Restaurant Insurance Policy Information
Restaurant Insurance. Restaurant ownership is hard work, and to open a restaurant in requires a substantial initial cash layout and lots of supervision of employees. Nonetheless, for the entrepreneur, restaurant businesses potentially provide good income potential. Protecting such a business with small business restaurant insurance designed for eating establishments makes a lot of sense.
Restaurants serve a full menu of food items which are served by a waitperson and consumed on the premises. They may serve beer, wine, or other alcoholic beverages. Others offer take-out or delivery services. A restaurant may specialize in a specific type of cuisine or may serve a general menu. Some entertain customers with contests, music, or other live entertainment, or promotions such as "happy hour" with discounts available during non-peak hours. Some have small dance floors.
One of the greatest perils facing the restaurant industry and all restaurant owners is the risk of fire. Each year, thousands of restaurants receive structural damage from fires, amounting to millions of dollars in damages. Around 65 percent of all fires result from cooking accidents, while around one in 10 occurs as a result of heating issues. Less than half of all fires originate in areas equipped with fire alarms or automatic systems to extinguish fires.
Restaurant insurance protects your eating establishment from lawsuits with rates as low as $47/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked restaurant insurance questions:
- What Is Restaurant Insurance?
- How Much Does Restaurant Insurance Cost?
- Why Do Restaurants Need Insurance Insurance?
- What Type Of Insurance Do Restaurants Need?
- Why Do Restaurants Need Liability Insurance Insurance?
- Why Do Restaurants Need Property Insurance Insurance?
- What Are Restaurants Risks & Exposures?
- What Does Restaurant Insurance Cover & Pay For?
What Is Restaurant Insurance?
Restaurant insurance is a type of business insurance that provides coverage for financial losses and damages that may occur as a result of operations at a restaurant. This can include liability coverage for injuries that occur on the property, property damage, loss of income due to closures, and other financial losses.
It can also include coverage for food spoilage, employee theft, and legal expenses related to lawsuits or claims.
How Much Does Restaurant Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small restaurants ranges from $47 to $89 per month based on location, size, payroll, sales, alcohol sales, and experience.
Why Do Restaurants Need Insurance Insurance?
There are several reasons why restaurants need insurance. Firstly, accidents and injuries can occur at any time, whether it be a customer slipping and falling on the premises or an employee getting injured while preparing food. Without proper insurance coverage, the restaurant could face costly legal fees and medical expenses.
Additionally, restaurants often have valuable assets such as equipment, fixtures, and inventory. Without insurance, a restaurant could suffer significant financial losses if these assets were damaged or stolen.
Furthermore, restaurants are subject to various regulations and laws that require them to have certain types of insurance coverage. For example, many states require restaurants to have workers' compensation insurance to protect employees in the event of on-the-job injuries.
In short, restaurants need insurance to protect themselves from financial losses due to accidents, injuries, and damages to assets, as well as to comply with legal requirements. Without insurance, a restaurant could face serious financial consequences that could potentially put them out of business.
What Type Of Insurance Do Restaurants Need?
Restaurant structure fires are usually more damaging in terms of costs than those in residential properties. Fire is a common hazard that all restaurant owners face, but it is not by itself. A comprehensive policy for restaurants is necessary to ensure that restaurateurs weather any peril without losing their businesses.
You may be required as the owner of a restaurant business to carry several insurance coverage types. The law requires some types of insurance, while financial institutions may require others if you have a large loan or you are paying on a mortgage for your business.
Further, if you lease the building in which you do business, your lease may have a clause requiring that you buy this type of restaurant insurance to stay compliant. Some types of insurance to consider for your restaurant include:
- Worker's comp insurance. In, it is essential that eating establishments, maintain worker's compensation policies to protect their employees while they do work on the premises. This insurance covers work-related accidents, injuries, and deaths.
- Unemployment insurance. requires UI insurance for employees. Sometimes this is included in the taxes that the business pays; other times it is a separate cost for the business owner.
- General restaurant insurance coverage. This type of coverage is designed for restaurant owners, and it covers property and liability damage based on the specific eating establishment's potential perils.
- Commercial auto insurance. If your restaurant delivers food in company-owned cars or if employees use company-owned vehicles while on the clock, this type of restaurant insurance protects the business from liability.
- Life insurance. If you have a large loan for your business, you may be required to maintain life insurance to cover the lender's output of capital should you die.
Why Do Restaurants Need Liability Insurance?
Owning a restaurant can be a risky endeavor. There are several potential liability risks involved in the operation of a restaurant, but restaurant insurance can ensure the business is covered if the unexpected happens. Some types of liability coverage available for owners of restaurants include:
- General liability insurance. Premise liability and operations liability ensures that if a customer or employee is injured on your business' premises, you are protected. Lawsuits often arise because of poorly kept parking lots or objects placed in a manner that causes a tripping hazard, leading to a fall injury. This restaurant insurance coverage takes care of damages and medical bills for the injured party.
- Product liability insurance. If the food you serve sickens a patron, product liability insurance can help. Oftentimes food-borne illness is the root of product liability claims. This insurance protects your business from the expense of claims and lawsuits resulting from your restaurant's actions in preparing and serving the food.
- Liquor liability. If your restaurant serves alcohol, then liquor liability insurance protects you from damage when an intoxicated patron causes property destruction or harm to another person.
These types of coverages generally pay for the legal fees required to represent your business in the event of litigation against you.
Why Do Restaurants Need Property Insurance?
Property insurance for restaurants ensures that damage to the property does not put your business in a hard position financially. This may include damages resulting from crime, theft, fire, weather, or electrical issues in the building that houses your establishment. Within this type of coverage, you will often find:
- Building insurance. Coverage to compensate you for damages to the structure of your restaurant is an essential type of coverage for restaurant owners.
- Contents insurance. The contents of your restaurant are often expensive to replace. This may include furniture, flooring, lighting fixtures, and equipment used in the kitchen.
- Equipment breakdowns. Equipment that breaks down can mean a loss in business for your restaurant. Freezers, dishwashers, air conditioners, and other essential types of equipment are necessary for running your business, and equipment breakdown insurance ensures that you can get your equipment up and running if some crucial components fails.
- Food contamination insurance. Mechanical failures and power outages may lead to food defrosting and becoming unusable. This coverage helps you recoup costs from such events.
- Loss of income insurance. Should your restaurant need to close its doors due to a covered peril, loss of income insurance helps you stay afloat until you reopen again, providing money for wages, monthly expenses, and more.
Does Your Restaurant Need Flood Insurance?
Although the coverage provided for damage to your restaurant by flood or high water varies between companies, many policies specifically rule out this type of coverage, which necessitates purchasing a separate policy for water damage/flood damage/sewage backups, and so forth.
Work with an agent to determine if purchasing a rider or addendum to your policy is important to your business. This is particularly crucial for restaurants operating in flood zones.
Restaurants - Risks & Exposures
Premises liability exposures are high due to public access to the premises. Serving of alcoholic beverages can impair customers' motor abilities and increase the likelihood of trips, slips, or falls. Servers move throughout the premises with trays of food and beverages, generating spills that can result in slips and falls. Spills should be cleaned up promptly. Temperatures of hot beverages must be limited to reduce injuries due to scalding.
Lists of ingredients should be posted to prevent allergic reactions. Customers may become ill from ingesting contaminated food or beverages. Cleanliness standards must be monitored. Floor coverings must be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Dance floors must be clean, smooth, and free of debris. Steps and uneven floor surfaces should be prominently marked. All fire exits should be plainly visible from any part of the premises and kept unlocked from the inside during business hours.
Backup lighting should be automatically activated in the event of a power outage. Parking lots and sidewalks need to be in good repair, with snow and ice removed, and generally level and free of exposure to slips and falls. Outdoor security and lighting must be consistent with the area. All employees must be instructed in proper customer handling, including how to deal with disgruntled or intoxicated customers.
Property exposures are substantial from cooking equipment, electrical wiring, refrigeration units, and heating and air conditioning systems. All wiring should be current, up to code, and well maintained. All grills and deep fat fryers must have automatic fire extinguishing protection, hoods, and filters. There should be fuel shut-offs and adequate hand-held fire extinguishers. The kitchen must be kept clean and grease free to prevent the spread of fire.
Filters should be changed frequently. Ammonia used in refrigeration units can explode. Spoilage exposure is very high. A small fire or a power outage of even moderate duration can cause all fresh and frozen goods to be condemned as unfit for consumption or sale due to the potential for contamination. If alcoholic beverages are served, the liquor should be stored in areas inaccessible to customers. Business income with extended time period coverage should be purchased. Losses can be minimized if there is an alternative location to continue operations and not lose customers. Returning to normal operations after a loss is difficult due to the lag time between reopening and returning to full income as regular customers may have moved to a new "favorite" restaurant.
Equipment breakdown exposures can be high as operations are dependent on refrigeration and cooking equipment.
Workers compensation exposures come from slips, falls, cuts, puncture wounds, burns, foreign objects in the eye, hearing impairment from noise, heavy and awkward lifting, and interactions with customers. Employees must be trained on the carrying of heavy dishes between the kitchen and the serving areas. Food and beverage handling can result in passing bacteria or viruses, resulting in illness.
While smoking is prohibited in bars in many states, others still permit this. In those states, workers can incur occupational disease from the ongoing inhalation of secondhand smoke. As with all retail businesses, hold-ups are possible, so employees should be trained to respond in a prescribed manner. Cleaning workers can develop respiratory ailments or contact dermatitis from working with chemicals. The employees in many restaurants tend to be minimum wage and turnover may be high. Company incentives to encourage long-term employment are positive signs of management control.
Liquor liability exposure can be very high in states that hold restaurants liable for injuries resulting from alcohol consumption. The type and amount of alcohol served, and the type of clientele directly impact this exposure. Failure to comply with state and federal regulations can result in the loss of a liquor permit.
There must be a set procedure to check ages of anyone attempting to purchase alcohol, as well as monitoring so customers purchasing alcoholic beverages do not then give them to patrons who are underage or intoxicated. All employees who serve alcohol should be trained in recognizing signs of intoxication. A procedure should be in place to deny serving underage or intoxicated patrons. Programs that encourage designated drivers or offer free taxi service can be useful.
Crime exposures are from employee dishonesty and money and securities. Criminal background checks should be conducted on any employee handling money. If the restaurant uses expensive cuts of meat or serves alcohol, theft of stock could be a problem. Cash receipts may be high. There must be consistent rules on cash drawer management and job assignments. Money should be regularly stripped from the cash drawer and irregular drops made to the bank during the day to prevent a substantial accumulation of cash. Closing time is the most vulnerable time so security procedures should be in place to prevent hold-ups. There must be a separation of duties between employees handling deposits and disbursements and reconciling bank statements.
Inland marine exposures include accounts receivables if the restaurant offers credit to customers, computers for tracking inventories and payrolls, and valuable papers and records for supplier and employee information. Duplicates of all records should be kept off-site. Cash registers, cooking equipment, and office equipment may have computer applications. There may be a bailees exposure from offering coat check services to customers or from storing entertainers' property. Some establishments will have paintings, statues, or other fine arts on premises.
Products liability exposure is due to food poisoning, contamination, and allergic reactions from food and beverages carried off premises for consumption. Monitoring the quality of food received, posting lists of ingredients, and maintaining proper storage temperature can reduce this exposure.
Business auto exposure may be limited to hired or non-owned liability exposures from employees running errands. If the restaurant offers delivery services, all drivers must have appropriate licenses and acceptable MVRs. Company vehicles should be used for all deliveries. Maintenance should be documented. If employees use their own vehicles, the vehicles should be checked for maintenance and upkeep.
Because most personal auto policies do not provide coverage when the vehicle is used for commercial purposes, requiring proof of insurance will be of little assistance. If the restaurant offers valet parking, garagekeepers coverage should be purchased to cover damage to customers' vehicles. MVRs and driving records should be obtained for any employee driving or parking customers' vehicles. If valet parking services are contracted to another firm, the restaurant should be named as additional insured on the contractor's policy.
What Does Restaurant Insurance Cover & Pay For?
Restaurants can be sued for a variety of reasons, including:
- Slip and fall accidents: If a customer slips and falls on a wet or slippery surface in a restaurant, they may be able to sue the restaurant for negligence. Food poisoning: If a customer becomes ill after eating at a restaurant, they may sue the restaurant for food poisoning.
- Allergic reactions: If a customer has a severe allergic reaction after consuming a dish containing an allergen that was not disclosed on the menu, they may be able to sue the restaurant for negligence.
- Assault and battery: If a customer is physically assaulted or attacked by a restaurant employee or another patron, they may be able to sue the restaurant for failing to provide adequate security.
- Discrimination: If a customer is denied service or treated unfairly because of their race, gender, religion, or other protected characteristic, they may be able to sue the restaurant for discrimination.
Insurance can protect restaurants from financial losses resulting from lawsuits. There are several types of insurance policies that restaurants can purchase, including:
General liability insurance: This type of insurance can protect a restaurant from lawsuits related to slip and fall accidents, food poisoning, and other accidents that may occur on the premises.
Example: A customer slips and falls on a wet floor in a restaurant and breaks their leg. The customer sues the restaurant for negligence. General liability insurance can help pay for the customer's medical expenses and other damages awarded in the lawsuit.
Product liability insurance: This type of insurance can protect a restaurant from lawsuits related to foodborne illnesses or allergic reactions caused by the food they serve.
Example: A customer becomes ill after eating a dish at a restaurant and is diagnosed with food poisoning. The customer sues the restaurant for negligence. Product liability insurance can help pay for the customer's medical expenses and other damages awarded in the lawsuit.
Assault and battery insurance: This type of insurance can protect a restaurant from lawsuits related to assaults or other violent acts committed on the premises.
Example: A customer is attacked by another patron in a restaurant and suffers serious injuries. The customer sues the restaurant for failing to provide adequate security. Assault and battery insurance can help pay for the customer's medical expenses and other damages awarded in the lawsuit.
Employment practices liability insurance: This type of insurance can protect a restaurant from lawsuits related to discrimination or other employment-related claims.
Example: An employee sues a restaurant for discrimination, claiming they were fired because of their race or gender. Employment practices liability insurance can help pay for the employee's legal fees and any damages awarded in the lawsuit.
Overall, insurance can provide restaurants with financial protection against various types of lawsuits, allowing them to continue operating without being unduly burdened by the costs of legal defense and potential damages.
Insurance Classification Of Restaurants
Insurers classify food service businesses using several coding systems. You can wind up paying more for your insurance if your restaurant is not properly classified - like a take out lunch place being coded a full service restaurant with liquor. Below are the most commonly used coding systems for restaurant insurance:
- SIC CODE: 5812 Eating Places
- NAICS CODE: 722511 Full Service Restaurant
- ISO General Liability Codes: 16900, 16901, 16902, 16910, 16911, 16915, 16916, 16920, 16921, 16930, 16931, 16940, 16941
- Suggested Workers Compensation Codes: 9082, 9083, 9084
Description for 5812: Eating Placess
Division G: Retail Trade | Major Group 58: Eating And Drinking Places | Industry Group 581: Eating And Drinking Places
5812 Eating Places: Establishments primarily engaged in the retail sale of prepared food and drinks for on-premise or immediate consumption. Caterers and industrial and institutional food service establishments are also included in this industry.
- Automats (eating places)
- Box lunch stands
- Buffets (eating places)
- Carry-out restaurants
- Coffee shops
- Commissary restaurants
- Concession stands, prepared food (e.g., in airports and sports arenas)
- Contract feeding
- Dairy bars
- Diners (eating places)
- Dining rooms
- Dinner theaters
- Drive-in restaurants
- Fast food restaurants
- Food bars
- Food service, institutional
- Frozen custard stands
- Grills (eating places)
- Hamburger stands
- Hot dog (frankfurter) stands
- Ice cream stands
- Industrial feeding
- Lunch bars
- Lunch counters
- Oyster bars
- Pizza parlors
- Refreshment stands
- Restaurants, carry-out
- Restaurants, fast food
- Sandwich bars or shops
- Snack shops
- Soda fountains
- Soft drink stands
- Submarine sandwich shops
- Tea rooms
- Theaters, dinner
Restaurant Insurance - The Bottom Line
Since there are so many different types of risks that food service businesses face, you should speak to an experienced insurance broker to go over all your options.
This way you can find out exactly what type of restaurant insurance you need and how much coverage you should have.
Additional Resources For Food Service Insurance
Learn about restaurants, bars, liquor stores commercial insurance coverages. See how small business food service insurance help protect against accidents, oversights and lawsuits resulting from business operations.
- Bagel Shop
- Coffee Shop
- Concession Stand
- Farmers Market
- Grocery Store
- Ice Cream Shop
- Internet Cafe
- Liquor Liability
- Liquor Store
- Sandwich Shops
- Specialty Food And Restaurants
The food service industry is a vital part of the economy and plays a crucial role in providing food to individuals and businesses. However, it is also a high-risk industry that is prone to numerous potential liabilities and risks. That's why it's important for food service businesses to have insurance in place to protect themselves against financial losses and legal issues.
One of the main reasons the food service industry needs commercial insurance is to protect against liability claims. When running a food service business, there is a risk of someone getting sick or injured due to food poisoning or food allergies. Insurance can provide coverage for these types of claims, helping to cover the costs of legal fees and damages.
Another reason the food service industry needs insurance is to protect against property damage. This can include damage to the business's physical location, such as from a fire or natural disaster, or damage to equipment, such as kitchen appliances. Commercial insurance can help cover the costs of repairs or replacement, ensuring that the business can continue to operate smoothly.
Additionally, commercial insurance can provide coverage for losses due to unexpected events, such as theft or vandalism. This can be especially important for food service businesses, as food products and equipment can be expensive to replace.
The bar and liquor industry is highly susceptible to accidents and injuries. With the presence of alcohol, there is a higher risk of slip and fall accidents, fights, and other mishaps that could result in serious injuries to employees or patrons. Insurance can provide coverage for these types of incidents and help protect the business from financial liability.
In summary, business insurance is essential for the food service industry due to the numerous risks and liabilities that can arise. It can provide financial protection against potential losses and legal issues, helping businesses to operate safely and securely.
Minimum recommended small business insurance coverage: Business Personal Property, Business Income and Extra Expense, Spoilage, Equipment Breakdown, Employee Dishonesty, Money and Securities, Computers, Valuable Papers and Records, General Liability, Employee Benefits, Umbrella, Hired and Nonowned Auto & Workers Compensation.
Other commercial insurance policies to consider: Building, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Accounts Receivables, Bailees Customers, Fine Arts, Cyber Liability, Employment-related Practices, Environmental Impairment, Liquor Liability, Business Automobile Liability and Physical Damage, Garagekeepers and Stop Gap Liability.