Running a restaurant comes with its own set of risks, from kitchen fires to employee injuries, and having the right insurance coverage is essential to protect your business. Understanding what insurance policies are necessary, and which ones are worth considering, can be overwhelming, but it’s crucial for safeguarding your restaurant.
This guide will break down what you need to know about restaurant insurance so you can rest easy knowing your business is cared for, even when you’re not there.
Why Insurance is Essential for Restaurants
Restaurant insurance is essential for a few reasons, but the largest is that it’s legally required in the US for all businesses. Beyond legality, restaurant insurance helps cover you during times that would otherwise be stressful such as an uncontrolled grease fire, flooding from equipment, the injury of an employee or customer, or even robbery.
Because of this, it’s a great idea to know what kind of insurance you can have, what you do have, and what you may need down the line (more on that below).
Legal Requirements for Restaurant Insurance in the US
As mentioned above, restaurant insurance is almost always a legal requirement for restaurants located in the US. While you’re certainly not expected to have every type of coverage available, you’ll often (varying by state, of course) be expected to have:
- Liquor liability insurance: If you sell alcohol, you need liquor liability insurance. It’s there to protect you and the people that you serve against drunken injury or damages.
- Worker’s compensation insurance: Worker’s compensation insurance generally covers two things: layoffs and injury. It’s used to handle unemployment claims and, importantly, to handle personal injury on the clock.
- Business insurance: While this goes by a few names, think of it like renter’s insurance for your business. Even if your state doesn’t require this, chances are that your landlord will, so come prepared with information on your building’s age, security and fire suppression systems, and general size/square footage when shopping for insurance.
You may also want to look into auto insurance if you have delivery vehicles.
Key Types of Restaurant Insurance Coverage
With that out of the way, let’s look at the most common types of restaurant insurance coverage that you’ll find.
General Liability Insurance
General liability insurance is there to protect against a wide range of miscellaneous things. From customers getting injured in your business to fires, floods, and other catastrophic events, general liability insurance is there to keep it under control. Because of this, even if you live somewhere that doesn’t require it, chances are that general liability insurance will be a good investment into your business and its ongoing health.
Property Insurance
Property insurance covers damage to your property, simple as that. This is often just as much a safety net for your landlord as it is for you, so it’s quite likely that your landlord will require that you provide property/business insurance in order to honor your lease.
Workers’ Compensation Insurance
Worker’s compensation insurance (otherwise known as worker’s comp) is, as mentioned above, designed to protect you against claims when employees get injured on the clock. More accurately, it’s there to ensure that their medical bills are paid and they’re able to return to work quickly (and healed). Additionally, worker’s comp insurance will generally be used to pay unemployment claims. While this may seem minor, it’s an incredibly useful tool to have and shouldn’t be ignored.
Liquor Liability Insurance
Liquor liability insurance generally protects against all injury and damages caused by drunk patrons. While there will be some overlap with other insurance, it’s there to protect you against injuries or damages caused because someone was overserved. It can protect against physical damage to your business or equipment, against assault charges should a fight break out, and more — in other words, it’s crucial.
Commercial Auto Insurance
Commercial auto insurance isn’t commonly required for restaurants, but that’s because not every restaurant has a shop car. If you do, whether it’s a van for catering or a small sedan for deliveries, you’ll need commercial auto insurance in the US. It’ll protect you against any accidents on (or off) the road.
Business Interruption Insurance
Business interruption insurance is an odd, but incredibly handy, type of restaurant insurance coverage to have available. Rather than covering the cost of repairs or replaced equipment after a fire or other covered event, it helps you to recover any predictable losses, such as lost income, payroll, rent, utilities, and anything else that you’d normally pay if you were able to remain open. Often, business interruption insurance is bundled with general business insurance.
Additional Insurance Options for Restaurants
Beyond those listed above, there are actually quite a few types of restaurant insurance that you can acquire. While they’re generally not required, many are a great option. They’ll help protect against a number of unpredictable but devastating events and keep you on your feet.
Food Contamination Insurance
Food contamination insurance is commonly used by restaurants that keep a large backstock of produce at any given time. This is because it covers the cost of produce that’s lost due to contamination if, say, your walk-in dies.
While regular maintenance should (theoretically) keep that from ever happening, I can tell you from experience that food contamination insurance is one example of the best insurance for restaurants to have. Losing thousands (or tens of thousands) of dollars worth of product can be devastating — unless you have food contamination restaurant insurance.
Cyber Liability Insurance
Cyber liability insurance is a more modern type of insurance that is generally not used by restaurants, though it’s becoming more common. This is because previously, most restaurants didn’t need to worry about cyber attacks. Nowadays, though, that’s changed. Any business that collects private data (in your case, likely through a loyalty program or email campaign) is at risk of being hacked.
Should that happen, you’ll want the ability to quickly recover from any damages and, importantly, ensure that you’re able to pay for any damages caused by your breach of security.
Equipment Breakdown Insurance
Once again, while this isn’t an incredibly common type of insurance to have, it’s a lifesaver when it’s needed. Often, it’s best to buy equipment breakdown insurance when you’re buying new (expensive) equipment. One of the best examples of this is your walk-in — it controls the lifeblood of your business, and if it fails, you’re in for a bad time.
Having insurance to help cover the cost of new equipment can be the difference between temporarily closing and keeping the train rolling — so consider it the next time you buy new equipment.
Employment Practices Liability Insurance (EPLI)
Employment Practices Liability Insurance (EPLI) is generally bundled with worker’s comp, though you can get it separately, too. In short, EPLI covers any potential lawsuits due to negligent or illegal employment practices. This can range from accusations of sexual harassment or unsafe work environments to false termination suits, all of which can rack up legal bills quite quickly.
How to Choose the Right Insurance for Your Restaurant
So, how do you choose the best insurance for your restaurant? What insurance does a restaurant need, when you really think about it? Let’s find out.
Assessing Your Restaurant’s Specific Needs
After narrowing down the specific types of insurance coverage that you’ll need (legally), it’s time to think about what your restaurant does regularly. Do you run deliveries or catering? If so, commercial auto insurance is likely to be quite important. Similarly, if you’ve been finding that your equipment is requiring more maintenance, it may be time to invest in equipment breakdown and food contamination insurance.
Working with an Insurance Broker
If you’re still unsure of what insurance you need or may want, it’s time to talk to an insurance broker. They’re there for a reason, and that reason is to make your life easier. They’re familiar with all local regulations, know what you need, and can often help you find ways to bundle insurance to get a better rate and better coverage.
Comparing Policies and Premiums
While looking at various quotes, you’ll want to compare policies and premiums. Generally, it’s best to shop around for a bit and, if possible, talk to an insurance broker. They’ll be more familiar with standard rates and be able to help talk down your premiums with a bit of finagling, which is what we want. In short, shop around and find the best deal for you — so take your time.
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