Owning and operating a restaurant is a lot of work. Restaurant businesses require a large initial investment and constant supervision. However, they also provide a great deal of income potential for the budding entrepreneur. If you are a restaurant owner, you have most likely devoted a lot of time and money to your business. You will want to make sure that it remains profitable by protecting it with a suitable restaurant insurance policy.
- In 2002, there were approximately 7,000 restaurant structure fires resulting in $116 million in damages
- 65% of these fires resulted from cooking accidents and 10% were caused by heating problems
- Fewer than half of these fires originated in an area that was equipped with automatic extinguishing systems or fire alarms
- On average, restaurant structure fires cause more costly damages than residential structure fires
Fire is one of the more common hazards faced by restaurant owners, but it is far from the only one. A comprehensive restaurant insurance policy can help to ensure that your business is able to withstand catastrophes and remain profitable.
What Kinds of Insurance Do Restaurant Owners Need?
As an owner of a restaurant, you may be required to carry several different types of insurance coverage. Some insurance is required by law and some may be required by your financial institution if you have taken out a large business loan or a mortgage on the building in which your restaurant is housed. If you rent the building, you may be required to carry business insurance as a condition of your lease.
Some necessary insurance types include:
- Workers compensation insurance: Most states require this insurance to cover any injuries your employees experience while on the job, as well as any job-related illnesses.
- Unemployment insurance: This may or may not be required by the state in which you operate. In most places, this insurance is included with your state taxes. Be sure to speak with an insurance professional or a tax advisor to ensure that you are complying with state laws.
- Life insurance: This is sometimes required by lenders if you have taken out a substantial business loan to finance your commercial enterprise. This way, the lender can be certain that your estate will be properly settled and your business loan paid if something should happen to you. Regardless of whether or not it is required, life insurance is a good idea if you want to secure the financial well-being of your loved ones.
- Commercial vehicle insurance: This is necessary if your restaurant offers delivery service or catering using company-owned vehicles, or your employees drive vehicles in the course of work.
- Restaurant insurance: This is a business insurance policy specifically designed for owners of restaurants. It provides general liability and property damage coverage as well as coverage for many types of hazards unique to restaurant owners.
Restaurant Insurance Provides Liability Insurance
Restaurant owners have a number of liability risks. Restaurant insurance costs far less than a serious lawsuit might, so it is an especially good investment. Some examples of the of liability coverage options available are:
- General liability: This includes operations and premise liability. If a customer is injured in your restaurant or parking lot and it can be shown that you are responsible due to negligence in upkeep, poorly placed objects or the actions of one of your employees, you may be responsible for extensive medical bills. General liability insurance is designed to provide coverage for medical costs and damages.
- Product liability: As a restaurant owner, your product is the food you serve. If customers become sickened by food poisoning or other food-borne illnesses, such as hepatitis or salmonella, and it can be proven that this occurred because of food served in your restaurant, you may find yourself sued for medical costs and punitive damages. Product liability insurance will shield you from the high costs associated with such a lawsuit.
- Liquor liability: If your restaurant serves alcoholic beverages and allows a customer to become intoxicated, your business may be held liable for the drunk patron’s ensuing actions, including acts of violence and property destruction. Liquor liability insurance can help to protect you from financial losses if you are sued.
- Hired and non-owned vehicles liability: If your restaurant offers food delivery service but your employees use their own vehicles, this will provide you with coverage against potential liability lawsuits if they are involved in an accident while making a delivery for you.
With every coverage type listed above, your insurance includes compensation for the court costs and legal fees you may incur as a result of a liability claim against you.
Restaurant Insurance Provides Property Coverage
Your insurance will also provide you with coverage for damages against your property. This can include damages caused by fire, crime, electrical problems and certain weather events. Some policies will require you to purchase specific event coverage. Some property coverage options include:
- Building coverage: This provides compensation for damages to the structure of your building. This is necessary only if you own your restaurant's building.
- Contents coverage: This includes coverage for your property, including furniture, light fixtures, artwork, flooring, computers and kitchen equipment.
- Equipment breakdown coverage: Equipment such as freezers, stoves, dishwashers and air-conditioning units are vital when running a restaurant. If a power surge or mechanical failure results in equipment breakdown, your business can experience expensive repairs and lost income. This coverage will provide you with compensation for your losses so that you can get your business up and running again without suffering financial setbacks.
- Food contamination coverage: If a power outage, mechanical failure or other covered event results in spoiled food that must be thrown away, this coverage will cover the replacement costs.
Other Coverage Options with Insurance for Restaurants
Some other coverage options you can expect to find with your restaurant insurance policy include:
- Loss of income coverage: If your restaurant must temporarily close due to a covered event, this insurance will provide you with the funds necessary to continue making payments on your monthly expenses, including employee salaries, until you are able to resume operations.
- Coverage against employee crimes: If an employee steals from you or commits other types of crimes, this coverage will shield you from any resulting lawsuits and will compensate you for your financial losses.
A Word about Flood Damage
Some restaurant insurance policies will offer coverage for drain and sewage back-ups and the damages they may cause. Often, if the sewage backup is the result of a flood, this coverage will not apply. Flood damage can be extremely expensive. It can lead to contamination of food and food-preparation areas as well as damage to expensive equipment and décor.
Be sure to learn how much or how little coverage you can expect from your restaurant insurance policy in the event of a flood. It is also important to determine whether you will benefit from purchasing a separate flood insurance policy to protect your business.
Find Restaurant Insurance Coverage Tailored to Your Business
Restaurant insurance costs vary significantly from one establishment to another. Your specific premiums will depend on factors such as the size of your business, the number of employees you have on staff, whether you serve both food and alcohol and whether your business includes catering services.
It's highly recommended that you acquire at least 3 rate quotes to compare before you buy. This way, you'll be able to see what kinds of coverage are available in your price range. It's very important to make sure that you're comparing similar coverage - you could be getting quotes for different deductible amounts, coverage types, and liability limits if you're not careful. It's also a good idea to consult with your accounting professional and an attorney to make sure that all your assets and liabilities are adequately addressed by your restaurant insurance package.
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