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.