Quick Summary: This blog provides essential insights into restaurant insurance costs, covering all types of hospitality businesses. It emphasizes the importance of understanding insurance nuances to save money and protect investments. Key takeaways include:
When venturing into the restaurant business, understanding the ins and outs of restaurant insurance is crucial. It's not just about protecting your establishment from unforeseen events; it's also about ensuring the longevity and sustainability of your business.
In this essential guide, we take a closer look at the aspects that influence insurance costs for restaurants. And we are not just talking about fine dining establishments. As you will see, all types of hospitality businesses can benefit from this coverage.
Whether you're a seasoned restaurateur or just starting out, understanding these key points can save you money and protect your investment in the long run. Join us as we explore the essential information every restaurant owner should know about restaurant business insurance costs.
First thing first, 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!
Most establishments that serve food and/or beverages should have a restaurant policy. Since these policies can frequently be adjusted to provide various levels of protection, there’s little reason not to get one. Additionally, restaurants that don’t have proper insurance could be financially devastated by a single incident.
After all, you rely on your reputation and ability to serve your customers quality food daily. So no matter if your restaurant is a small family-owned business or has grown to a prominent chain, you operate a thriving bar or a quaint sports bar, this type of coverage is crucial.
Restaurant owners need to consider four basic property and casualty insurance coverages:
Let’s take a closer look at these important 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 causes 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. The restaurant environment is prone to various hazards, such as slips and falls, cuts, burns, and other bodily injuries. This insurance is a critical component of a restaurant's risk management strategy.
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.
Of course, restaurants and other hospitality establishments should consider additional coverages on top of these basic protections. These coverages help mitigate financial risks associated with more liability claims, employee-related risks and other unforeseen events.
Here are some additional types of insurance coverages that restaurant owners should consider:
Business Interruption Insurance: This coverage helps replace lost income and covers operating expenses if your restaurant is temporarily closed due to a covered disaster, such as a fire or natural disaster.
Liquor Liability Insurance: If your restaurant serves alcohol, liquor liability insurance is crucial. It protects against claims resulting from damages or injuries caused by intoxicated patrons.
Cyber Liability Insurance: With the increasing reliance on digital technologies for everyday tasks like reservations, orders, and payments, restaurants are at risk of cyber threats. Cyber liability insurance protects against losses related to cyber-attacks, including data breaches.
As with most insurance options, restaurant liability insurance costs can vary greatly. That is because 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 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 provide a restaurant business insurance cost quote:
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. These are just a handful of the things an insurer looks for when determining your restaurant insurance costs. They may also be curious about the number of employees you have and other aspects of how your business operates.
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 obtain 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.
Here are a few to consider:
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 your restuarant insurance coverage 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 who 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 coverage 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.