Café business insurance

Who is café insurance for?

The word café covers a surprisingly broad range of businesses. Some have a small kitchen and a relatively simple menu of coffee, cakes, sandwiches and cooked breakfasts. Others prepare a much wider lunch menu, use commercial cooking equipment and serve alcohol.

At the more complex end, a café can start to look quite similar to a small restaurant from an insurance point of view. That is why what you actually do matters more than the name above the door.

What insurance does my café need?

We normally suggest starting with the business itself rather than a list of insurance products. Think about the people you deal with – customers, employees, suppliers and other third parties. Then look around the café: do you own the building or rent it, what have you spent on the fit-out, and what equipment and stock belong to you? Finally, consider what would happen if damage to the premises meant you couldn’t open for several weeks or months.

Those questions help separate the risks into liability, property and the financial consequences of not being able to trade.

Liability insurance for cafés

We like to deal with liability first because it is part of the everyday operation of a café. You have customers eating and drinking on the premises, employees preparing and serving food, suppliers making deliveries and products leaving the business.

The type of claim that could follow depends on who has suffered the loss and what has happened.

Café public liability insurance

Café public liability insurance covers claims against your business if someone is injured, or their property is damaged, because of your business activities.

There are plenty of ways an ordinary day in a café could result in a claim. A customer might fall over a bag left beside a table, be burned by something hot or have their belongings accidentally damaged. A delivery driver or another visitor to the premises could be injured too.

For cafés with cooking facilities, there is also more happening behind the scenes. Hot food is moving between the kitchen and customer areas, deliveries are coming in and staff may be cleaning while the café remains open. Good housekeeping therefore matters as much as dealing with the more obvious hazards.

Typically, public liability insurance – including the cover available through Suited – does not cover injuries to your employees. Those claims belong under employers’ liability.

Public liability isn’t designed to insure the café’s own property either. Damage to your ovens, furniture, refrigeration or stock needs to be considered separately, as do contractual disputes.

Something we always try to make clear is that having liability insurance doesn’t transfer responsibility for running the premises safely to the insurer. Policies will generally require reasonable precautions to be taken, relevant laws and safety requirements to be followed and the premises and equipment to be properly maintained.

Products liability insurance for cafés

For a café, the products liability exposure can be quite broad because you may be preparing food rather than simply reselling it.

Products liability insurance covers certain claims arising from food and drink you supply. Food poisoning and allergic reactions are obvious examples, but the underlying principle is that something supplied by the business is alleged to have caused injury or damage.

We pay particular attention to allergens with cafés because the more varied the menu becomes, the more ingredients are likely to pass through the same kitchen. A breakfast and lunch menu can involve eggs, milk, cereals containing gluten, nuts, sesame and other regulated allergens.

There is an important distinction between a product causing a claim and the product itself simply being unusable. Spoiled ingredients, food that has to be thrown away or a customer asking for a refund are not the same thing as somebody claiming they have been injured.

Product recall is another separate consideration. The cost of withdrawing food from sale or recalling products already supplied should not automatically be assumed to form part of ordinary products liability insurance.

Products liability also goes hand in hand with running a compliant food business. Insurance doesn’t replace food hygiene, allergen management, appropriate labelling or the responsibility to make sure the food you sell meets applicable legal and safety requirements.

Employers’ liability insurance for cafés

Cafés can employ a mixture of permanent, part-time and casual staff, and it is important not to assume that somebody working only occasionally falls outside your responsibilities as an employer.

Employers’ liability insurance is designed to cover claims where an employee is injured or becomes ill because of their work. For most UK employers, it is also compulsory.

From our point of view, anyone working under the direction and control of the business needs to be properly considered when you tell us how many people work in your café – even if they only help during busy periods.

Staff also need appropriate training for the work they do, particularly where they use hot cooking equipment, steam, knives or deep-fat fryers, with suitable PPE provided where necessary.

Employment circumstances differ, so don’t take our word for whether you are legally required to hold employers’ liability insurance. Check the official GOV.UK guidance if you are unsure.

Commercial legal expenses for cafés

Running a café can also lead to legal problems that have nothing to do with somebody being injured. There may be an employment issue, a disagreement over a contract, an unpaid debt or a dispute involving the premises.

Commercial legal expenses insurance can help with certain business legal disputes and associated legal costs, depending on the policy.

One limitation worth understanding is reasonable prospects of success. Legal expenses insurers will generally only continue funding a civil case where there is a better-than-even chance of achieving a successful outcome.

Each section of legal expenses cover also has its own conditions and exclusions, so it is particularly important to read the policy documents rather than assume every employment, property or contractual dispute will be covered.

Does serving alcohol affect my café insurance?

Some cafés serve beer, wine or other alcoholic drinks alongside food. From an insurance point of view, we need to know if alcohol forms part of the business, so make sure it is declared when arranging your cover.

There is also a legal side to it. If you sell or supply alcohol, you need the appropriate authorisation and must comply with the conditions attached to it.

For us, the important point is simply that the insurance and the way you actually operate need to match. If you add alcohol after taking out your policy, let us know so the change can be reflected in your insured activities.

What about cooking and deep-fat fryers?

Some cafés do relatively light food preparation. Others have a full kitchen cooking breakfasts and lunches, with hobs, ovens, grills and perhaps deep-fat fryers.

That matters from an insurance point of view because cooking – and particularly cooking with hot oil – increases the fire risk.

A real London Fire Brigade incident illustrates this rather well. In February 2021, a fire at a café in Belgravia started when hot oil in a deep-fat fryer ignited. The fire then spread into a build-up of fat and grease in the extraction ducting, damaging half of the kitchen, part of the roof and destroying the extraction system. Nobody was reported injured.

The Brigade specifically warns cafés and restaurants about cooking appliances, electrical installations, extraction systems and the accumulation of grease as fire risks.

When we insure cafés using deep-fat fryers, we therefore ask additional questions about the equipment and how it is operated. It’s a good example of why two businesses both calling themselves a “café” can present quite different insurance risks.

Protecting your café premises

A café can have a considerable amount of money tied up in one location. What needs insuring depends largely on whether you own the premises, what belongs to your landlord and what belongs to the business.

Buildings insurance

If you own the building, buildings insurance can protect the structure against specified causes of physical damage.

For a rented café, the landlord will commonly insure the building. Check your lease rather than assuming where that responsibility sits.

Tenants’ improvements, fixtures and fittings

Renting doesn’t necessarily mean you have nothing invested in the building.

Counters, flooring, lighting, plumbing, electrics, kitchen extraction and other improvements may have been paid for by the café owner. Depending on the policy and the item concerned, these can fall within tenants’ improvements, fixtures and fittings or other property cover.

The important thing is to understand what you have paid for and how the policy treats it.

Contents and kitchen equipment

A café can accumulate a surprisingly valuable collection of equipment: ovens, grills, refrigeration, coffee machines, dishwashers, display cabinets, tills, furniture and plenty more.

Contents insurance is designed to protect business property against specified causes of physical loss or damage.

Stock

Stock can look very different from one café to another.

For a simple daytime café, much of it may be food ingredients, coffee and other relatively fast-moving or perishable supplies. A licensed café may also hold wine, beer and spirits, potentially increasing both the overall value of the stock and its attractiveness to thieves.

Whatever the business holds, the sum insured should reflect the amount of stock that could realistically be at risk rather than only what happens to be on the shelves on an average day.

Protecting the café’s financial position

Insuring the physical café is one thing. There is also the question of what happens to the business financially if those premises suddenly become unusable.

For a location-dependent business, even relatively short periods of closure can mean lost turnover or additional costs trying to keep the business operating elsewhere.

Business interruption insurance

Business interruption insurance can cover certain financial losses when insured damage to the premises prevents the café from trading normally.

The property policy deals with repairing the physical damage. Business interruption looks at the financial effect on the business while that is happening.

It is typically linked to insured damage affecting the premises, rather than being standalone protection against an unexplained fall in turnover.

Increased cost of working

Sometimes the café can keep trading, but doing so costs more.

Increased cost of working can cover certain additional expenses incurred to reduce the interruption – perhaps hiring temporary equipment or using alternative premises – depending on the policy.

So one cover looks principally at the financial loss caused by the interruption, while the other can help with certain extra costs incurred to reduce it.

What happens if my coffee shop can’t trade?

Now we get to the part that is sometimes harder to see because it isn’t a physical asset.

You can insure the building. You can replace a damaged espresso machine. You can replace tables, chairs and stock. But what happens to the business while you are waiting for all of that to happen?

A coffee shop is usually heavily dependent on its premises. If you suddenly can’t open, the sales can stop immediately while rent, wages and other costs continue.

That financial loss is separate from the cost of repairing the shop.

Business interruption insurance

Business interruption insurance is designed to cover certain financial losses when an insured event prevents the business from trading normally. It commonly sits alongside property insurance because the interruption is often triggered by insured damage to the premises or equipment.

A fire is the easiest way to explain it.

The property insurer may pay to repair the shop and replace damaged equipment. But if the coffee shop is closed for three months while the work is completed, there is also three months of disrupted trading to think about.

In our conversations with businesses, this is often the part that requires a little more thought. Physical assets have obvious values – you know roughly what an espresso machine costs. Lost trading can be much harder to estimate, particularly if the interruption lasts far longer than expected.

Increased cost of working

Closing completely isn’t always the only option.

Sometimes a business can continue trading, but only by spending additional money – perhaps hiring replacement equipment, using temporary facilities or putting another short-term arrangement in place.

Depending on the policy, business interruption insurance can include increased costs of working incurred because of the insured event.

The principle is fairly simple: it can sometimes make financial sense to spend additional money to keep some of the business running rather than lose all of the income while the premises are being restored.

Premises insurance isn’t currently available online, but Suited can assist you. Please contact us if you are interested.

Does my café need cyber insurance?

Cyber is unlikely to be the first insurance consideration for many small cafés, but it shouldn’t be dismissed completely.

Online ordering, loyalty schemes, stored customer information and reliance on digital till or booking systems can all create cyber exposures.

Cyber insurance can cover certain losses, liabilities and response costs following a cyber incident, depending on the policy.

Whilst cyber insurance isn’t currently available online, Suited can assist you. Please contact us if you are interested.

What do I need to be able to insure my café?

A café needs to be run as a properly registered and compliant food business. That includes meeting applicable food hygiene and allergen requirements and maintaining the premises and equipment appropriately.

Cooking equipment can bring additional insurer requirements, particularly where deep-fat fryers and commercial extraction systems are involved.

If alcohol is sold, the café also needs the appropriate authorisation and must comply with the conditions attached to it.

Insurance sits alongside all of these responsibilities rather than replacing them.