Owning a restaurant or bar can be one of the most fulfilling endeavors for an entrepreneur of any age or background. The great food, the atmosphere, the loyal customer base—it’s all part of the joy of being a professional restaurateur. Often, the financial profits of running a successful restaurant are secondary to the sheer sense of personal satisfaction that comes with providing good food and drinks to the community.
Running a bar or restaurant isn’t all fun and food, however; food and beverage service business owners face a significant number of legal and professional obligations that have to be met in order to operate and provide a safe work environment
One of these obligations is that of carrying the appropriate insurance policies on one’s property. If you’re considering opening a restaurant for the first time, there are a few things you’ll need to know about commercial property insurance before you get started.
What Kind of Insurance Does a Restaurant Need?
Any time you open a business to the public—especially one that involves a consumable product—you’ll need to be fully covered in the case that something goes wrong (fire, hurricane, theft, employee injury, and so on).
In the food and alcohol service industry, there are four primary kinds of insurance that most restaurant owners invest in: commercial property insurance, general liability insurance, workers’ compensation insurance and liquor liability insurance.¹
Each type of insurance covers a different set of circumstances:
- With general liability insurance, a restaurant is protected in the case of customer injury (or damage to a customer’s property). This kind of insurance is important in cases where a restaurant is accused of spreading foodborne illness or creating an unsafe environment (e.g., the ubiquitous slip-and-fall case).
- Commercial property insurance protects the restaurant owner’s investment in the property. Any equipment, furniture, renovations and business income is generally covered in the case of accidental damage or loss.
- Worker’s compensation, as the name implies, provides financial support for any employee injuries or illnesses that may occur. It also pays for any costs incurred during legal proceedings between the business and an employee.
- With liquor liability insurance, a restaurant that serves alcohol is protected in case an inebriated customer is injured or causes harm or damage to another. In the state of Texas, the Dram Shop Act of the state’s Alcoholic Beverage Code holds businesses liable for selling alcohol to a person who is already intoxicated.²
With these four types of insurance (and any additional insurance that may be required by local or specialty laws), a bar or restaurant owner can ensure that he or she is covered with regard to several of the most common types of business-related accidents and issues. Plus, decent insurance coverage can save a restaurant owner thousands of dollars in damages, legal expenses, and more.
What Is a Restaurant Total Loss?
A total loss, sometimes referred to as a “write-off,” is a case in which the value of or repair costs for the property that was lost exceeds the value of the policy under which it was insured. In the case of a restaurant, a total loss may occur as a result of fire, flooding, or any other major disaster that destroys more than what the original policy was insured for. When this occurs, the mental, emotional, and financial repercussions can be devastating to the restaurant’s owner(s) and employees. Fortunately, a decent commercial property insurance policy can keep you covered.
How Insurance Can Protect You During a Total Loss
Most general commercial property coverage includes something known as a total loss endorsement, which amends the original policy in the case of a total loss. Once the total loss amount exceeds a set percentage, the policy holder will receive an insurance payout equal to the full insured value of the property. This allows the property owner to recoup the entirety of the property’s value rather than only the value of what was destroyed, given the fact that the property is not likely to be salvageable.
For example: A restaurant owner insures her property for $750,000 with a total loss threshold of 75%. One night, an electrical fire caused by an overloaded outlet begins in an east-facing wall, spreading slowly across the building. As a result of fire-fighting efforts to quench the blaze, much of what isn’t destroyed by the fire is damaged by the hundreds of gallons of pressurized water that pour in from the hoses.
Incredibly, some of the restaurant’s assets on the opposite side of the property are spared (though maybe a bit damp), including kitchen appliances, equipment, food, supplies, décor, furniture, and other items totaling roughly $160,000.
Naturally, the restaurant owner is distraught at the idea of having to rebuild after such an unexpected loss. Fortunately, she hasn’t quite lost her entire investment; because her damages are roughly equal to 79% of her total insured amount of $750,000, the loss exceeds the 75% threshold and is considered a total loss.
As a result, the policy pays her the full $750,000 amount, allowing her to recoup her losses and rebuild without falling behind on cleanup costs, bills, taxes, and other expenses that won’t wait for her to get up and running again.
Get Affordable Liability Insurance in Texas from Tabak Insurance Agency
At Tabak Insurance Agency, we specialize in providing general liability, liquor liability, and commercial property and food liability insurance to bar and restaurant owners from all walks of life. Whatever you serve or provide to your customers, our commercial insurance and dram shop law experts can help you design an appropriate policy to protect your business and its assets.
Whether you’re a first-time business owner opening your first restaurant or an existing bar owner looking for umbrella coverage to flesh out your existing protection plan, Tabak Insurance Agency can help you weave the ideal safety net, giving you and your employees peace of mind.
Not sure how much commercial property coverage you’ll need? We’ll explore your options one-on-one to find the right amount to cover your assets in a disaster. Just learning about dram shop laws and liquor liability insurance? We can help you gain a clearer understanding of your obligations and liabilities as the owner of an establishment that sells alcohol.
To learn more about what kinds of coverage we offer or receive a fast online quote, fill out our online insurance quote questionnaire or contact us with questions! We look forward to helping you create a protection plan to suit your needs at a monthly premium you can afford.