Insurance For Restaurants

Restaurant insurance 101

Restaurant insurance has a lot of moving parts. There’s no one-size-fits-all insurance policy for restaurants that will work to limit liability for every risk. However, with the right mix of insurance products, it’s possible to greatly reduce your liability risk.

Who Needs Restaurant Insurance?

If you’re wondering if you need insurance, there’s a good chance that you do. Restaurant insurance is a necessity for any eatery, including:

  • Caterers
  • Cafes
  • Coffee shops
  • Delis
  • Diners
  • Fine dining
  • Food delivery services
  • Full service
  • Pizza shops
  • Sandwich shops
  • Nearly any eatery

However, the types of insurance you need will vary. For example, if you’re a small coffee shop, you don’t need liquor liability insurance, nor do you need spoilage insurance (in most cases). A full-service restaurant would likely need both of these insurance products.

In short, every restaurant or eatery needs some form of insurance, but the degree of insurance you need will vary.

How Much Does Restaurant Insurance Cost?

restaurant liability insurance requirements

Insurance costs will change based on multiple factors:

  • Location
  • Business size
  • Limits chosen
  • Etc.

However, there are averages for certain types of insurance that must be considered:

  • Business Owner’s Policy – Averages $175 a month with a $1,000 deductible and $1m limit
  • General Liability Policy –Averages $70 a month with a $1m limit for each occurrence
  • Liquor Liability Policy –Averages $45 – $50 a month with a $1m limit
  • Workers’ Compensation – Averages $125 a month or $2.25 for each $100 on payroll

There are additional forms of insurance coverage that you can obtain below, too. In total, restaurants can pay as little as $1,000 per year or over $10,000, depending on size and the number of locations.

Combining policies into one can lower costs and make insurance more affordable.

Information You’ll Need to Get a Commercial Restaurant Insurance Quote

Restaurant insurance companies will require a lot of information before giving you an accurate quote. A few of the questions that will be asked of you include:

  • Zip code
  • Type of insurance you need
  • Describe the type of business you run
  • If you serve alcohol or not
  • If you offer delivery or take out
  • Business owner’s name
  • Email address
  • Telephone number
  • Business name
  • Physical business address
  • Number of employees
  • Vehicles used for work
  • Services provided
  • Square footage of your location
  • Equipment and inventory information
  • If you have a security system or fire system
  • Hours of operation
  • Activities and entertainment
  • Sales volumes
  • More

Insurers will walk you through the process step-by-step to provide a quote. Companies may also require additional information to provide you with the most accurate estimate possible. Online quotes will make it fast and easy to accept the quote and even download the certificate necessary to show proof of insurance.

Covering your restaurant’s liabilities with insurance products is a smart choice that allows you to focus on your business rather than the potential risks you face.

Restaurant Liability Insurance Requirements

Restaurants face a number of liability risks, and insurance can help protect against them. Every state will have its own requirements for restaurant liability insurance. Determining how much liability coverage you need is an impossible task simply because there are too many variables, including:

  • Your location
  • The type of food business you run

It’s common for restaurants to choose policies that provide up to $2 million in cover for general and product liability.

You may find that your restaurant requires more coverage. Consulting with an insurance agent can help you determine how much coverage you need.

In general, restaurants operating in the United States will need the following:

  • Workers’ compensation insurance
  • Unemployment coverage
  • Auto liability

Your state may also have insurance requirements. Keep in mind that these are the minimum insurance requirements, and you will want additional policies to ensure all of your risks are covered.

Restaurant Insurance Coverage Options

Multiple insurance coverage options are available for business owners to help them reduce liability risks and focus on their business. The following is a list of the most common forms of coverage restaurants seek:

Workers’ Compensation Insurance

A workers’ compensation insurance policy will protect employees if they become injured or ill while on the job. This type of insurance is required in virtually every state by law.

Even if your restaurant is located in a state that does not require this coverage, you put yourself at great financial risk by not purchasing it.

Workers’ compensation covers:

  • Medical benefits
  • Income replacement

In some cases, it may also provide vocational rehabilitation, job placement services, and educational assistance if the injury forces the employee to change careers.

Business Owner’s Policy

A business owner’s policy, or BOP, is a bundled policy that includes the most essential insurance coverages for restaurants, including:

  • Liability: Protects against third-party property damage, medical bills, product-related claims and advertising injury. This insurance does not cover employees. Workers’ compensation will cover these costs.
  • Property damage: Protects commercial buildings and movable property that your business owns. It can also provide coverage for things such as loss of income, debris removal and pollution cleanup.

Like any other type of insurance policy, BOPs have exclusions that you should understand and be aware of before you purchase coverage.

Commercial Property Insurance

Commercial property insurance will cover the cost of replacing your building or the items inside of your building if it becomes damaged or destroyed due to a covered peril.

This type of insurance can cover repairs and losses caused by:

  • Fire
  • Vandalism
  • Theft

If you rent the building, you can adjust your coverage to include only your business’s property.

General Liability

Every restaurant should have general liability insurance. This insurance will cover liability if your business causes damage to a third party, including:

  • Bodily injury
  • Property damage
  • Advertising injury

General liability will provide coverage if you are sued for customer injury, damage to their property or damages caused by your advertising.

If you have a business owner’s policy, general liability will likely be included.

Spoilage Insurance

Spoilage insurance will provide financial compensation if you lose food or drink due to spoilage. Food and beverages can spoil for a variety of reasons, including unpredictable power outages. With this coverage, restaurant insurance companies will help reimburse for the damages.

Spoilage insurance typically has a deductible, so make sure that you choose an option that your restaurant can afford and still provides adequate coverage.

Liquor Liability

If your restaurant serves alcohol, liquor liability is essential. This insurance will cover medical, legal and property damage costs if your establishment serves alcohol to an intoxicated individual who causes damage to property or a person.

You may provide your staff with thorough training, but it can be challenging to determine whether a patron is intoxicated. If an employee makes the wrong call, your business may face a lawsuit.

In many cases, this type of insurance is required in order to obtain a liquor license.

Food Contamination Insurance

If your food is ever mishandled, improperly stored or leads to food-borne illness, food contamination insurance can help cover financial losses.

No restaurant owner wants to find that their eatery was responsible for making customers ill, but it can happen. Food contamination claims can force your restaurant to suspend operations while local authorities investigate.

Food contamination insurance will provide financial relief to keep your restaurant afloat until you can resume operations.

Employee Dishonesty

Employee dishonesty coverage will provide financial compensation if employee theft occurs, whether directly or indirectly. Restaurant employee theft is more common than you think. A recent survey found that employee theft accounts for 75% of inventory shortages, amounting to $3-$6 billion per year in losses.

Employment Practices Liability

Employment practices liability coverage, or EPLI, can help protect your business if an employee makes a wrongful termination, discrimination or harassment claim. However, even if you think you’re doing everything right as an employer, that won’t protect you against a lawsuit.

It’s important to note that while EPLI can offer protection for restaurant owners, you still need to ensure that you understand and abide by federal and state employment laws.

Tips for Buying Restaurant Insurance

Start Getting Quotes Early

Rushing to get insurance right before opening is never beneficial in terms of maximizing price with coverage. Instead, it’s best to get quotes well before your current insurance policies are up for renewal or when signing your lease.

The earlier you get quotes, the easier it will be to negotiate rates and compare the available options.

Gather Business Information

Earlier in the article, we discussed a wealth of information that insurance companies will ask you for when receiving a quote. If your business is just opening, you may need to provide forecasts, too.

Consider Specialty Insurers

There are many insurance companies out there, but finding one that specializes in restaurants can be beneficial because they understand the unique risks of your industry.

You may even consider finding a company that’s even more specialized. For example, some insurers specialize in delis, taverns, food trucks or nightclubs. These companies are more likely to provide the coverage you need to cover your unique risks.

Bundle Options When Possible

Bundling can save your restaurant money on insurance premiums, but it’s important to be strategic when you bundle policies together. Some insurance companies may cut back on coverages in order to offer less expensive bundled policies. Make sure that you take the time to compare the difference between a policy when purchased on its own and in a bundle.

Being in the restaurant business comes with many risks, but the right insurance coverage can help reduce these risks. The coverages above are some of the most important for restaurants, but you may have unique risks that require special coverage. Working with an experienced insurance agent and gathering quotes from multiple insurers can help you get the coverage you need to protect against liability and loss.

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