Restaurant Insurance: What Coverage Does Your Local Need?

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Running a restaurant, it’s both financially and personally rewarding but also comes with great responsibility. For a gourmand, these locals are as easy as walking in, choosing a table, ordering whatever looks delicious on the menu, and paying. Local owners, however, experience all the background logistics that determine whether a restaurant succeeds or shuts down. According to a study by Ohio State University on restaurant failure rates, more than 60% of dining establishments close within a year, and 80% fail within five years. 

With so many moving parts and different processes that go into successfully running an eatery, it’s hard to foresee, prepare for, and prevent all of the potential risks you might encounter on a day-to-day basis. All it takes is one lawsuit from an unsatisfied client or customer, and you find yourself in a colossal financial loss. 

These risks should not hinder young entrepreneurs from dreaming, but there are things you need to be aware of and sweat for. After all, all you can do is to bring the impact of those risks to a minimum. 

One thing you should stress is purchasing restaurant insurance. As someone who’s newly arrived in the business world and has only limited funds, you may think that business insurance may only hang heavy on the list of expenses that you need to cover. But while online loans remain a viable option, purchasing restaurant insurance comes with a lot of benefits. For one thing, it will protect your business against the financial consequences of claims associated with bodily injury or damage to property. 

General Liability

Any respectable dining place requires general liability coverage against property damage or bodily injury lawsuits that result from slips and falls.  The general liability insurance also covers product liability, which protects your business from lawsuits coming from food poisoning. 

Food that clients consume in your restaurant may not be labeled as a “product” on your policy unless authorization for Hazards of Products and Completed Operations is added. This document ensures that lawsuits caused by the food you sell will be covered under the products/completed operation policy, whether it’s consumed on or off your premises. 

Commercial Property Insurance

This coverage might be the second most important insurance policy for your locality since its success is very intrinsically bound by the physical property on which your food is being prepared, purchased, and consumed. 

Commercial property insurance would cover your current location, as well as your equipment, signage, furniture, and other valuable property that’s vital to your business operations. 

We recommend customizing your coverage in order to address specific risks that your local might encounter. For instance, if your business is located in a region where natural disasters like wildfires, earthquakes, or landslides are commonplace, you should make sure that your commercial property policy will protect you in such circumstances. 

If you’re leasing your local, the property owner will typically already have a type of property insurance. However, you will still need to consider a policy to protect your valuable business assets.  

Liquor Liability

If your local serves alcohol-based beverages, then you are going to need liquor coverage as well. As anyone working in the hospitality industry knows, excessive alcohol consumption can lead to a series of problems; problems that local owners could be responsible for if the intoxicated customers accountable for the problems were consuming at your local.  

Liquor liability coverage will protect your restaurant whenever a customer that becomes intoxicated at your local damages your property, the property of others, injures someone or commits any other crime while under the influence. 

Employees Compensation Coverage

As the name suggests, this type of coverage is designed with the employees in mind. Staff injuries are very common in the hospitality industry, which is why employee compensation coverage is imperative, and more often than not, mandated by the state. 

A recent report from the Bureau of Labor Statistics, employees in the special food services industry experience a higher rate of several specific types of injury. These include strains and tears, lacerations, cuts, and thermal burns, injuries that in most cases require off days at a rate of 107.6 per 10,000 full-time employees. 

Most accidents take place in the kitchen, where the floor surfaces are often slippery, and open fires are commonplace. That’s why employee comp policy costs are often higher for dining establishments than most other service-based businesses.  

Worker comp insurance will cover all expenses related to staff injuries, including loss of income, medical bills, rehabilitation costs, and even death and disability benefits in worst-case scenarios. Also, providing your employees with proper worker compensation benefits will reduce the chance of declining the benefits and filing a lawsuit against you. 

What is the Cost of Restaurant Insurance?

The amount you will have to pay for insurance clearly depends a lot on what type of local you own and what risk profile presents. In truth, a food truck and bar & grill with more than 200 seats will not be going to pay the same amount for business coverage.

As with all coverage products, your restaurant premium cost depends on factors like:

  • Claims history
  • Location of the restaurant
  • Upkeep of the local/cleanliness
  • Construction material of the building
  • Hours of operations
  • Value of inventory
  • Value of equipment and technology
  • Number of employees
  • Estimated number of customers

When signing for the right insurance program, it’s important to have an agent on your side who understands the risks those working in your industry face and what policy is needed to protect your locality properly, so it makes sense to seek guidance from a reputable insurance provider. 

Restaurant insurance is an important asset to any successful establishment. It allows you to pay a monthly payment, so you don’t have to stress about the financial consequences of an accident. The right policy will also help you deal with these issues as they arise so that you can focus on running and growing your business.