The restaurant business can be both complex and stressful. There are a lot of different things that go into building and running a restaurant which leaves a lot of room for things to go wrong. Restaurant owners need a comprehensive mix of business insurance policies to keep them properly covered should something go wrong.
There is no one kind of small business insurance named restaurant insurance. There are many business insurance policies, each tailored to protect restaurant owners from specific liabilities, that come together to create the perfect policy for each restaurant owner. Let’s look into what they are what the average restaurant insurance cost comes out to.
Which Types of Insurance Cover a Restaurant?
Restaurants have some unique hazards and situations that make their insurance needs rather distinctive. They have some of the same needs as all other businesses while also having issues and challenges that traditional business owner policies alone aren’t equipped to handle. These are some of the kinds of coverage the average restaurant owner may require:
- General Liability Insurance: General liability insurance protects businesses from liability in cases of bodily injury. For restaurants, this can include burns from hot plates or slipping and falling due to spilled food.
- Commercial Property Insurance: Commercial property insurance, or property liability insurance, covers your building and equipment, and even food, from damages like a kitchen fire or other accident.
- Liquor Liability Insurance: Liquor liability insurance covers you if someone gets too drunk and injures themselves or others.
- Workers Compensation Insurance (Workman’s Comp): Workers comp insurance protects you and your employees from costs related to employee injury or illness.
- Commercial Auto Insurance: If you use vehicles for any business purpose, including food deliveries, commercial auto insurance protects you from related costs.
- Product Liability Insurance: No matter how careful you are, there’s always a chance someone will get food poisoning or react to allergens. Product liability insurance will cover the cost of any lawsuits.
- Employment Practices Liability Insurance (EPLI): EPLI protects you against lawsuits claiming employee harassment or unfair hiring practices like discrimination.
- Business Interruption Insurance: If a power outage or other event forces your restaurant to shut down for any length of time, this policy will cover your losses.
- Business Owner’s Policy (BOP): BOP bundles general liability, property liability, and sometimes business interruption into one policy. This policy would replace the ones included.
How Much Does Restaurant Insurance Cost?
We roughly estimate restaurant insurance to cost on average between $2,000 and $8,000 for most restaurants. Since there is no one-size-fits-all restaurant insurance, the cost will depend on which policies you need along with other business-specific factors. To be a bit more specific to your restaurant’s needs, each individual policy has an annual average cost which can be added together.
- General Liability Insurance: $500
- Property Liability Insurance: $755
- Liquor Liability Insurance: $1,000
- Workers Compensation Insurance (Workman’s Comp): $2,500
- Commercial Auto Insurance: $1,500 per vehicle
- Product Liability Insurance: $0.25 per $100 in revenue
- Employment Practices Liability Insurance (EPLI): $1,100
- Business Interruption Insurance: $1,200
Should You Get a Business Owner’s Policy?
A business owner’s policy or BOP will likely be the best option for restaurant owners. BOPs are packaged business insurance policies that include general liability, professional liability, property insurance and any other niche specific coverages. Since you are buying them in one bulk, you will end up saving more money than buying each policy individually.
A BOP will cover the most essential insurance policies as well. Restaurants need a healthy amount of general liability insurance since most claims from restaurants stem from a customer injury. You will also need a healthy amount of workers compensation insurance since many claims also come from injuries from employees (which is not covered by general liability). Recall, workers comp is a special type of insurance meant to help cover lost wages for injured employees.
What Influences the Cost of Restaurant Insurance?
As we said, a small business insurance policy is highly tailored for you business. What generally influences the cost are the following:
- Size of the restaurant
- Yearly revenue
- Location of the restaurant
- Previous lawsuits and claims
- Whether you serve liquor/alcohol
- Number of employees
Essentially, the bigger your restaurant, whether it be physical size, revenue, employees, etc, the easier it is for something to go wrong. Insurance companies are going to ask for a higher premium to cover the increased risk.
Why Do Restaurants Need Insurance?
No matter how careful you are, accidents happen. In a restaurant with a lot of people, many hot foods, open fires, and customers who may have allergies, there are even more dangers that can’t be prevented 100% of the time. A single lawsuit can easily cost you $200,000 or more so the average restaurant saves hundreds of thousands on each suit by having proper coverage. While shelling out at least $2,000 a year on insurance may seem a lot at first, consider whether your restaurant could even survive the cost if you’re sued for giving several people food poisoning and you don’t have the right coverage.
What Are Common Insurance Claims for Restaurants?
There are a lot of things that can go wrong, but some things happen more often than others. The top five most common restaurant insurance claims are related to:
- Damage from a fire
- Customer or worker injury
- Spoiled food
- Theft (often employee-related)
- Hacker-related credit card fraud
How to Buy Business Insurance for Your Restaurant
Restaurants can be great businesses that often come with a lot of success and fulfillment. They also come with many dangers. Since many claims can bankrupt a restaurant, it’s better to be safe than sorry. If you’re unsure what coverage your restaurant needs, try an insurance marketplace like CoverWallet to get assistance with the right policies for you at the best possible price.