It may not be the most exciting part of the restaurant planning process, but it’s a vital one: insurance. Every restaurant needs insurance, and this is one area you do not want to skimp on.
Restaurant insurance will protect your business from a wide range of issues, including broken equipment and liability lawsuits. But what type of insurance will you need? How much will it cost? How can you compare insurance companies?
What Kind of Insurance Does a Restaurant Need?
Restaurant insurance requirements will vary from state to state. Thus, the breadth of coverage will depend on your needs and local laws. There are several different types of insurance that every restaurant should have, including:
Commercial General Liability
General liability insurance for restaurants will protect your business from third-party claims, including personal injury, bodily injury and property damage. In many cases, restaurant liability insurance will also cover food poisoning claims.
More than one million people are injured in restaurant slips and falls each year. Even the most diligent of restaurant owners will face at least one slip-and-fall incident, but one incident is all it takes to put your business at risk.
Don't underestimate the importance of having this coverage. Without it, you leave your business vulnerable to lawsuits that could potentially bankrupt your restaurant.
Coverage will vary, depending on the carrier and policy. That’s why it’s so important to shop around and compare your coverage options. Some general liability policies will offer more expensive coverage than others.
Commercial Property
Whether you own or lease your restaurant’s building, you’ll need commercial property insurance.
Property insurance will provide coverage for:
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Water damage
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Break-ins
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Fires
Depending on the policy, property insurance may not cover natural disasters, such as earthquakes and floods. You may need additional coverage for these issues.
If you have a mortgage on the property, your lender will likely require you to have this coverage.
Commercial Auto
If you offer catering or delivery service and you have employees drive company vehicles, you’ll need commercial auto insurance.
In some cases, company vehicles are covered under general liability policies, but this is not always the case. You may also need commercial auto insurance if you allow your employees to use their own vehicles to make deliveries.
Workers’ Compensation Insurance
Every business with employees is required to have a workers' compensation insurance. As a restaurant owner, it is your responsibility to ensure the health and safety of your employees. Even if your employees follow all of the appropriate safety protocols, they can still be injured while on the job. That’s where workers’ compensation comes into play.
Although it’s an added expense, workers’ compensation is beneficial for both you and your employees. If one of your workers is injured on the job, workers’ compensation will cover the cost of medical expenses and a portion of the employee’s wages.
Specialized Coverage
General liability, property insurance, commercial auto and workers’ compensation are the four main types of insurance restaurants need. But you can also purchase specialized insurance for a restaurant.
Life Insurance
If you have a mortgage for your restaurant, your lender may require you to have a life insurance policy. The policy would ensure that the loan is satisfied in the event of your death.
It’s a good idea to have life insurance anyway. The last thing you want is to leave your family with a restaurant they don’t know how to run or a pile of bills they cannot afford.
Inventory Insurance
Inventory insurance will protect your restaurant against any inventory-related losses, such as food spoilage. For example, if you lose power during a storm and your refrigerated products spoil overnight, your inventory insurance policy may cover you against this loss.
Liquor Liability
If your restaurant serves, sells, distributes or manufactures alcoholic beverages, you may be held liable for injuries or damages caused by patrons who were served alcohol at your establishment. Most states will require you to carry liquor liability if you have a liquor license.
There’s insurance coverage for virtually every item, action or person you can think of. Your insurance agent will be able to explain your coverage options and possibly make some recommendations for additional coverage you may want or need.
Keep in mind that specialized policies may sometimes cost more than whatever you’re insuring. Weigh the pros and cons of having each type of coverage before making a commitment.
How Much is Restaurant Insurance?
Insurance is a necessity – not a luxury. Still, you want to prepare for these costs when creating your budget.
How much does restaurant insurance cost? The average restaurant insurance cost will depend on the insurer, the location and the policies purchased.
Business Owner’s Policy
As you know, restaurants need many different policies to cover their needs and risks. Fortunately, many insurance companies bundle these coverages into a single policy called Business Owner’s Policy (BOP).
How much does restaurant insurance cost per month?
Restaurant owners typically pay less than $180 per month for a BOP policy, or an annual median price of $2,160. Policy limits are usually $1 million, and most will have a deductible of $1,000.
It’s important to note that commercial auto insurance isn’t usually included in a BOP package. On average, commercial car insurance policies cost $600 per vehicle per year.
General Liability
How much does restaurant liability insurance cost?
A standalone general liability insurance policy has a median cost of $80 per month, or $950 per year. Most policies have a $1 million limit and no policy deductible. General liability coverage is often included in a BOP.
Liquor Liability
Liquor liability may be required as part of your bar and restaurant insurance coverage. Depending on the jurisdiction, this coverage may be required in order to get a liquor license.
The median cost of liquor liability is $50 per month, or $620 per year. Most policies have a $2 million limit.
Workers’ Compensation
Most restaurants pay a median cost of $125 per month, or $1,500 annually, for workers’ compensation coverage. Policy limits are typically $500,000. Keep in mind that policies can vary greatly, depending on the state and business operations.
How to Compare Restaurant Insurance Companies
While you shouldn’t skimp on coverage, there’s nothing wrong with wanting to lower your restaurant’s insurance costs. Comparing insurance companies and their policies will allow you to get the coverage you need at the right price. The simplest and most effective way to compare insurance companies is to gather restaurant insurance quotes from at least three providers.
You may have to get separate quotes for BOP, commercial auto and workers’ compensation policies.
Comparing quotes and doing your research on insurance providers can be a grueling task, but it’s one that will pay off. An affordable policy with a reputable insurance company will ensure that you have reliable coverage when you need it most.