Whether you’re opening a new establishment or re-examining your options as a long-time fixture in the community, the question of restaurant insurance is going to come up sooner rather than later.
Any business in the hospitality industry – restaurants, bars, night clubs, etc. – is going to face some very specific risks and challenges that business owners in other industry simply won’t. These unique situations may call for unique types of insurance, which changes the original question from “do I need insurance?” to: “what types of insurance will provide the most effective solution?”
But let’s start at the beginning, which means asking:
Why Do You Need Restaurant Business Insurance?
Many restaurant operations are a constant balancing act. There are so many pieces that have to come together to keep everything running – and running at a profit – that when the unexpected happens, it can throw everything into chaos.
Many (upwards of 60%) restaurants close within a year of opening, and 80% will drop off within the next five. Can this all boil down to bad management, or is there something else that could have been done to protect the establishment?
There are several common incidents at restaurants that could be mitigated with the right insurance, including:
- Accidents on your premises that injure a guest – Everything from spilled hot coffee to slips on an unattended floor can cause bodily injury to someone who, up until a moment ago, was just looking for a nice meal in a nice place. Now, they may be looking for some kind of compensation for the harm they received.
- Injuries on the job – Every accident that can harm a customer can just as easily harm an employee. On top of that, you have wait staff, kitchen staff, and others who are moving around as quickly as possible, increasing the risk of bumping, slipping, cutting, or otherwise injuring themselves or others while putting together the next order.
- Food-related illnesses – There is a very good reason why there are some strict regulations on how restaurants prepare and serve food to the public. However, despite your best efforts, there is always the risk of something slipping through. Worse, there’s also a risk that a perceived illness resulting from the food you served could lead to a lawsuit. And, even if that legal action doesn’t bankrupt your business, chances are the damage to your reputation might.
- Unfulfilled expectations – If your restaurant or bar provides special services for groups and special events, or even if you just allow reservations for special occasions, these customers will expect a certain level of quality and attention. If they believe that your restaurant has failed to live up to its side of the bargain, they may seek some kind of compensation to make up the difference.
What Kind of Coverage Will Protect Your Restaurant?
So, now that we know how even the simple, everyday activities of your restaurant could unexpectedly lead to serious problems, what can you do about it? What types of insurance programs can help you keep everything running.
There are a few basic types of insurance coverage that every restaurant owner should consider. This includes:
- Restaurant liability insurance – This is a general, catchall category which can protect your business from many types of third-party claims, including bodily injury, property damage, and even medical claims. This type of insurance can be a general liability policy, or it can get very specific into what it covers, from intoxication-related situations to cyber liability.
- Restaurant property insurance – You need to protect everything on your property, from the building itself to the equipment and other assets you have on the premises. This is intended to help in case of human error/intention that destroys your property and to minimize business interruption in the case of fires, floods, or natural disasters.
- Workers compensation insurance – No one wants to get injured on the job, but if it happens, there are some mandatory steps you need to take, including providing wage replacement and medical benefits.
- Errors and omissions insurance – If your customers claim that they suffered some kind of loss because of negligence on your part, this type of insurance can cover your needs. It is particularly useful in cases that are not covered by your general liability policy, or when someone feels that the restaurant over-represented its capabilities.
What Variables Impact Your Restaurant Insurance Costs?
There are several factors that can influence how much you pay for restaurant and bar insurance. This is important to note, because if prices are too high, businesses may forgo the complete coverage that they actually need.
Some of the variables that may impact your insurance premiums include:
- Location and type of property
- Years in business
- Volume of sales
- The amount of alcohol sold on the premises
- Types of activities on the premises (other than serving food)
- The level of coverage you require
All of these elements may increase or decrease your costs, but its important to note how most of these elements also contribute to your risk exposure.
Get Started Today
So, back to the original question: do restaurants need insurance?
Obviously, yes. Whether that’s because of state regulations or a prudent approach toward minimizing your risks, every restaurant owner needs to insure their business against the unexpected.
Get a quote today for an insurance plan that is designed for your specific situation.