Learn about the different types of insurance coverage for food and beverage service businesses
Introduction
If you’re starting a restaurant or working on your restaurant business plan, you’re probably wondering what you need to know about getting business insurance.
This guide will help you understand the basics of restaurant insurance, why you need it, how to estimate the cost and how to go about getting it.
Why Do Restaurants Need Insurance?
Whenever you’re engaged in business there is a certain amount of risk. The more people you serve or employ the more risk there is that someone may become hurt or injured.
There are additional unforeseen circumstances that can affect your business, from natural disasters to power outages and equipment failure.
To protect yourself and your business from unforeseen costs due to a lawsuit, loss of business or loss of property you can pay a set monthly fee for restaurant insurance.
What Businesses Need Restaurant Insurance?
Actually, what we mean here by restaurant insurance is insurance for any business in the hospitality industry. This could be any food and beverage service concept from nightclubs to catering trucks.
Every hospitality service concept needs some sort of insurance and very often multiple policies covering different areas of loss.
What Are The Legal Requirements For Insurance Coverage?
While this guide is not an authoritative legal source, we can say that there are likely some requirements that your restaurant must carry some level of restaurant insurance, by law.
Places to look for legal requirements for insurance that your business may be subject to are:
- Your lease agreement
- The Alcoholic Beverage Control Board
- Requirements tied to various permits
If you need help determining what your legal requirements are for insurance you may consider hiring a restaurant business consultant or a lawyer with experience with hospitality industry laws.
What Type of Restaurant Insurance Should I Get?
You probably won’t find one restaurant insurance policy to cover all aspects of your business. Nor do you really want to. Insurance companies specialize in different types of coverage.
Some types of insurance are to protect you from lawsuits, others protect you against losses you may suffer. The type and extent of the coverage you get is unique to your needs.
The following details the different types of restaurant insurance and what they are for.
-
Property Insurance
- Property insurance covers your business’ assets. This could be equipment, inventory or the building itself.
- Since property insurance can cover so many different things, it’s important to work out with your agent the coverage you need.
-
Examples of when you’d need property insurance:
- Your walk-in breaks down and all the food spoils.
- A fire catches in the kitchen and damages the building and equipment.
-
General Liability Insurance
- General liability insurance for restaurants covers damages and injuries to your guests.
- It protects you from the risks associated with lawsuits from the public you serve.
-
Examples of when you’d need general liability insurance:
- A slip-and-fall case due to a spilled drink.
- A customer’s dress that is damaged when caught on something.
- Someone sues you for false advertising.
-
Product Liability Insurance
- Product liability insurance pertains specifically to damages that occurred because of the products you sell.
-
Examples of when you’d need product liability insurance:
- Someone chips a tooth on a bone in the hamburger meat.
- A guest becomes sick from food borne illness.
-
Business Interruption Insurance
- This insurance covers events that cause you to lose business due to unforeseen circumstances.
-
Examples of when you’d need business interruption insurance:
- The city closes the street for a month due to construction.
- A natural disaster shuts down your building.
- Your oven stops working and you can’t produce food.
-
Liquor Liability Insurance
- If your establishment is serving alcohol, having liquor liability insurance is likely a requirement for getting your liquor license.
-
Examples of when you’d need Liquor Liability Insurance:
- An over-served guest injures themselves.
- An intoxicated guest damages your property.
- An impaired guest is kicked out and gets in a vehicle accident.
-
Commercial Auto Insurance
- If your business involves driving a work vehicle you may require commercial auto insurance.
-
Examples when you’d need commercial auto insurance:
- You drive a catering truck or van.
- Your delivery drivers have company cars.
-
Workers’ Comp
- When workers have accidents and are injured on the job, workers’ comp claims are filed. Most states require employers to carry workers’ compensation insurance.
-
Examples of when you’d need workers’ comp insurance:
- A cook burns his hand on a hot stove.
- A server develops joint pain from long hours on their feet.
-
Disability Insurance
- Disability insurance protects your business in case you are unable to work. Sometimes this is called “key person insurance”.
-
Examples of when you’d need disability insurance:
- You develop a disabling illness.
- You are hurt and are unable to work.
-
Life Insurance
- Life insurance pays out to those left behind in case you become deceased.
-
Examples of when you’d need life insurance:
- To help pay the bills when you’re gone.
- To cover loss of work/missing skills in your absence.
How Much Does Restaurant Insurance Cost?
It’s unlikely that you’ll have all of your restaurant insurance in one single package with a neat monthly bill. Each of the types of insurance mentioned above are specialized areas of coverage. Your restaurant will most likely have multiple coverage providers.
The insurance plans you choose will be based on your legal and contractual obligations, the value of the assets you wish to protect and your own appetite for risk.
The more comprehensive your insurance coverage, the greater the cost in premiums. You may end up paying the same amount as you would have otherwise without insurance.
Because there are so many variables, based on the size and type of your restaurant business, it’s difficult to make an estimate.
However, you can inquire with multiple companies who offer the types of insurance listed above to get a ball-park figure.
How Do I Get Insurance For My Restaurant?
When you’re ready to actually purchase insurance for your restaurant there are a number of ways you can get in contact with insurance companies.
You can perform an internet search and inquire with them directly, but that assumes some understanding of what is required and what you want.
Another way is to hire an insurance agent that specializes in restaurant insurance. They can perform a detailed evaluation of your business and find a coverage plan that matches your needs, requirements, budget and risk tolerance.
Conclusion
While restaurant insurance can be an expensive up-front cost, when you need it you’ll wish you had it. Insurance can provide peace of mind, knowing that if lightning strikes your restaurant it won’t take all your hard work down with it.
This guide is a free resource from Rezku, a leader in restaurant business intelligence and management software since 2012. Rezku provides real-world solutions through cutting-edge technology that is both affordable and easy to use.
Find out more about Rezku on our homepage. Call or click today to speak one-to-one with your personal Rezku restaurant management consultant for free.
