Are you about starting a restaurant business and want to get it insured? If YES, here is exactly how much it will cost you to get insurance for your restaurant.
The plans to open your new restaurant is taking shape nicely, and you have even picked out a tentative opening day, but of course you know you cannot fling open the doors of your restaurant to the public unless you are properly covered…insurance wise.
Too many accidents and scenarios exist outside of a restaurant owner’s realm of control, which is why insurance is a very valuable asset to a restaurant business, or any other food business for that matter.
There are several types of business insurance policies in existence, but many restaurants don’t require all of them to safely operate. It’s important to review your business’s specific risks to determine which policies you should purchase.
In this article, we have outlined the very important insurance policies your restaurant business ought to carry in order to achieve maximum protection, the cost of these policies and how these policies can be obtained.
7 Important Insurance Coverage That Your Restaurant Must Have
General liability insurance is often the first policy that a food and beverage business needs. It provides protection against lawsuits, accidents, and oversights that might otherwise financially devastate your business. Plus, it’s required for most commercial leases.
This policy provides liability coverage at your restaurant in the area of customer injury, customer property damage and advertising injuries, such as slander, libel, and copyright infringement. Situations general liability cover for restaurant businesses include;
- Third-party bodily injury
From a slip-and-fall injury at a deli to a burn from coffee served at your cafe, accidents can happen at any food or beverage business. When a customer gets hurt on your property, general liability insurance can pay for everything from an ambulance ride to the cost of a lawsuit if your business is sued.
General liability insurance covers; legal defense fees, medical expenses, court-ordered settlements, funeral expenses in fatal incidents. However, this policy does not protect your own employees. For that, you’ll need workers’ compensation insurance.
- Third-party property damage
General liability insurance also protects you when customer property is damaged. If a waiter spills a drink on a patron’s tablet, your general liability policy could help pay for; legal fees, the cost of replacing the tablet.
- A court-ordered settlement
General liability insurance can also protect your food service business from off-site incidents. For example, if your business caters a corporate reception and your food-warming equipment starts a fire, any resulting lawsuits alleging property damage would be covered by your policy.
- Host liquor liability
Though it won’t cover incidents at a bar or restaurant that regularly serves alcohol, general liability insurance includes host liquor liability insurance. This insurance covers bodily injury and property damage resulting from alcohol served at a social function. That includes a company party where you provide alcohol, or other events unrelated to the business’s profits.
- Advertising injuries
You may think your restaurant’s advertising is unique, but inadvertently copy a competitor’s slogan. Whether accidental or intentional, advertising injuries are covered by general liability insurance. That includes; Defamation, both libel (written) and slander (spoken), Copyright infringement.
If you use advertising or promotional materials to attract customers to your restaurant, food truck, catering business, or other food service business, you’ll want to make sure your insurance includes this protection.
2. Business owner’s policy (BOP)
A business owner policy sometimes packages all the required coverages a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance.
Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverage’s.
3. Workers’ compensation
Workers compensation is a must if you have employees. It pays for your workers’ medical costs if they get injured during work, and for any damage to their property during their work. Workers Compensation Insurance, which is often mandated by the government, covers employees for wage replacement and medical benefits for injuries on the job.
It’s illegal to employ staff without workers’ comp in most states, although some do not enforce this policy if you have fewer than three to five employees. Check your local legislature to ensure you’re in compliance. As a business owner, it is very important to have worker’s compensation insurance because it protects yourself and your company from legal complications.
4. Equipment insurance
Equipment insurance also called mechanical breakdown insurance, covers large items of equipment. If you are running a restaurant, you’ll need this to protect your refrigerated cabinets, ovens, mixers and other large items of equipment in case they stop working, are damaged by a careless employee or are stolen.
Equipment insurance goes beyond warranties to include theft or deliberate damage by a third party. If you can’t run the business without your freezers, you can’t risk operating without equipment insurance. This insurance protects you in the event of business interruption if your business cannot operate for some reason such as a fire.
If a fire, storm or theft causes a property loss, the right property insurance will cover it. Equipment coverage is usually based on the value of the equipment you have in your restaurant. If all of your equipment will cost $20,000 to replace, you’ll need $20,000 in equipment insurance coverage.
5. Auto insurance or commercial vehicle insurance
Auto insurance or commercial vehicle insurance covers company vehicles like delivery vans and private cars that are used for work purposes. Commercial auto insurance is for vehicles owned, leased, rented or borrowed by the business.
For example, if your employees are using their cars to deliver pizzas for your pizzeria, your business is exposed and should own commercial auto insurance. This is also something to consider if you have a valet service. Auto insurance provides replacements if your vehicles are written off and pays for damage done to or by vehicles during company time.
If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage. Commercial Auto insurance typically starts at $600 per vehicle per year.
6. Spoilage insurance
Spoilage insurance coverage helps a business owner compensate for lost revenue should food contamination, food spoilage, or loss of product resulting from power outages or breakdown of coolers or refrigerators occur. In a restaurant, food contamination and spoilage can occur, which can lead to serious illness for both customers and employees.
Spoilage insurance does much more than cover the costs of spoiled food. It can also protect your business against serious and costly lawsuits. Food poisoning is a major liability risk for your business. With spoilage insurance coverage, you do not have to feel bad about throwing away a fridge full of spoiled food as you will receive reimbursement for fresh replacement food. For a small restaurant or catering company, the insurance cost may be $500.
7. Liquor liability insurance
Liquor liability insurance is only for restaurants or stores that have a liquor license. Liquor liability coverage will protect your business from the high legal risks that come from the selling, manufacturing or consumption of alcohol on your premises. It also protects you from being sued if a customer injures someone else or themselves after having too much to drink in your establishment. In most states, this insurance is mandatory for any business with a liquor license.
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Cost of Buying Insurance Policies for a Restaurant
The cost of restaurant insurance depends on the policies you choose, the unique risks your restaurant faces, the value of your business equipment, and several key operation factors. It also depends on your restaurant’s sales and niche. In short, the more money you make, the more insurance will cost.
Extra policies like liquor liability and garagekeepers insurance (if you have a valet service) will also add cost. Cost on average:
- Small restaurants and food stands: A few thousand a year.
- Large, high-end restaurants: Potentially over ten thousand a year.
- Chain restaurants: Premiums can vary, but will cost the most due to sheer numbers.
But specifically, these costs are outlines as follows;
- Business owner’s policy cost
Restaurant owners typically pay less than $180 per month for a business owner’s policy, or a median annual premium of $2,160.
A business owner’s policy usually puts together general liability insurance with property insurance, usually at a discounted rate. Pricing is determined by your restaurant’s location, operations, and value of business property and equipment. This policy may include business interruption insurance, which covers income lost at your restaurant due to an unexpected closure.
The median cost per year for obtaining a business owners policy insurance is at $2,160. Its policy limit is at $1 million, while its policy deductible is at $1,000. You must note that not all restaurants qualify for a business owner’s policy.
2. Workers’ compensation insurance cost
The median cost for workers’ compensation insurance at a restaurant is less than $125 per month, or $1,500 annually. Policies can vary significantly depending on the state and business operations. Include accurate payroll figures in your quote application to avoid the need to adjust premium rates if your payroll amount changes.
Workers’ compensation insurance is required for restaurants in almost every state. This coverage helps pay medical fees and lost wages for employees who are injured on the job. Most policies include employer’s liability insurance, which protects owners against lawsuits related to workplace injuries.
The median cost per year for workers compensation insurance is around $1,500, and the policy limit is at $500,000.
3. Liquor liability insurance cost
The median cost for restaurant liquor liability insurance is a little over $50 per month, or $620 annually. This type of insurance protects restaurants that serve alcohol from liability for the actions of intoxicated customers. In some jurisdictions, your restaurant might need liquor liability insurance in order to obtain a liquor license.
The median cost per year for a liquor liability insurance is at $620, and the policy limit is at $2 million.
4. General liability insurance costs for restaurants
Restaurants pay a median premium of $80 per month, or $950 annually, for general liability insurance. This policy provides protection for third-party injuries at restaurants, property damage and theft, and advertising injury.
It is recommend to purchase a business owner’s policy for comprehensive coverage versus a standalone general liability policy that could leave business owners at risk. The median cost per year for general liability insurance is at $950. Its policy limit is at $1 million, and it has no policy deductible.
Where to Get Restaurant Insurance for your Business
Many insurance companies offer all the insurance policies necessary to run a restaurant. You may even receive discounts for having all of those policies with the same company just like insuring your auto and home together.
But it is important to understand that you don’t have to have these policies with the same company. To make the best decisions for your business, you may want better coverage that isn’t offered by the company carrying your other policies, or there may be a less expensive option with the same coverage amount through a different company.
The main thing to consider is that you have options, shopping around with as many companies as possible is the only way to find the best coverage at the lowest rates. There are two primary ways to buy restaurant insurance and they include;
- Insurance Agent: You can contact an insurance agent directly. If you contact the insurance company directly, you’ll likely work with an agent that represents that agency. Be sure to get quotes from at least three agencies before you settle with one.
- Insurance Broker: When you work with a broker, they will do most of the work for you. A broker can help you shop multiple national insurers and guide you toward the best coverage with the most competitive pricing. A lot of restaurant owners prefer to utilize the services of brokers.
Be sure to do your homework and choose the provider that has the best combination of coverage and cost to suit your needs and not necessarily the lowest premiums. You need to focus on the value of the insurance more than the cost.
Also, insurance agents should be helpful and informational and not too eager to make a sale. Once you’ve purchased restaurant insurance, make sure you have easy access to your certificate of liability insurance (proof of your insurance) which can be requested by suppliers, and clients at short notice.
Factors That Would Determine the Cost of your Restaurant Insurance
Every business is unique, so it’s impossible to say how much insuring your restaurant will cost you without getting a tailored quote. But on average, basic general liability insurance, property insurance and workers compensation can cost between $500 and $2,000 per year, per policy for a small business.
Your final insurance cost will be determined by a few factors. These factors include:
- Types of insurance. The more types of policies you buy, the more your premiums will cost, though in some cases buying multiple policies from one carrier will get you a discount.
- The amount of coverage you buy. Most small businesses need around $1 million of general liability insurance, although you may opt for more depending on how valuable your inventory or equipment is.
- The size of your restaurant. The larger the store space, the higher your premiums, particularly for property insurance.
- Also affecting your cost is how many employees you have, since the larger your staff, the more you’ll need to pay in workers’ compensation and potentially other types of insurance too.
- Your deductible. The higher your deductible, the lower your monthly premiums. Raising your deductible is an easy way to reduce your monthly insurance costs, but don’t raise it so high that the amount you save each month is wiped out by the amount you have to pay out of pocket whenever you make a claim.
How to Reduce the Cost of your Restaurant Insurance
Starting up a restaurant business can be quite expensive, and you really do not need added expenses, especially when they can be avoidable. This is the reason why you need to look for ways to cut down cost on your insurance premiums. Here are ways you can reduce the quotes insurance companies present to you.
- Ask for bundled coverage
There are certain coverages that all restaurants need to have, like commercial auto liability for the vehicle, food liability for the restaurant, liquor liability if you serve alcohol etc. All these coverages should be bundled together through a single insurance agent.
- Opt for high deductibles
One way to lower your premium is to go with high deductibles. This is one of the riskier ways to save money. If you find yourself in an accident, you could end up paying more in the long run than you would have in your pursuit to save money.
- Pay yearly
Your insurance agent will give you the option of spacing out your payments month to month or paying a large deposit upfront. If you have the means, it’s usually best to pay upfront. This can cut as much as 20% off your overall bill.
- Look around: Far and away the best way to save on restaurant insurance is to compare several prices at once. After you have made your comparisons, you can now choose the least expensive company.
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