Restaurants can be sued for hundreds of thousands of dollars due to lawsuits. Major lawsuits can even cost restaurants millions of dollars.
These types of lawsuits can run restaurants out of business if they do not have insurance.
If you are planning on opening up your own restaurant, know which types of restaurant business insurance you need to buy. It can save your restaurant from having to shell out serious cash in a future lawsuit.
We have outlined the most valuable 5 pro tips on how you can choose the best restaurant insurance for your business.
1. Know the Required Types of Insurance Your Restaurant Needs
All restaurants and new businesses need certain types of insurance. The following are the recommended insurance policies you should buy no matter what state you operate in.
Workers’ Compensation Insurance
Workers’ compensation insurance is meant to be used in the event that one of your employees is injured while on the job.
An injured employee may not be able to work following an injury. Instead of suing you as the restaurant owner, workers’ compensation insurance will cover the employee’s lost wages, medical bills, and other related costs.
Property insurance is necessary as it covers every physical piece of property your business owns. This can include the actual building and any equipment like stoves, refrigerators, and dishwashers.
Property insurance will cover the resulting damages in case of a fire, major storm, natural disasters or other covered perils.
Property insurance can also help cover any loss of income if these types of events shut down your business in order for repairs to be completed.
Liability insurance is another required form of restaurant business insurance you need to have. Liability insurance will cover most costs related to lawsuits brought about by customers and others against your restaurant.
Always speak to your insurance representative as certain things are not included under a general liability insurance policy. If you feel as if you need extra protection against certain events, such as assault and battery or liquor liability, look into different policies that could cover that.
2. You Will Probably Need Specialty Insurance
In addition to the required types of insurance policies listed above, you will also most likely need extra insurance coverage for specific features of your restaurant.
An example is commercial auto insurance. If you run a pizza shop or send out your employees on food deliveries in cars, you need commercial auto insurance. If you have a valet service at your restaurant that you manage as an owner, you also need commercial auto insurance.
Commercial auto insurance is to protect your employees and yourself from financial and medical damages in the event of an accident while doing a business activity.
If you hire a third party to manage your valet service, make sure they have commercial auto insurance. Otherwise, you could potentially be held liable if one of your patrons’ cars gets dented or scratched while at your restaurant.
Another type of specialty insurance is food contamination insurance. On occasion, restaurants can receive shipments of spoiled produce or contaminated food. Poor refrigeration in delivery trucks can be the culprit.
If a restaurant does not have food contamination insurance, they may have to eat the costs of this unusable food. If they do have food contamination insurance, they can receive the money-back they paid for that order of food.
3. Know How Certain Factors and Risks Will Affect Your Insurance Rates
There are a variety of factors that will influence the rates and overall costs of your restaurant business insurance.
Serving liquor is one such risk. It is an unknown risk every time you serve alcohol to a customer on whether or not they will cause any sort of physical harm to other customers or somebody else’s property.
You as a restaurant owner can be held liable for overserving a customer who later dies, goes on to injure someone else, or causes property damage.
You can purchase liquor liability insurance to mitigate these risks. Liquor liability is specialty insurance that will cover any medical costs, legal fees, or legal settlements resulting from damage or injury from overserving alcohol.
Other risks and factors that can affect your insurance rates include your hours of operation, what type of property you are on, additional activities you provide, and how long your restaurant has been open.
Restaurants that have been in operation for longer have typically had lower business insurance rates. This is because there is more data available to their insurance provider of the types of risks that are more likely to occur.
If your restaurant is typically busiest at night or is open past midnight, your insurance rates will most likely be higher, as that is when alcohol is more likely to be consumed. Crime is also more likely to happen at restaurants at night.
If your restaurant is located near or on top of a body of water, your insurance rates will reflect that greater risk.
So many factors influence your insurance rates that it is necessary to discuss in detail with a licensed agent what your risks are. In that way, you may find out that you may actually qualify for lower insurance rates.
4. Shop Around to Get The Best Rate and Deal
It is critical as a restaurant owner to save costs where you can and get the best price possible for your insurance policies. Shop around for the best deal on your insurance policies.
Because you need so many different types of required and specialty policies, you may feel compelled to get separate policies from separate insurance companies. Rather than shopping for multiple quotes yourself, you can work with an independent agent who will find the best pricing and coverage on your behalf.
You should also talk to your agent to see which insurance companies offer bundling. If you can bundle your required and specialty insurance policies, you pay less in overall fees.
You are only paying fees and related costs for one insurance provider rather than paying costs to four or five separate insurance providers.
You should also look for customer testimonials prior to getting an insurance policy. Customer testimonials will help you avoid insurance agencies that do not provide quality service or good rates to their customers.
5. Read the Fine Print to Know Exactly What Is and Is Not Covered
The worst thing that can happen to a restaurant is to experience an event or business interruption and find out that the resulting losses will not be covered by your insurance policy.
Before you sign any insurance policy document, be sure to go over the policy with a fine-tooth comb. Make sure you ask about certain perils and situations that are not covered under your insurance policy so you know what they are.
Often times there are endorsements you can add to the policy to include certain risks and perils if not already provided on the base policy.
Knowing what is and isn’t included can save you from painful hidden costs down the line.
What Happens if You Do Not Get the Right Restaurant Business Insurance
Getting the right business insurance is more than just an item on a checklist you have to complete. If you do not get the right restaurant business insurance policies, you can face severe legal and financial responsibility.
Restaurants have been driven out of business because of lawsuits brought against them by customers and former employees. They were unable to pay the legal fees and were forced to close their doors.
Business interruptions are also another major event that can shut businesses down for good if they don’t have insurance to cover the disruption.
COVID-19 has caused major disruptions to the restaurant industry. Many restaurants were shocked to discover that their insurance policy would not cover pandemic-related causes.
In the future, you should always focus on buying the best type of restaurant insurance possible. Consulting with insurance agents prior to opening a restaurant can help you avoid financial ruin.
Contact Us to Help Choose the Best Restaurant Business Insurance
Choosing the best restaurant business insurance is vital to the success of your restaurant. It will save you from a costly lawsuit in the event of an unfortunate event. It can also help keep your doors open in times of financial trouble.
But not all business insurance is made equal and you want to make sure you are getting the right insurance for your business needs.
Here at EPG Insurance, we can help you find the right insurance policies for your restaurant or business. Our dedicated team of agents can evaluate the policies you need and help lower your overall insurance costs.
Reach out to get an insurance quote in seconds.