If you have taken the leap and started your own hospitality business, you need to make sure that your business is full protected by a variety of commercial business insurance policies. We thought it might be a good idea to put together an insurance overview for bar and restaurant owners. Here is everything you need to know about insuring your bar or restaurant.
Insurance Coverages You Need for Your Bar or Restaurant
Regardless of whether you own a bar, restaurant or combination of both, you will need to protect your business with a variety of insurance coverages. It can only take one disaster to put your entire business at risk if are not carrying the proper insurance.
Bar and restaurant insurance is actually just a combination of a variety of insurance products to make sure your entire business and employees are protected. The majority of bars or restaurants should carry most of the coverages we highlight below but there can be exceptions.
Depending on what type of bar or restaurant you own will determine what coverages you will need, as an example, if you don’t serve food or have a kitchen you can most likely drop food spoilage coverage.
Here is a breakdown of the various insurance products you should have in place:
- Building coverage: If you own the building your restaurant/bar is housed in or are required to insure it by the building owner you will absolutely need this type of coverage. This insurance will pay to repair your building if it is damaged or destroyed by a covered peril such as fire damage, severe weather, falling objects, and vandalism.
- Contents Coverage: This part of your insurance coverage will protect all of the contents inside your business. It covers most items such as tables, chairs, stoves, ovens, glasses, alcohol supply and even the light fixtures. If your restaurant is filled with antiques or other high value finishing’s you may have to purchase an additional rider or policy to fully protect them. Contents insurance also comes with a deductible.
- Equipment Breakdown Coverage: Professional cooking and bar equipment is expensive and if a power surge or other issues damages your equipment this insurance will help pay for repair costs of any covered equipment.
- Food spoilage coverage: If you are serving food you should definitely consider this coverage. Power outages or even equipment failures can result in thousands of dollars of spoiled food. This insurance will help cover the cost of lost food inventory and get your freezers restocked.
- Loss of income coverage: A fire, tornado, or other severe weather event can force you to close while repairs or rebuilding is done. This can be a catastrophic situation for most businesses if they don’t have the proper insurance in place. This coverage will provide income while your business is closed so that you can cover expenses and employee wages. In most cases, this coverage is limited to a one-year shutdown period.
- Flood insurance: Just like homeowners insurance, most commercial property insurance policies exclude flood damage. If your business is at risk of being flooded you should absolutely consider this coverage. If you are in a high-risk flood zone,flood insurance is a necessity. Flooding can cause massive damage and even an inch of water cause up to $25,000 in damage according to the Nation Flood Insurance Program.
This is similar to a homeowners policy, it’s only job is to repair your building. It comes with coverage limits and a deductible. The deductible will vary by policy and like homeowners insurance, the higher the deductible, the lower the premium.
In addition, this coverage will reimburse you for lost income if you are forced to shut your business down while repairs are being made. This can be a financial lifesaver, especially if your business is young and doesn’t have the financial reserves to survive a shutdown due to equipment failures.
Liability Insurance for Bars and Restaurants
Lawsuits happen every single day and bar and restaurants are particularly vulnerable to being sued, especially if you are serving alcohol. Liability insurance is an absolute must for restaurants and bars. It can be bundled into a policy with the rest of your coverages. Here are the liability coverages you should consider:
- General liability insurance: This general liability insurance will cover bodily injuries and property damage if a customer is injured in your bar or on its property such as a parking lot. This would cover incidents like a slip and fall on a wet floor or an icy parking lot. Medical bills and lawsuits can quickly become very expensive and if you don’t have the proper coverage you may have to pay these expensive bills.
- Liquor liability insurance: This coverage is specific to people that are injured or property that is damaged due to over-served patrons at your bar or restaurant. This would help pay medical bills, as well as property damage related to an over-served guest who injures themselves or another patron.
- Assault and battery liability insurance: This coverage steps in when injuries and property damage is the result of violence or a fight.
- Product liability insurance: This coverage will pay out if any food or alcohol you serve is tainted and makes people sick. It will pay for medical expenses and lawsuit costs if you end up being sued.
- Garage-keepers liability insurance: If you offer valet service you may want to consider this coverage which will pay to repair a customer’s car if it is damaged by one of your valet drivers.
Property damage is also covered. If something falls off your building and damages a car in the parking lot, your insurance would cover the repair bill.
It should be noted that if you offer hazardous entertainment features, such as a mechanical bull, you may need an additional rider as a general liability policy may exclude these types of risks. If a person is injured because they are intoxicated after being over-served in your establishment, their injuries would be excluded from your general liability policy, you would need to carry a liquor liability policy.
However, this coverage comes with an important exclusion. If the injuries or property damage are related to fights or an assault, this insurance will not pay out. Unfortunately, fights break out, especially at bars so if your clientele are prone to violence you may need to consider Assault and Battery insurance.
Coverage for Your Employees
In addition to covering your establishment and liability issues, you will need to protect your employees. Some of these coverages are required by law while others are optional. Here are the coverages you should consider if you have employees:
- Unemployment insurance: This is required by law and is part of your state taxes. This coverage provides temporary financial assistance if one of your workers ends up unemployed through no fault of their own.
- Disability insurance: If your business is located in California, Hawaii, New Jersey, New York, Rhode Island, or Puerto Rico this coverage is required, everywhere else, it is optional. This insurance helps pay part of an employee’s salary if they cannot work because of an injury or illness.
- Medical insurance: Medical insurance is only required of businesses with more than 50 employees so if your establishment employs less than 50 people you are not required to offer medical insurance. However, it is a nice perk for employees and makes it easier to hire and keep quality employees.
- Workers compensation insurance: Workers compensation insurance helps prevent costly lawsuits by covering the cost of worker injuries on the job. Restaurants and bars tend to be crowded and busy which often leads to slips and falls and employee injuries.
How much does Restaurant or Bar Insurance cost?
The cost to insure your business will vary on a number of factors but in many cases, expect to spend between $3,000 and $6,000 a year but this number can be much less (or much more) depending on the size of your operation and the coverages you actually need.
We can help you find a great policy that protects your business and employees at an affordable price.
What is the best and cheapest bar or restaurant insurance?
There are a variety of companies specialize in Bar / Tavern / Restaurant Insurance. It all depends on the gross sales of the operation and how much alcohol sales are involved. We recommend getting a quote from us by filling out the online form found on our site.