Your restaurant insurance cost must be factored into your fixed cost in your monthly budget, but keep in mind that premiums may go up annually. Operating a restaurant will require multiple types of insurance:
- Liability
- Workers' comp
- Commercial property liability
If you have plans to open a restaurant in the near future, you need to adhere to your state's requirements and obtain the necessary insurance to remain in operation.
Why Restaurants Need Insurance
Your business has inherent risks. Customers may get food poisoning and sue you. They may drop hot coffee on themselves or trip and fall in your establishment. Without insurance, these liability costs can quickly bankrupt your restaurant.
But your employees may also be injured, and workers' compensation insurance would protect your workers in the process.
Insurance is often a legal requirement, depending on the type, but even in circumstances where insurance may not be required, it's a smart choice to limit liability risks.
What Does Restaurant Insurance Cover?
Restaurant insurance "doesn't exist," per se. Instead, you'll need a package of insurance policies that limit your risks and liabilities. Some of the many types of insurance and what they cover are:
General Liability Insurance
What most people think of when they think of insurance is a general liability policy. A general liability policy will cover claims of bodily injury and property damage at your restaurant. For example, if someone sues you for slipping and falling on a wet floor, this type of policy will cover:
- The person's medical expenses
- Legal fees
- Settlements
Commercial Property Insurance
Your restaurant will have a lot of physical assets, including furniture, inventory and equipment. If a fire happens, your property insurance will replace these items. Commercial property insurance covers fires, natural disasters, theft and vandalism of the restaurant's property.
Workers' Compensation Insurance
Most states, aside from Texas, require workers' compensation insurance. If an employee is injured at work, insurance will cover:
- Lost wages
- Medical bills
- Other expenses
You may also need multiple other forms of insurance, such as business interruption insurance, liquor liability insurance, commercial auto insurance and others, depending on your eatery's unique circumstances.
How Much Does Restaurant Insurance Cost?
Average restaurant insurance cost will depend on multiple factors, which we'll outline in greater detail shortly, but most restaurants will pay between $1,000 and $10,000 per year. Costs can be broken down into the following:
- General liability insurance ranges from $500 to $2,500 annually, with average costs of $900.
- Commercial property liability insurance ranges from $500 to $2,500 annually, with average costs of $740.
- Workers' compensation insurance ranges from $300 to $3,000 annually, with average costs of $600.
Costs will vary based on multiple factors.
What Factors Dictate a Restaurant's Insurance Cost?
There are several factors that will influence your food business insurance cost, including but not limited to:
Where You're Located
Location will play a big role in the cost of your insurance. If your restaurant is in a busy city with higher crime rates, your premiums will likely be higher as a result. If your restaurant is in a more suburban or even rural area, the cost may be much lower.
Locations that are more prone to natural disasters may also have higher premiums.
The Type of Restaurant You Run
Every type of restaurant has its own unique risks.
- Fine dining establishments have more expensive equipment, which can raise the price of premiums.
- Fast-food restaurants may have a greater risk of employee injuries.
- Food trucks have to contend with the risk of vehicle accidents.
Unique factors such as these will impact your rates.
The Size of Your Establishment
The larger the restaurant, the higher the risk and the higher the premium. Smaller restaurants with fewer staff members often pay lower costs for insurance because they have a lower level of potential liabilities.
These are the biggest factors influencing the costs of insurance premiums, but there are steps you can take to reduce your costs in some cases.
Steps to Take to Reduce Your Monthly Insurance Premiums
Although it's a necessary expense, there are still steps you can take to reduce your restaurant insurance cost per month without compromising on the quality of your coverage.
Partner with an Experienced Insurance Agent
It's easier than ever to take a DIY approach to buying insurance, but if your goal is to save money on your premiums, partnering with an agent is a great place to start.
Choose an experienced agent who specializes in restaurant insurance. They will understand your industry and the specific coverages you will need to protect your business. The right agent will also:
- Know which coverages are unnecessary
- How to find the best rates
- Help you compare policies
An agent's goal is to ensure that you get the right coverage at the right price, so take advantage of their valuable services.
Bundle Your Insurance Policies
One of the simplest and most effective ways to save money on your restaurant's insurance premiums is to bundle your policies.
A Business Owner's Policy (BOP) is a great way to do this. A BOP combines basic essential coverages that your restaurant will need, like general liability, business interruption insurance and commercial property coverage, into a single policy.
Your insurer may have other bundling options for you to consider.
In most cases, insurance companies offer discounted rates when you bundle coverages. Along with saving money, bundling will simplify your insurance management to save you time.
Focus on Risk Management
The cost of insurance premiums is largely based on risk. The higher the risk, the higher the premiums. If you want to lower your premiums significantly, you need to focus on risk management.
Many insurance companies will offer discounts to restaurants that proactively reduce their risks through strategies such as:
- Staff training. Employee training can go a long way in reducing the risk of foodborne illness and other liability claims. Provide extensive and ongoing training on food handling, customer service and alcohol service.
- Investing in security. Installing a security system, investing in cybersecurity training and cultivating a security-focused culture can help reduce the risk of incidents.
- Implementing a maintenance program. Regular maintenance of your facility and equipment can help lower the risk of breakdowns and subsequent claims.
If you can demonstrate to your insurer that you're proactively managing risks, you'll be well-positioned to negotiate rates and lower your premiums.
Restaurant insurance is a necessary expense for every owner. Understanding the costs, which coverages are most important and how to save on your premiums can help you stay compliant while also staying on budget. If you're unsure of where to start, an experienced insurance agent can guide you through each step.