Restaurant Insurance. What’s on the Menu?
Learn about different types of commercial insurance applicable to restaurants.
Read some practical applications pertaining to commercial insurance for restaurants.
As restaurant owners and managers, you know what’s on the food and drink menu. But do you know what’s on the menu of insurance coverages protecting your restaurant business? Depending on the size and type of restaurant operations, a range of insurance coverages are needed or highly recommended. This blog is an informational overview only and limited to commercial property and casualty insurance for restaurants (does not address Workers’ Compensation, Health, or Disability Insurance). As always, actual policy terms, limits, and conditions apply.
At a minimum, small restaurants need a Business Owner’s Policy (BOP), which combines three basic business insurance coverages.
- General Liability Insurance.
Restaurants may be liable for bodily injury or property damage to third parties occurring on the premises. An example of a general liability claim is a customer slips on a wet floor and breaks an elbow. Another example may be a waiter accidentally spills hot coffee that scalds a customer. Products Liability Insurance is often included in the General Liability portion of the BOP. An example of this type of liability claim against a restaurant may be a customer sues for injury resulting from food poisoning.
- Commercial Property Insurance.
Protects the restaurant building (if owned) and contents for damage resulting from any peril not excluded in the policy. Examples of covered restaurant property losses are damage from accidental fire or explosion.Equipment Breakdown Coverage is not part of the BOP, but is an optional coverage available for an additional premium. Due to the expense and nature of restaurant equipment and operations, it is highly recommended.
Food spoilage is excluded. However, an endorsement covering the cost of lost food or beverages due to power outage, equipment failure, or other covered causes of loss may be purchased for an additional premium.
The BOP usually includes some Crime Insurance for burglary, theft, employee dishonesty, and forgery, although some insurance companies require these coverages be added by endorsement to the BOP for an additional premium.
- Business Income Insurance.
Provides income protection if your restaurant is unable to operate due to loss from a covered peril, such as fire. This coverage helps cover lost income until your restaurant can be reopened, which helps pay ongoing business operating expenses, such as rent.
CAUTION: There is no coverage for loss of business income due to:
- pandemics, viruses, bacterial outbreaks, communicable diseases
- undocumented income not included in your restaurant business’ financial records
- flood or earthquake damage
Restaurant owners and managers are encouraged to carefully run through potential scenarios that may result in business income loss to gauge how much Business Income Insurance is needed and for how long. Discuss your questions or concerns with your independent insurance agent before a loss occurs, so you understand what triggers Business Income coverage and what receipts, etc. you must retain.
While the BOP is a package of insurance coverages, it is a basic package. The following additional coverages are highly recommended for restaurants, and/or a necessity for some restaurants.
- Commercial Automobile Insurance.
Any vehicle titled in the restaurant business’ name must be insured for liability. Comprehensive and collision coverage are optional.If any vehicles that are not owned by the restaurant and used in the normal operations of the restaurant (for example, an employee drives to the grocery store to purchase supplies), the restaurant business needs non-owned and hired automobile liability insurance. If your restaurant operations include delivery using non-owned or hired autos, this insurance is needed, but may be difficult to obtain and likely be expensive.
- Liquor Liability Insurance.
Necessary for any restaurant that serves alcohol of any kind (including beer). This includes restaurants with well-trained, reliable workers who consistently follow protocols with respect to alcohol service. Without this insurance, one claim could financially ruin your restaurant business.
- Cyber Liability Insurance.
Provides protection to your restaurant against customer or supplier claims of identity theft or theft of credit card information due to data breaches in your restaurant’s processing, handling, or storage of credit card information.
- Employment Practices Liability Insurance.
Provides protection to your restaurant against claims by employees alleging employment-related wrongful acts, such as discrimination, harassment, or wrongful dismissal. The defense against these types of claims is often the practical benefit of this insurance. Usually defense costs are included within the limit of liability.
There is no coverage for criminal or fraudulent acts, unpaid wages, labor disputes, breach of contract, or workers’ compensation benefits.
- Commercial Umbrella Liability.
Provides additional liability limits over and above scheduled underlying liability policies, protecting your restaurant in the event underlying policy limits are exhausted. Particularly applicable for restaurants with more than one location.
Richey-Barrett Insurance is your Trusted Choice Independent Insurance Agency for commercial insurance, including restaurants.
