Key components of restaurant insurance coverage

Restaurants typically need several types of insurance to reduce the risks associated with their activities. These coverages typically include general liability insurance, commercial property insurance and workers’ compensation insurance.

1. General liability insurance

General liability insurance protects restaurants from financial losses due to property damage or customer injuries occurring on the premises. For example, if a beverage dispenser leaks, a customer could slip in the puddle and sustain an injury. General liability insurance covers legal fees and other damages arising from such accidents.

The aggregate limit for a general liability policy often ranges between $1 to $2 million per industry standard. This total is the maximum amount an insurer will pay for all covered claims during the policy period. Having a high aggregate limit helps protect restaurant owners against legal claims.

2. Commercial property insurance

Commercial property insurance covers damages to property owned or leased by the restaurant. This type of insurance covers losses related to fires, theft and other hazards. For instance, your policy may pay to replace stolen equipment or repair an oven damaged by a kitchen fire. The value of a restaurant’s assets, including high-value equipment like commercial ovens or walk-in refrigerators, can affect the cost of commercial property insurance.

3. Workers’ compensation insurance

Workers’ compensation insurance provides financial support for employees with work-related injuries. This type of insurance helps protect workers from the financial burdens associated with job-related injuries. For example, a workers’ compensation policy typically covers medical expenses and lost wages. Insurers set their workers’ compensation premiums based on the number of employees and other factors.

Specialized coverages for food and beverage businesses

A restaurant business insurance policy usually covers various risks related to the food service industry. For example, products-completed operations coverage protects you if a customer files a claim after consuming one of your products outside your restaurant. This includes takeout and delivery orders.

You may also benefit from having liquor liability insurance or food spoilage insurance and working with a provider familiar with catering or food vendor operations.

Liquor liability insurance

Liquor liability insurance helps protect restaurants against claims arising from incidents involving intoxicated patrons. Selling alcohol can come with many risks, which might significantly raise your insurance costs. For example, if a driver gets into a DUI incident, the bar may be liable under dram shop laws. These put legal responsibility on restaurants that overserve visible intoxicated customers.

Food spoilage insurance

Food spoilage insurance protects against losses from the spoiled food itself, due to equipment failures or power outages. For instance, you may be able to recoup the spoiled food costs if a refrigerator thermostat malfunctions and fails to keep one of your products at a safe temperature.

Importance of business interruption insurance

If you provide catering services, you may want to ask your insurance agent about getting business interruption coverage. This type of insurance protects against losses associated with business disruptions. For example, if a natural disaster forces you to cancel several events, a business interruption policy can help you continue paying your employees and covering other fixed costs.

Business interruption insurance may also cover losses associated with equipment failures. Having this type of coverage can help your business recover more quickly after unexpected disruptions.

Factors affecting restaurant insurance costs

Several factors might affect the cost of food business insurance, including business size and location, the types of coverage needed and the restaurant classification. If you have a high-volume business, you may face higher premiums, as there are more opportunities for customers to injure themselves or experience other types of harm.

The location of your business affects the risk of covered events, so it costs more to insure restaurants in some areas than others. For example, a restaurant located on the coast may have higher premiums to account for the increased risk of hurricane damage.

If you decide to purchase coverage for food spoilage, liquor liability or other specialty circumstances, you’ll likely pay more for food liability insurance than you would for a basic policy. Even the type of food you offer can affect your insurance rates. For example, if your restaurant has multiple fryers, your insurer may charge more due to the increased risk of grease fires. Locations serving raw seafood may also have increased liability.

Finally, insurers consider your claims history when determining your restaurant insurance premium. If you’ve filed multiple claims in a short period, you’ll likely have to pay more for this type of coverage. Similarly, the length of time your restaurant has been in business can influence your premium, as established operations may be seen as lower risk.

How to choose the right insurance provider

If you want to purchase restaurant insurance, consider requesting multiple quotes. Some providers offer lower rates than others for the same level of coverage, so you may save money by shopping around. These fluctuating rates may depend on whether the provider specializes in restaurant coverage or how they assess risk.

You can also work with an independent insurance agent. Independent agents sell policies from multiple insurance companies, allowing them to focus on finding you the best quote rather than trying to convince you to buy from a specific company.

Before selecting an insurer, you may want to read several online reviews to ensure the company has a good reputation. Consider reading reviews mentioning response times, customer service, pricing and other important factors.

Steps to obtain a restaurant insurance quote

If you’re not working with an insurance agent, you can get your own quote by using an online tool or contacting the insurance company that holds your other business policies. You’ll need to provide these details about your business:

• Contact information
• Number of employees
• Business structure, such as a corporation, limited liability company (LLC) or sole proprietorship
• Restaurant type
• Assets and their value
• Hours of operation
• Business activities

Once you complete a request for an insurance quote, you can review your policy options to help determine how much your coverage will cost.

Benefits of comprehensive insurance for restaurant owners

Comprehensive insurance reduces the risk of significant financial losses by protecting your business against various liabilities. Additionally, a reliable insurance provider should offer support any time you have a claim or a question about your coverage. Once you pay the premium, your coverage may become active right away. However, the timeline generally depends on the insurer and the underwriting process.

Frequently asked questions about restaurant insurance

Why is restaurant insurance so expensive?

Restaurant insurance can be expensive due to the risks involved in operating a food business. When customers visit your restaurant, there’s a chance that they could sustain other injuries, such as a burn from hot food. If your restaurant employees don’t handle food according to established safety guidelines, there’s a risk that customers could develop food poisoning.

Since restaurant insurance includes commercial property insurance, your insurance company must also consider the risk of the restaurant catching on fire or being damaged in some type of accident.

Is food truck insurance the same as restaurant insurance?

Food truck insurance isn’t exactly the same as restaurant insurance, as there are different risks involved in operating each type of business. Because restaurants have fixed locations and food trucks are mobile, a food truck insurance policy typically includes protection for vehicle damage and theft. If you have a custom truck, you may also need additional vehicle coverage.

Do I need restaurant insurance if I own a catering business?

As a caterer, you may benefit more from a policy designed specifically for catering or food vendor insurance, due to the added risks presented through transport, property damage caused through off-site setup or foodborne illnesses due to temperature changes while en route. Catering insurance may include additional coverages, such as commercial auto insurance, providing you with extra protection. Consider working with an insurance agent to determine whether you should get restaurant insurance or catering business insurance.