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The Ultimate Guide to Restaurant Insurance​

Buying insurance for a restaurant online isn’t always as straightforward as you might first expect. With so many variables and variations in the types of levels of coverage to buy, it’s very rare to find an on-the-shelf insurance policy for a restaurant.

Quick References

What kind of insurance does a restaurant need?

If you own a restaurant, deli, fast food businesses, or a coffee shop, or you plan to open a restaurant, buying insurance will be one of the items that are top of your agenda. Making sure you have the right insurance for your restaurant is essential to protect you, your business, your staff, and your patrons.

The majority of restaurants or franchise owners will buy commercial liability and property coverages with a business owner's policy, AKA BOP.

#1 Commercial Property Coverage for a Restaurant

As with most companies who offer restaurant insurance, there are different elements you can add-on to a standard policy in order to meet the exact needs of your restaurant business. Here are just a few you should ask about before you buy insurance for your restaurant.

Utility Interruption – Water, gas, and electricity form the backbone of support for most restaurants. When these core services are interrupted, this can impact your bottom line. This gives your restaurant insurance for such an occurrence.

Sewer Back-Up – A sewer back-up is a typical exclusion in commercial property insurance. However, when you buy insurance for your restaurant, this is an optional type of coverage that provides protection should your business be affected if a sewer backs up into your premises.

Business Income – If a named peril on your policy damages your premises, resulting in you being unable to open or even shut down, this gives you added protection for any resultant loss in business income.

Spoilage – If the cooling equipment in your restaurant fails or shuts off completely due to a power cut or other event, this could render the food in your freezers or refrigerators unusable. You can insure your restaurant from any potential losses caused by spoilage with this coverage.

Extra Expense – If your restaurant is damaged by a peril outlined in your restaurant insurance policy or a fire, you might wish to operate out of other premises while any repair works take place. The additional rental costs could be covered if you have this additional extra expense coverage in place.

Fine Arts – Some restaurant owners like to decorate their walls with fine arts. If you have invested money into your wall coverings, then adding a fine arts extension to your policy can provide additional coverage for these investments.

Equipment Breakdown – It goes without saying that almost every restaurant is dependant on its equipment. Without working freezers, ovens, steamers, and food warmers, for instance, operations can grind to a halt. Having insurance in case of a mechanical or electrical breakdown can give you peace of mind that repairs and replacements will happen quickly.

Peak Season – If you buy restaurant insurance and your business makes more money during a peak season, then adding peak season coverage to your policy is a worthwhile consideration. It will usually give you a higher limit for personal property coverage for a specified period.

Please note that the majority of BOPs should automatically have this included. Typically, it will account for a 25% seasonal increase.

Electronic Data Processing – While there are some exceptions, most restaurants will now use electronic devices to process information about their customers, their business, and their suppliers. Some will also use this for ordering and running their online e-commerce operations. The majority of property policies will only provide a very minimal amount of coverage for the equipment. So, if it is going to be a significant part of your operations, getting the EDP add-on is worth considering.

Employee Theft – It’s an unfortunate reality that all business owners face at one time or another. Employees have the access they need to steal cash, food, and other types of company property. Usually, theft from an employee is excluded from a standard insurance policy. If you need to buy restaurant insurance, this is another optional add-on that could give you coverage for any employee thefts.

#2 Liability Coverage for a Restaurant

General Liability – Buying general liability coverage for a restaurant is a must. It gives your restaurant coverage for property damage or bodily injury claims that arise from accidents such as falls, slips, and trips. Usually, it will also cover you for product liability, which could protect your restaurant from any insurance claims which arise from food-borne illness.

Employee Benefits Liability Insurance – If your restaurant gives employees dental coverage, health insurance, or any other pertinent benefits, then an employee benefits liability insurance policy can help protect you from any legal action that arises due to admin mistakes in this field.

Employment Practices Liability Coverage – Employees could sue for a number of matters such as harassment, discrimination, and more. These are not typically covered by a general liability insurance policy, but purchasing this extra insurance for your restaurant can give you added protection for such an occurrence.

Liquor Liability – If you are held liable for causing somebody to become intoxicated through liquor sales or service, then you will find that most general liability policies will exclude coverage for property damage or bodily injury claims. So, if you serve or sell liquor, this is a type of additional liability coverage you might want to buy.

If you lease your restaurant premises - read this!

Due to the nature of a restaurant business, the buildings that house restaurants are considered to be prone to fires. What’s more, many restaurant owners will lease their buildings, rather than owning them outright. If a restaurateur accidentally starts a fire that damages property, then the landlord could potentially sue for property damage.

Thankfully, most liability insurance policies for restaurants and other businesses will include a type of coverage known as ‘Damage to Premises Rented to You.’  When you talk to a broker about buying insurance for a restaurant, just make sure the sub-limit on this particular area is adequate for your needs.

Does your restaurant provide a valet parking service?

If you provide valet parking for your patrons, and there is an accident, most liability policies will not actually provide your restaurant coverage for this. This is because of a clause, also known as the ‘care, custody, or control exclusion.’  If you want to make sure you are protected for any valet parking accidents, you can buy garage keepers liability coverage.

#3 Commercial Auto Insurance for a Restaurant

If you use a vehicle for anything that is connected to the restaurant business, then you need to buy restaurant auto insurance for that vehicle. Most premises will use a vehicle for collecting supplies, food deliveries, and more. If the vehicle in question is owned by the business, then it should be insured under a business auto policy. Within this policy, it is also possible to get coverage for hired and non-company owned vehicles as well.

Who Needs to Buy Restaurant Insurance?

Contrary to popular belief, restaurant insurance isn’t just needed for those with physical premises that serve food to seated customers. Any business of any size that cooks and serves foodstuffs must ensure they have adequate restaurant insurance in place. Here is a list of the most typical business types that should buy restaurant insurance.

  • Coffee Shops or Cafés
  • Bars, Taverns, or Lounges
  • Delis, Sandwich Shops, or Diners
  • Fast Food Businesses
  • Food Delivery Services

What are the factors affecting the cost of restaurant insurance?

There is no one-size-fits-all restaurant insurance policy; each individual policy is underwritten on the specifics of your business, and insurance brokers for restaurants, along with insurance underwriters, will need to ask a range of questions before they will be able to give you a cost for your restaurant insurance.

Here are some of the factors they will use to determine how much your restaurant insurance will cost.

  • The type of property
  • Any lease requirements
  • The location of your business
  • Number of years in business
  • History of losses in business
  • Volume figures, for instance, payroll, turnover, sq. footage
  • Activities, for instance, entertainment, liquor, off-premise catering, events, food deliveries, etc.
  • The use of ID checkers for liquor sales
  • Operational hours
  • Coverage levels

If you need to buy insurance for your restaurant, as a starting point, make sure your property, liability, workers' compensation, and auto insurance is all accounted for. Dealing with an insurance broker for your restaurant coverage could give you a much wider reach in terms of knowing all the optional extras and inclusion for the various business insurance policy options. It can also help you to save time and money during your search to buy the best restaurant insurance for your individual business needs.

Disclaimer: This information has been written for the public as informational only. Since coverage varies from state to state, it is important to speak to a licensed insurance agent in your state.

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