized equipment. When your commercial oven or walk-in freezer breaks down, you're not just paying for repairs—you're losing business every hour you're not baking. This coverage can include both repair costs and business interruption losses.
If you deliver your products, commercial auto insurance is essential. Your personal auto policy won't cover you when you're using your vehicle for business purposes. And if you're operating delivery vehicles primarily for business use, you'll definitely need a commercial policy.
Many bakeries bundle these coverages into a Business Owner's Policy (BOP), which combines general liability, commercial property, and business interruption coverage at a lower cost than buying each separately. The typical BOP for a bakery includes the standard $1 million per occurrence and $2 million aggregate limits.
How to Get Started with Your Bakery Insurance
Start by reading your commercial lease carefully if you're renting space. Your landlord's insurance requirements will set your baseline—you'll need at minimum whatever they specify, which is typically $1 million/$2 million general liability with them listed as additional insured.
Next, honestly assess your risk exposure. If you have employees, strongly consider workers' compensation despite it being optional. Calculate the annual cost—about $22 per month per employee—against the cost of defending even one workplace injury lawsuit. For most bakeries, the math clearly favors getting coverage.
Talk to an insurance agent who specializes in food businesses. They understand the specific risks bakeries face—from allergic reactions to equipment breakdown to slip-and-fall claims. They can help you identify coverage gaps and often find discounts you wouldn't discover on your own.
Texas gives you flexibility in how you protect your bakery business, but that doesn't mean you should minimize coverage to save money in the short term. The right insurance isn't about checking boxes—it's about making sure one accident, one illness claim, or one equipment failure doesn't destroy the business you've worked so hard to build. Get quotes, understand what you're buying, and make informed decisions that protect both your customers and your livelihood.
