The Complete Guide To Restaurant Insurance

If you are opening a restaurant, the list of things to accomplish before you open your doors can be lengthy and overwhelming. In addition to planning a menu, finalizing decor, training staff, and lining up your deliveries, you also need to make choices that will protect your restaurant in the event of an accident, injury, lawsuit, or property damage. Setting aside some time to learn about business insurance, specifically insurance needed for restaurants, could save you from costly mistakes and lawsuits.

Read on to learn what business insurance is essential for your restaurant.

Why Restaurants Need Insurance

Every business needs insurance, but restaurants have more than their fair share of opportunities for mistakes, injuries, and business-ending accidents. (Personal anecdote: as a former restaurant manager, I drove employees to the ER multiple times for cooking-line related accidents. Also, one time a man was so angry we ran out of ribs that he threw a pitcher of water on me. I’m not sure business insurance would’ve improved matters in that story, but it felt important to share. Restaurants are wacky places.)

If a customer slips and falls, or is served an allergen, or the kitchen catches fire, you need insurance to give you peace of mind and to protect your restaurant against bankruptcy. At minimum, you need insurance to cover your building, potential lawsuits, employee injuries, and any other routine incidents that take place inside a restaurant. And while it’s impossible to create a list of all the potential what-ifs, it’s important to ponder your business and any potential risks so you can explore your explore insurance options and discover the right fit.

6 Types Of Insurance Restaurants Might Need

The bottom line for all insurance decisions is that your own restaurant is unique and needs a unique package of policies. Some insurance policies are more case-by-case. For example, restaurants that cater and rely on deliveries would want to consider adding a commercial auto package to their insurance bundle. However, the following six insurance types should be considered essential for any restaurant.

General Liability

General liability insurance covers your business if you are at fault in an accident or mistake and someone sues you. This pays for legal representation, judgment pay-outs, or medical bills if someone is injured on your premises. Sometimes called “slip and fall” insurance, this is a must-have for all restaurants.

Commercial Property 

If you need protection from fire, vandalism, theft, or other natural disasters, commercial property insurance that will cover these risks. Did strong winds push a tree into your building? Has your store becomes a target for some fun spray paint? Commercial property is the insurance needed to handle those claims.

Worker’s Compensation Insurance 

While general liability protects your customers and provides medical help if they are injured at your restaurant, it doesn’t cover your own employees. You’ll need worker’s compensation insurance for that. Each state has different workers comp policies, so be sure to check your state’s laws and regulations. If an employee is injured at work, this insurance provides medical assistance and income assistance if he/she is unable to return to work.

Business Interruption Insurance

If your business has to close because of a disaster or accident, business interruption insurance will cover your lost income or the costs of temporary relocation. This policy could even protect you if a property leader suffers damage or foot traffic is limited to your establishment.

Liquor Liability Insurance

If someone consumes alcohol at your restaurant and then leaves and causes damage, you may be held liable for that damage. All restaurants that serve alcohol need to invest in liquor liability insurance.

Product Liability Insurance 

General liability insurance will cover some, but not all, lawsuits related to product liability. In this case, your product is your food. However, if your product is risky, extra product liability insurance is a must. Think of it like this: what would happen if a spread of E-coli on lettuce made many people from your restaurant ill? Or salsa with shards of broken glass is served to guests? Without product liability insurance, these incidents could be the end of your restaurant. Luckily insurance protects your business.

When it comes to all six types of restaurant insurance, the process for finding a great policy boils down to research.

Study the averages for your industry and compare competing rates. Start with an idea of the risks your business might face and arrive equipped and ready your first meeting with an insurance broker with knowledge of what you need and why. Don’t be afraid to ask questions and ask if specific scenarios are covered under the policies you are looking to purchase.

How Much Coverage Does Your Restaurant Need?

How much coverage and what type of coverage will all boil down to your individual restaurant. Most experts agree that restaurants would need at least $1,000,000 per incident and $2,000,000 total aggregate amount of general liability coverage.

It’s important to sit down with an insurance expert and talk numbers. All needed policies are restaurant specific.

How Much Does Restaurant Insurance Cost?

When you add up the policies needed to effectively cover a restaurant, the cost isn’t cheap. However, there are so many individual factors it can be hard to predict the overall cost.

According to Insureon, over 53% of small businesses pay between $400-$600 a year for general liability insurance and 21% paid less than $400 a year. Here is what can affect your premium:

• Your specific restaurant risks
• How much liability insurance you need
• The size of your business
• How many employees you have
• The location of your business
• What kind of advertisements you run

A commercial property plan will run restaurants between $1,000-$2,000 annually, and worker’s compensation might settle between $600-$10,000 depending on the safety conditions and number of employees. The ranges are wide, so check with an insurance expert for a more accurate quote.

When you meet with an insurance expert, discuss if it is cost effective to bundle insurance policies. And then go shopping for the best policy! Many sites like Coverwallet, Coverhound, and Insureon will comparison shop for you.

Ways To Save On Restaurant Insurance

Because restaurant insurance may be expensive, you might be looking for ways to cut down on the cost. There are a few ways to make purchasing insurance a bit more manageable.

• Choose A Higher Deductible: Your monthly premium decreases if you choose a higher deductible to pay. (For example, if your deductible is $5,000, then you would pay that much out-of-pocket before your insurance takes over.) The higher the deductible, the lower the premium.
• Buy A Package Or Bundle Policies Together: Business owner’s policy (BOP) insurance is a policy that combines general liability, commercial property, and sometimes business interruption service into one. The BOP is less expensive than if you purchased those policies individually.
• Install A Security System: Just like you can get an auto discount for good behavior (driving safely), business insurance works the same way. To get a discount on your commercial property insurance, update your security system or install outdoor lighting. This goes for worker’s compensation, too; those rates may be lowered by implementing employee safety procedures and training.

Getting Started

Assign some time and brain power to think about risk management. Ask yourself, what types of coverage are right for you and your business?

Once you’ve decided to invest in business insurance for your restaurant, you’ll now need to decide what type of coverage is best suited for your specific business. Make a list of assets you’d like to protect or lawsuit concerns. Managing insurance is just as important as other restaurant concerns such as acquiring loans, planning a menu, or choosing the best point of sale system. When you’re ready to make the insurance leap, read Merchant Maverick’s article on the steps needed to buy insurance. There are four quick steps to getting yourself secured with the right policy.

1. Assess your risk and choose which insurance you need.
2. Gather the necessary business information about your restaurant (square footage, number of employees, type of equipment, etc.)
3. Comparison shop the costs. (You can use comparison sites like Coverwallet, Coverhound, and Insureon, or contact your local insurance provider to see what commercial plans are available.)
4. Purchase your insurance!

Good luck as you embark on your restaurant business. Protect yourself from the things you can predict and the things you’d never predict, so you can focus on making your business the best you possibly can.