Vending Machine Business Insurance

Regardless of your vending machine business size, you probably have an endless to-do list every day: from purchasing stock to maintaining the machines to managing the inventory and restocking the machines. It’s a never-ending story. It’s not surprising then that many vending machine business owners rarely have the time to stop and think whether they need to insure their business and if yes, how they should go about it. That’s why we thought it might be useful to put together in a blog post a quick rundown of what types of insurance there are, how much they cost, and what should you be careful about.

1. Do I need insurance for my vending machine business?

You might be thinking “my vending machines are not placed outside, I’m safe”, but the risk of vandalism exists as no machine is safe when placed in a public space. And while the risk is somewhat minimal, you might suffer from another undesired and unpredictable event such as machine breakdown, credit card fraud, and so on. You might find yourself liable for things you have a hard time to imagine at the moment such as expired goodies, customers tripping over spilled beverages, etc., etc. And this is just for starters. People can sue you for various reasons that might or might not sound reasonable to you. If you’d like to get a good night’s sleep and have the time and energy to focus on your vending machine business rather than (il)legitimate customer claims, it probably does make sense to insure your business.

2. What vending machine business insurance options are there on the market?

There are several critical insurance policies for any vending machine business to have: property, general liability, and auto coverage.

a) General Commercial Liability

The General Commercial Liability insurance covers your vending operations in the case of a client getting hurt while using your machine, a product in the machine causing harm to somebody, someone tripping over leakage and falls, a customer getting food poisoning, etc. General liability also protects you if you get sued for things like causing physical damage to someone or someone’s property, using someone else’s trademark without permission, making false claims in advertising and so forth. If any of this happens, the liability coverage will take care of your customer’s medical bills and protect you from any further obligation towards him/her. What’s more, it’s not uncommon for building owners and location managers to require vending machine operators to own and show proof of liability insurance. In other words, if you’d like to be competitive and secure the location you fancy, general liability insurance is a must-have for you. This type of insurance is incredibly important to have. Even if it’s not your fault, if someone else thinks it is, that person can sue you. Liability insurance helps you cover the cost of a lawsuit—and if you are found to be negligent, the insurance will also cover what you did wrong. To track inventory levels and expiry dates at your warehouse and for each machine, you might want to consider using vending machine business management software. It can help you avoid pricey lawsuits due to food poisoning, for example.

b) Property insurance

Property insurance helps protect your business assets (property and equipment) from theft, damage or any type of loss:

• Your stock
• Office equipment such as computers
• Owned/leased property used to run your business (such as office and warehouse)

What your insurance premium should be (that is, how much you should pay for your coverage) depends to some extent on the type of machines you own, as well as on the location where you are planning to place them. Some insurance providers combine property and general liability in a single policy named Business Owner’s Policy. Combining a few policies from a single insurance services provider guarantees you a discount, too.

c) Commercial Auto Insurance

The Commercial Auto Insurance protects your vending car/truck when on route to refill existing machines or install new ones. If you are using your personal car as a vending truck, remember that the personal auto insurance policy usually does not cover commercial use, so you can’t rely on it in the case of a problem. Commercial auto insurance typically:

• Covers damage to your vehicle in the case of a collision with another driver
• Insures you in the event of theft
• Includes medical coverage whenever medical bills need to be paid
• Protects you whenever the accident is with a driver who doesn’t have insurance himself

Keep in mind, however, that many commercial auto insurance policies will cover your truck, but not necessarily any damage to your products in the truck. While the above three insurance policies are a must-have when operating a vending machine business, there are a few other types that might be worth considering depending on your particular case: If you have employees, the worker’s compensation policy is something that you definitely need as it covers your employees in case they get injured while working. The policy typically covers the injured employee’s medical bills and pay for the period they would need to be off work. There’s also the option to protect your vending machine business from loss caused by crime. As most vending machines still accept cash rather than cashless payment options, employees and owners are forced to carry a lot of bills and coins around with them. Most insurance providers offer protection from this type of risk labeled as crime insurance. Location owners/managers might also ask if you have something called a Certificate of Insurance (COI). While this is not yet another type of insurance policy that you need, you might have to pay a fee to have the COI issued. (See more on the subject)

3. The latest threat: cybercrime

If your vending machines accept credit cards, one type of liability insurance that you might want to consider is cyber liability coverage. Albeit minimal, the risk of customer data theft through “skimming” exists. What’s more, as of October 1, 2015, a change in how card payments are accepted and processed in the US has come into effect. Now vending machine operators, not banks, are liable in case of fraud with credit cards that have EMV chips if the business owners have not installed an EMV-ready credit card reader. In short, when a credit card fraud takes place, whoever did not comply with the latest standard, absorbs the charge. The real issue for vending machine business owners, however, is the potential risk for chargebacks. Beware that the chargeback fee is assigned per transaction, not per card or customer! It can be a huge issue for vending machine business operators. (See more on the topic on VendingMarketWatch)

4. How do I insure my vending machine business and how much does it cost?

If you’d rather focus on your vending machine business instead of doing thorough research on what type of insurance package your business needs, it’s important to find someone, a subject matter expert, whom you can trust to provide advice and insight into the topic. An insurance agent or broker can help make the process less stressful and time-consuming. And what is the difference between agents and brokers? Here it is: Both brokers and agents act as intermediaries between you and the insuring company which means they both must have the appropriate licenses to offer the insurance they are selling while adhering to all laws and regulations. The main difference then has to do with whom they represent. While an agent acts as an extension of the insuring company and may represent one or more insurance providers, a broker represents the buyer (that is, you), and is independent of any insurance companies. As you can imagine, the cost can greatly vary and is mostly dependent on your turnover. If your vending machine business sales are around $100k or less / year, your general liability premium should be in the range of $400-500. There are insurers who’d offer the option to add additional coverage for each machine you own for an additional premium. The commercial vehicle insurance will vary depending on the type of car/truck you own and your driver’s record. The annual commercial vehicle insurance costs range is $750 – $1,200 per vehicle. The employee insurance premium varies on the number of workers your business has employed and may range between 3% up to 5% from the employee salary. There are also subscription-based options such as CoverWallet that have packaged together readymade monthly plans which include one or more policies (for example, the General Liability one starts at $39 a month).

5. What should you watch out for when insuring your vending machine business

Just like with everything, when selecting an insurance policy (or a package of policies), measure twice cut once. Be sure to make yourself familiar with the nitty-gritty details such as what the procedures are in the event of an emergency, what exactly the policy covers, etc. In other words, read the fine print. Many times, vending machine business owners simply don’t invest enough time to select the right insurance policy which may result in expensive mistakes:

• Not insuring all the products that are sold in the vending machines. When the list of products you sell is long, and the variety is large, you might forget to disclose a few items to your insurance provider. This might result, however, in an invalid insurance claim when it turns out that the policy you’ve purchased does not cover incidents related to those items.
• Failure to maintain your vending machines. To keep your machines up and running and avoid pricey tech support and fixes, proper upkeep and maintenance need to be performed regularly.
• Forgetting to insure your vending machines when they are leased.

Vending management software can help you keep an up-to-date track record of all your merchandise, easily calculate expiry dates, and see at a glance what items need re-ordering. Using a VMS can help you gauge your vending machines’ performance and quickly understand if there is a breakdown or another issue. If you are ready to streamline your operations and improve your vending machine business profits, grab your free VendSoft trial now.