How to insure a brewery
The beer business is booming in America. After decades with just a few alternatives to big beer companies like Anheuser-Busch and Miller, independent breweries are popping up all over. Today, the U.S. is home to more than 2,300 breweries and brewpubs.
"We're seeing more than one brewery open every day," says Paul Gatza, director of the Brewers' Association, an industry group for breweries.
If you're an avid home brewer, you might be looking at starting your own brewery. But before you go too far with your business plan, you'll want to make sure you have the protection you need in case something goes wrong. Here's what you need to know about brewery insurance.
Types of brewery business risks
"A brewery has all of the risks of a manufacturing plant, along with the risks of an on-premises liquor service in most cases," says Chris Ballard, owner of Ballard Insurance in Washington, which provides customized insurance policies for breweries. That means you've got quite a few coverage options to consider.
Coverage for commercial general liability and commercial property are essential, to ensure that expensive equipment such as the brewery's boilers can be replaced if they're broken or destroyed.
When it comes to materials, you'll need to make sure you're protecting more than just the cost of the raw ingredients.
"If you have 2,000 gallons of beer destroyed in a catastrophic fire, all you've really lost is some water, yeast and hops," Ballard says. "You're losing the profit from the time involved in brewing."
Ballard says breweries should find insurers that agree that once the product is mixed, it will be assessed at its retail price, instead of an assessment based solely on the cost of purchasing the ingredients.
A workers' compensation policy also is important, as it covers the high risk of injuries faced by brewery workers. For example, "when you're bottling your own beer, if you get a finger in there, it's gone," Ballard says.
Business interruption insurance also can be valuable to breweries, since it can take months for brewery equipment to arrive if it's been destroyed.
"If a major windstorm destroyed your building and brew kettles, you're out of business for six to nine months," Ballard says.
If your business is forced to close temporarily, this type of coverage can provide reimbursement for the average profit your business otherwise would have generated.
And because breweries produce alcohol, buying a liquor liability policy is mandatory. This type of policy will protect the brewery from liability if someone files a claim regarding your product, such someone being injured in a car accident after drinking the brewery's beer. Such coverage is mandatory even if you don't serve alcohol on the premises; if, for example, your brewery offers on-site tastings or operates an attached restaurant, "you'll pay three to four times more than the rate for wholesale alcohol," Ballard says.
The overall cost of insurance for a brewery varies widely, based on the brewery's size. "Little ones can spend less than $10,000 a year, but for larger breweries, insurance costs can go well into the six figures," Ballard says.
Be prepared before launching
Despite the substantial expense of insuring a brewery, Gatza doesn't think high insurance premiums have been a major barrier for would-be beer brewers.
"I haven't heard of it impacting someone to the point where they don't start up," he says. "I'm assuming they come in with a pretty good idea of what it's going to cost."
Gatza says breweries choose from a menu of options for business insurance. "Some will go with a local option that they know, and others go with larger national companies with specialized brewers' policies," he says.
The Brewers' Association offered its own insurance plan with a single carrier until 2008, but decided to discontinue the program so that all insurers could compete for brewers' business. "Now, there are nine companies that we're aware of that offer specific insurance coverage for breweries," Gatza says.
Along with Ballard Insurance, companies like Whalen Insurance, Micro Breweries Insurance and Brewery Pak Insurance Programs sell customized insurance packages for breweries of all sizes.
As your brewery grows, it will be important to regularly monitor your insurance coverage so that you have enough protection. Buying more equipment and hiring more employees, for instance, are likely to lead to higher insurance costs. Check in with your insurance agent each time you're looking at expanding or changing your business.
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