What Insurance Does a Restaurant Need?

Running a restaurant is many people’s dream. Although it can be very rewarding when everything goes well, there are risks associated with welcoming guests to your premises and serving them food. To make sure you don’t face financial hardship if there is a problem, you should take out various insurance policies. But what are the insurance costs for a restaurant, and is it worth getting covered?

Every restaurant owner should get certain kinds of policies, such as liability insurance and workers’ compensation, but the optimal amount and type of cover depends on the kind of business you run and how financially stable it is. A good insurance agent can explain the various options and help you find a suitable insurer, so you’re optimally covered but not paying for policies you don’t need.

What Insurance Does a Restaurant Need? 

The kind of insurance you need to run a restaurant depends on your area. For example, insurance isn’t generally required by law in California, but if you don’t insure your restaurant business, you are taking on a significant amount of risk, and you could face bankruptcy if something goes wrong. To prevent financial difficulties, you should take out liability insurance, workers’ compensation insurance, and business property insurance.

If you want to be even better protected, you can also look into getting business interruption insurance, liquor liability insurance, and food contamination insurance. These additional policies can cover issues that are specific to the service industry. Most insurance policies don’t cost a lot, so they can be well worth it.

Liability Insurance

Lawsuits from customers or members of the public are one of the biggest threats businesses face. Unfortunately, getting sued is a common occurrence, especially in the service industry, where customers spend time in the business. If one of your customers slips and gets injured at your restaurant, they can ask you to pay for their medical bills and their loss of income. In severe cases, you might even have to cover long-term disability payments.

Liability insurance can protect you from lawsuits related to false advertising, property damage, or personal injury. Most experts recommend that businesses take out a liability insurance policy that covers them for at least $500,000–$1,000,000, if not more. Your insurance will pay the plaintiff’s compensation, but it will also cover your legal costs associated with the case.
 

Workers’ Compensation Insurance 

While liability insurance covers personal injury and property damage lawsuits filed by customers or members of the public, it doesn’t compensate you if one of your employees sues you because they had an accident or picked up an illness while working for you. Unfortunately, working at a restaurant can be dangerous because there are hot items, lots of steps, glasses and crockery, and knives.

Workers’ compensation insurance pays out if one of your employees sues you because they believe that you should have prevented them from getting injured. For instance, you might not have cleaned up spilled water quickly enough, or you might not have conducted safety classes before allowing employees to handle dangerous tools. Unless you have insurance, you’ll have to pay for the worker’s medical bills and their rehab.

Business Property Insurance 

Some people believe that business property insurance is only necessary if the building belongs to the restaurant. Owners who are renting their building and are worried about the high insurance costs for a restaurant might be tempted to skip business property insurance. However, this isn’t necessarily a good idea. You should still get property insurance if you have valuable items such as kitchen equipment, electronic gadgets, expensive furniture, and artwork.

You can get compensated by your business property insurance policy if your restaurant burns down, gets vandalized, or is the victim of a natural disaster. What’s more, theft might also be covered. There are property insurance options for every situation, so you can buy a policy that protects only the items you own, not the ones you are renting or leasing. There are also policies that cover business vehicles such as delivery vans.

Business Interruption Insurance 

Running your restaurant business takes money, and you need to sell a certain amount of food and drink just to break even. For this reason, an interruption to your business can be damaging and cause long-lasting financial hardship. Business interruption insurance can protect you from this risk because it compensates you for the money you’re losing when you’re not able to open.

However, it’s important to remember that not all reasons for closure are covered. If you’re going on vacation or you have to take care of a family member and you close your restaurant for a few weeks, you won’t receive money from your insurance company. Some of the most common covered reasons include damage due to a fire or natural disaster and damage due to vandalism.

Liquor Liability Insurance 

Not every restaurant can automatically serve liquor on the premises. Business owners who would like to serve alcohol will have to apply to their nearest district office of the Department of Alcoholic Beverage Control. The process of getting your license might take several months, but for most restaurants, it is well worth it because it increases the customer base and the total revenue.

Unfortunately, there are certain risks associated with serving alcohol to customers. You’re not allowed to serve anyone who is already intoxicated because they could be a danger to themselves or others. Because it’s sometimes extremely hard to know whether someone has had a lot of alcohol already, mistakes can happen. If you or one of your employees inadvertently served an intoxicated customer, liquor liability insurance can pay for the damage.

Food Contamination Insurance 

Issues with food contamination are every responsible restaurant owner’s worst nightmare. No matter how often you clean your kitchen and how thoroughly you vet your suppliers, problems can occur. If you serve contaminated food and your customers become ill, you might have to close down your restaurant for a certain period of time while the issue is being investigated. What’s more, you’ll have to sanitize all surfaces and replace the spoiled food.

This process can take several days or even weeks, and it can be incredibly expensive. If you’re worried about food contamination and the associated costs, you could take out a specific insurance policy that will pay for the cleaning of your equipment, the replacement of the food, and the income you lost during the shutdown. Some policies even provide you with money to advertise, so you can restore your business’s reputation.

What Are the Average Insurance Costs for a Restaurant?

On average, owners pay $150-200 per month for restaurant insurance coverage. However, there are many variables, and it’s very hard to determine the cost of restaurant insurance for an individual business. Aside from the location, the cost of your policy depends on the kind of restaurant you run, the size of your business, and the value of your property.

What’s more, there are countless options, such as add-on policies or different coverage amounts, that can affect the monthly cost of insurance. If you’re confused by all the possibilities, you should reach out to an insurance agent, who can have a look at your individual situation and help you determine what kind of policy is best for you.

Can I Get a Comprehensive Policy? 

To be protected from the most common issues, a restaurant owner has to take out various kinds of insurance, including liability insurance, workers’ comp, property insurance, and business interruption insurance. Managing four to six policies from different providers can be confusing and time-consuming. For this reason, many people opt for a comprehensive policy, called a business owner’s policy.

The BOP includes many of the above-named types of insurance, although workers’ comp isn’t always provided, and it is often cheaper because it is sold by a single company. What’s more, it’s easier to manage because the restaurant owner only has to go through the paperwork once.

Where Can You Get Comprehensive Insurance?

If a business owner’s policy sounds right for your restaurant, you can reach out to an insurance agent and request quotes. You will need to provide some information, including your restaurant’s location, background, annual turnover, and number of staff. Your agent will then provide you with several options, and you can either choose one that suits you straight away or discuss the possibilities with the expert.

Having a conversation with the agent is often a good idea because it allows you to explain the unique aspects of your business and therefore get more accurate advice. Once you’ve selected a good policy, you can purchase it through the insurance agency. That way, you’ll know that you’re getting the best deal, and you can easily switch policies if your business changes or expands.

Virtually every restaurant owner needs to take out insurance to protect their business from problems like lawsuits, property damage, or a loss of income due to unforeseen circumstances. Get in touch with us at ISU Armac to speak to a professional about how you can keep the insurance costs for a restaurant reasonable. We will provide you with quotes and help you decide which policies your business requires.