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By Dana Krook
You may think you don’t need restaurant insurance if you and your staff are diligent with safety precautions. While some things, like the 7,000 fires that American restaurants experience each year, are preventable, other things, like the COVID-19 pandemic, are out of your hands. When you equip your business with insurance, you can be prepared to handle anything that comes your way.
A combination of restaurant insurance policies can protect you from being sued if an employee gets injured on the job, or if a customer gets hurt on-premise, for example. Insurance also protects your delivery drivers from accidents on the road, and your revenue from an interruption in business if your equipment stops working.
Restaurant insurance is a no brainer because it covers the costs of emergencies big and small, and protects your business. In this guide to restaurant insurance you’ll get the answers to these FAQs and more:
Restaurant insurance is a policy package that offers financial protection for your business, staff, and customers in the case of fires, accidents, lawsuits, revenue loss, and more. Contrary to popular belief, there is no single insurance policy called “restaurant insurance.” Instead, this phrase refers to bundles of plans that protect restaurants, cafes, bars, and other foodservice establishments from risks they’re likely to encounter.
You can buy restaurant insurance from one provider, or create your own package by combining coverage plans from various providers.
Insurance is a critical operating cost for restaurants and other small businesses. Restaurants need insurance for a number of reasons:
You may not be able to pay out of pocket to repair damage to your restaurant caused by a fire, or to pay staff if a natural disaster causes an interruption in business. Insurance can help you pay for repairs and recoup lost revenue, so you don’t have to deplete your life’s savings or file for bankruptcy to save your business.
Workers’ comp insurance, for example, gives employees who get injured on the job money for their medical expenses. It also protects you from being sued.
If a customer falls on-premise, for example, your insurance would cover their medical expenses.
Even with great care taken to minimize safety hazards at a restaurant, there are so many unpredictable factors that can’t be controlled. Restaurant insurance doesn’t minimize these risks, but it can help minimize the damage caused by a variety of bad situations.
Restaurant insurance isn’t one type of insurance policy, but rather, a combination of several policies that cover a variety of liabilities.
So, what kind of insurance does a restaurant need? These are the types of coverage every restaurant – even very small operations – should consider:
Keep in mind that not every restaurant will need all of the policies listed above. As a result, the best strategy is to combine the policies you do need to create the perfect restaurant insurance bundle for your business.
Many factors affect restaurant insurance costs. The riskier your restaurant, the more expensive your premiums will be. A premium is how much you pay, usually on a monthly basis, for your insurance policy.
For example, a restaurant with no stoves, like an ice cream parlor, may have lower insurance premiums than a restaurant with stoves because of a reduced risk of a fire breaking out. However, a bar that doesn’t serve food and doesn’t have a stove may have higher insurance costs because of its liquor liability.
These are the major factors that insurance companies take into account when creating estimates for restaurant insurance costs, so make sure to have this information handy as you shop for a quote:
Having these details on hand will help you get accurate restaurant insurance quotes quickly.
Here’s a look at the median annual cost of each type of restaurant insurance you need:
While the table above provides you with a good estimate of your annual insurance costs, keep in mind that these are median figures provided by various insurance companies and that your own restaurant insurance costs will vary based on the factors outlined in the previous section. Also note that you’ll pay monthly premiums, which are more conducive to successful cash flow management than annual payments.
And while the cost of insurance may seem high, just think about what it would cost to pay for an injured employee’s medical expenses, buy a delivery driver a new car, or rebuild your restaurant if it burned down. When you put it into perspective, several thousand dollars in annual insurance premiums is a small chunk of change compared to paying out of pocket for these kinds of emergency expenses.
Consider these insider tips before buying your restaurant insurance policies.
Not all of the policies outlined above apply to every restaurant owner. For example, if you don’t employ delivery drivers, then you won’t need commercial auto insurance, and if you don’t serve alcohol, you won’t need liquor liability insurance.
Do your research to make sure you’re buying only what you need. Insurance agents can also help you figure out whether or not their policies are applicable to your business.
If a policy is relevant to you, but you’re not sure if you should pay for it, consider whether the annual premium costs are cheaper than covering the costs of whatever might happen out of pocket. More often than not, investing in coverage makes more financial sense than not buying into it.
As you know, there’s no such thing as a catch-all restaurant insurance policy. Instead, you have to build a restaurant insurance package out of multiple policies. And while you might be able to get a good deal on the half dozen policies you’ll need from one insurance provider, it doesn’t hurt to compare quotes and even buy policies from several providers.
Shop around until you find the policies that give you the best coverage for the best price. If you don’t know where to start, ask fellow restaurateurs about their insurance providers. Carefully examine bundles to make sure you need everything you’re paying for.
A business owner’s policy (BOP) is a type of insurance that combines several critical coverages into a single policy. Most BOPs combine general liability, commercial property, and business interruption insurance, and are usually cheaper bundled than a la carte.
A deductible is how much you have to pay out of pocket for damages and other costs before the insurance kicks in and covers the rest. A restaurant insurance policy with a $50,000 deductible means that even though you’re paying a premium (your monthly investment to be insured), you’re responsible for paying the first $50,000 of otherwise covered costs before your insurance kicks in and pays for the rest. A policy with no deductible, on the other hand, will cost you nothing besides your premium.
Deductibles can be costly and surprising. Make sure to ask about deductibles before you buy your restaurant insurance policies. Often, the lower the deductible, the more expensive the monthly premium, and the lower the premium, the higher the deductible. Having no deductible is ideal – as long as it’s affordable. Weigh the costs of the deductible against the cost of the premium and the risk that you’ll actually need to use the policy.
To sum up, restaurant insurance is the name for a bundle of insurance policies that cover financial risks that restaurants and other foodservice establishments face. These bundles may include general liability, commercial property, workers’ compensation, commercial auto, liquor liability, business interruption, and equipment breakdown insurance plans.
When shopping for policies, make sure to get only what you need, consider your deductible, and ask about discounts on BOP bundles. While you will hopefully never have to use your restaurant insurance, having it will give you peace of mind knowing that if something were to happen, your business, staff, and customers would be protected.
Dana is the former Content Marketing Manager at TouchBistro, sharing tips for and stories of restaurateurs turning their passion into success. She loves homemade hot sauce, deep fried pickles and finding excuses to consume real maple syrup.
By Katherine Pendrill
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