Insurance is an integral part of any business. It helps protect your business against catastrophes that could otherwise bankrupt a growing, thriving business.
If you operate a restaurant, you need to ensure that it carries the right insurance. To know the proper insurance to purchase, you need to understand the dangers that your restaurant faces.
Here you’ll learn more about restaurant insurance, why you need it, and how to determine the right coverage.
Let’s get started:
What is Restaurant Insurance?
Generally, restaurant insurance refers to the types of insurance that a restaurant needs to remain covered and protected in case of damages, accidents, injuries, and other uncertainties. It’s not really a particular type of insurance, it’s a bundle of insurance products suited for restaurants.
Why You Need Restaurant Insurance
Accidents happen, and they’re unpredictable. Even a single accident or unexpected incident could cost you thousands of dollars. Restaurant insurance helps:
- Eliminate penalties and fines for noncompliance. Most states require a business with employees to have workers’ compensation insurance to protect their business in case an employee is injured, gets sick or dies due to work-related incidents. Your state might issue penalties if you fail to comply.
- Protect your restaurant in case you’re sued due to a fall or food poisoning incident at your restaurant.
- Validate you with financial institutions or landlords to buy equipment or sign leases.
- Retain employees who are concerned about their safety in case of an unexpected incident.
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Types of Insurance You Need for Your Restaurant
General liability covers against claim due to property damage or bodily injury that results from accidents such as slips and falls. It also covers product liability, which offers protection against claims due to food poisoning.
Arguably the most common insurance product, this coverage protects your restaurant as well as its contents. If you own the building hosting the restaurant, you’re covered in case of vandalism or fire.
If the hotel is located in a rented place, the building enhancements you’ve developed such as built-in cabinets, range hoods, and light fixtures are protected. Your contents such as computer equipment, appliances, furnishings, kitchen implements, and sale equipment, are also covered.
Be sure to carry enough coverage to protect all your property. Some policies have coinsurance clauses that can penalize business owners for underinsuring.
Liquor Liability Coverage
This policy comes into play when you’re sued after a customer who consumed alcohol at your restaurant suffers bodily injury or causes property damage.
Liquor liability coverage will pay legal fees and cover any settlement or award. Due to the nature of liquor liability claims – which is inherently catastrophic, this coverage is a must-have for any restaurant.
Your employees may sue your restaurant for harassment, discrimination, lost wages, and bodily injury. Many states require businesses to buy this policy, making it highly indispensable.
Business interruption coverage will cover your business when a covered loss affects your regular business operations. Most restaurants need gas, water, electricity and communication networks to operate. If any of these are interrupted, it may cause you to close your restaurant temporarily. Business interruption coverage will pay the earnings you would have received if the interruption didn’t occur.
Commercial Auto Insurance
Most restaurants operate vehicles for delivering food, picking up supplies, and other business purposes. You should insure all business-owned vehicles under a business auto policy. The policy should cover owned vehicles, non-owned autos as well as hired vehicles.
Umbrella coverage adds an extra layer of protection over liability coverage. Every insurance policy you buy has a coverage limit value in the event of an unpredictable incident. This is where umbrella insurance coverage steps in.
Umbrella insurance has a coverage limit as well, so be sure to check with your insurer on the maximum value limit. Without umbrella insurance, you may be forced to pay anything above your policy limit from your pocket.
A business liability suit against your restaurant can exceed the actual value of your small business, so we would recommend you buy an umbrella policy to protect your business.
Equipment Breakdown Insurance
Restaurants depend on machinery such as boilers, steamers, walk-in refrigerators, ovens, freezers and food warmers. An electric or mechanical breakdown can severely hamper operations and compromise the quality of the perishable inventory. Equipment breakdown insurance will respond in the event of machine breakdown.
It depends. If you own a small business, you can be charged anywhere from a few thousand dollars and tens of thousands for fine-dining restaurants. Be sure to look for insurance providers that not only understand the restaurant business but are passionate about helping small businesses go to the next level.