When we talk about “restaurant insurance” we are really talking about insuring all types of hospitality businesses including bars, taverns, sports bars, night clubs, entertainment venues, full service and quick service restaurants, pizzerias, delis, caterers, food trucks and more!
Restaurant owners need to consider four basic property and casualty insurance coverages:
Property insurance is to insure things your business owns, which could be the building, your restaurant equipment, food in the freezers and also can include insurance for business interruption if your business cannot operate for some reason such as a fire. If a fire, storm or theft cause a property loss, the right property insurance will cover it.
Liability insurance is to protect your business from claims from others, including lawsuits. Liability insurance starts with “general liability” (GL) policies, and gets more specific with excess liability policies (to increase your coverage limits), liquor liability, assault and battery liability, employer practices liability (which addresses claims by workers that their rights as employees have been violated) and cyber liability (to address data breaches). To be fully covered, some of these risks can be bundled in a single policy but there are others that require separate policies.
Workers compensation insurance, which is often mandated by the government, covers employees for wage replacement and medical benefits for injuries on the job.
Commercial auto insurance is for vehicles owned, leased, rented or borrowed by the business. For example, if your employees are using their cars to deliver pizzas for your pizzeria, your business is exposed and should own commercial auto insurance. This is also something to consider if you have a valet service.
Insurance in the hospitality industry is individually underwritten based on the specifics of your particular restaurant. Insurance applications ask dozens of questions and underwriters at insurance companies do their own research and reconnaissance on your restaurant before they determine the price that they will quote you for insurance.
That being said, here are 10 key factors that insurance companies consider when they price up your insurance coverage:
For example, a bar open until 2 a.m. that has bands playing 3 nights a week, has ID checkers and 75% of total sales are alcohol sales will generally pay higher insurance premiums than a restaurant that has 80% of its sales in food, no entertainment and closes at 10 p.m.
Keep in mind, if your restaurant leases its space, there are probably insurance requirements in your lease that you are obligated to meet or otherwise would be in violation of your lease.
Restaurant insurance is a complicated topic, and every risk is different. Today, you really can’t buy restaurant insurance entirely on the internet for almost any type of restaurant, although you can fill out online quote forms, but then someone receiving that information will be contacting the insurance companies and obtaining the quote to send to you.
Another complicating factor is that there is no one insurance company that can insure all types or even most types of restaurants at the best price. The reality is that there are dozens of companies that insure restaurants, and most of them focus on niches within the restaurant industry, for example Everguard Insurance specializes in insuring establishments that serve alcohol, such as night clubs, taverns and bars. Travelers Insurance does a great job insuring workers in the hospitality industry through its workers comp insurance programs. GUARD Insurance is a go-to market for establishments that focus on food, like delis and neighborhood restaurants. Plymouth Rock is really good at insuring commercial auto exposures.
What often happens is restaurant businesses end up obtaining multiple policies covering the four basic insurance coverages cited above, often from more than one insurance company. Although you might prefer the convenience of one single policy and bill, that often is not possible or would be more costly or provide inadequate coverage.
When you arrange insurance coverage for your restaurant you can go to a captive agent (like State Farm or Allstate), but these agents only represent that one company. They may have the best choice of coverage for you, but its not likely given they only have one market that they represent.
An alternative is to arrange your insurance from an independent agent, who represents multiple insurance companies. Keep in mind however, that each independent agent has a different roster of insurance companies they represent and that most independent agents do not specialize in restaurants and the specific needs of the hospitality industry. What this means is they may not have the expertise to advise you on what your risks are and how best to insure them, and it likely means that they do not have a stable of insurance companies that focus on restaurants. What you really want to do is find an independent agent that is active in insuring restaurants of all types.
Ask your agent, how many restaurants do you insure? And can you give me a list of five that you insure that are the same type of establishment as mine? If you get this information, you can feel better that the agent at least is knowledgeable about restaurant insurance and has access to insurance companies that focus on this exciting but complex sector of the insurance market.
World Insurance Associates, LLC insures over 10,000 clients including over 800 restaurants, bars, taverns, and entertainment venues in 10 states.