What is Food Spoilage Coverage?

Food Spoilage Coverage, also called food spoilage insurance or perishable goods coverage, is insurance that reimburses you for the value of food inventory that spoils due to a covered cause of loss. Common covered causes include power outages, equipment breakdown (refrigerator or freezer failure), contamination from refrigerant leaks, temperature fluctuations due to mechanical failure, and damage to temperature control systems from fire or other covered perils. The coverage typically pays the actual cash value or replacement cost of the spoiled food, minus your deductible, up to your policy’s sublimit for spoilage (often $5,000 to $25,000, though higher limits can be purchased). This coverage can be included in your commercial property policy, added as an endorsement, or purchased through equipment breakdown coverage or utility interruption coverage depending on how your policy is structured.

What you need to know

Food Spoilage Coverage protects restaurants from financial losses when food inventory spoils due to refrigeration failures, power outages, or other covered mechanical breakdowns.

Common covered causes of spoilage:

• Power outages – Loss of electricity from storms or utility failures
• Equipment breakdown – Refrigerator or freezer mechanical failure
• Refrigerant leaks – Contamination from cooling system leaks
• Temperature fluctuations – Mechanical failures causing improper temperatures
• Fire or covered peril damage – Damage to temperature control systems from insured events

Coverage structure and limits:

The coverage typically pays the actual cash value or replacement cost of the spoiled food, minus your deductible, up to your policy’s sublimit for spoilage. Standard sublimits range from $5,000 to $25,000, though higher limits can be purchased based on your typical inventory value.

Where this coverage comes from:

Food Spoilage Coverage can be included in your commercial property policy, added as an endorsement, or purchased through equipment breakdown coverage or utility interruption coverage, depending on how your policy is structured. It’s important to verify exactly what your policy covers.

Why it matters for Restaurant Owners

Food spoilage is one of the most common and expensive losses restaurants face, yet many restaurant owners are underinsured or have no coverage at all for this exposure.

The financial exposure:

Consider that a single walk-in cooler or freezer can hold $5,000 to $20,000 or more in inventory—meat, seafood, produce, dairy, prepared foods—and if your refrigeration system fails overnight or during a weekend, every bit of that food may need to be thrown away.

How spoilage happens:

Power outages from storms, equipment breakdowns due to age or poor maintenance, refrigerant leaks, compressor failures, and thermostat malfunctions all cause food spoilage on a regular basis. These events are not rare—they happen to restaurants frequently, making this coverage practical rather than theoretical.

The cost without coverage:

Without Food Spoilage Coverage, you would pay to replace all that inventory out of pocket while also dealing with the cost of repairing the equipment and the lost business while you restock. A single significant spoilage event could cost more than several years of coverage premiums.

Why this coverage is cost-effective:

The coverage is relatively inexpensive compared to the significant financial protection it provides. For a modest annual premium, you’re protecting against losses that could reach tens of thousands of dollars.

Critical coverage details to verify:

Make sure you understand your policy’s sublimit for spoilage (the maximum it will pay for a spoilage loss) and consider increasing it if you typically carry high-value inventory. Also understand what triggers the coverage—some policies only cover spoilage from equipment breakdown, while others include power outages from any cause. The broader the triggers, the better your protection.