There are over 1 million restaurant locations in the United States, as of 2020.
Though the process may appear to be straightforward, those on the inside know that running a restaurant is not easy. There are endless moving parts.
Management must keep a constant eye on staff, customers, equipment, and product at the same time. Plus, now there are COVID-19 concerns forcing a fundamental change in the industry thrown into the mix.
With so much to worry about, restaurant business insurance should not be another cause of stress on your plate.
Investing in restaurant insurance ensures you can protect your business and protect yourself from unforeseen costs. It takes the pressure off and allows you to focus on what really matters—running your restaurant. Plus, it is typically required by law.
For more information on restaurant business insurance and how it can work for you, keep reading!
Changing Times in the Restaurant Scene
2020 has been an extremely volatile year in the restaurant industry.
In addition to legal requirements for restaurant business insurance, the COVID-19 pandemic has forced 100,000 restaurants around the country to close their doors for good.
Many long-time restaurant and hospitality industry veterans lost their jobs. With the situation looking bleak for the foreseeable future, the restaurant industry has chugged along this past year.
While there have been numerous government programs established to assist this struggling industry amidst the pandemic, results have been varied.
A majority of establishments have struggled to obtain any federal funding. Many that did receive loans or grants have reported the funds were quickly depleted.
Those that were lucky enough to remain in business have been forced to stand on their heads just to keep the doors open. So many unknowns remain, giving even more cause to keep restaurant owners up to snuff with their insurance coverage.
If 2020 has taught us anything, it’s that it is so important to be prepared for the unimaginable. Proper restaurant business insurance is one of the best ways to keep your business protected from the unknown.
This ensures first and foremost that your business, property, and employees are protected against the worst happening. Furthermore, it keeps you in line with rules from various regulatory bodies that could conduct an inspection at any time.
How Does Restaurant Business Insurance Work?
For the most part, any establishment that serves food or drinks to the public will need some type of restaurant business insurance. These operations can range from ice cream shops to fine dining locations.
This insurance exists to protect businesses from the high costs associated with responding to unforeseen situations.
The actual insurance terms will vary based on the insurer and the terms of the policy, as well as the nature of the coverage. It’s best to carefully weigh your options and find the balance between what is legally required of you and what works best for your business.
The cost of insurance will vary widely, based on many factors. Some of these may include:
- Industry
- Square footage of the location
- Type of building/its age
- Fire and security system in use
- Projected sales
- Projected number of customers
- Value of inventory/equipment/technology
- Type of equipment
- Number of employees
You will find quite a large range of premium costs for many areas of restaurant business insurance.
This is due to the fact that insurance cost is based on risk. Some types of businesses are riskier than others. As such, it costs more to insure them.
For example, a large and busy sports bar across the street from a baseball stadium is an entirely different type of restaurant than a small ice cream shop in town. It would be unfair to charge the same insurance rates, as they carry very different risk levels.
Technically speaking, the only policies actually required by law in the United States are:
- Workers’ compensation
- Unemployment insurance
- Automobile liability insurance
However, there are various other key coverage areas that can prove extremely beneficial to business owners.
Business Owner’s Policy
A business owner’s policy (BOP) is a common starting place for restaurants. This provides coverage for claims that arise from business operations.
A business owner’s policy combines three of the most important areas of insurance for foodservice businesses. Of course, these policies can sometimes also be purchased independently of each other. But with a business owner’s policy, you can save money by bundling them.
The Makeup of a Business Owner’s Policy
The first area is general liability insurance. This helps to protect your restaurant from claims of bodily injury or property damage during normal operations. The average annual premiums for general liability insurance range from $500 to $6,000.
The second area is commercial property insurance. This coverage helps to protect your physical property and equipment from damage.
The average annual premiums for commercial property insurance range from $500 to $2,500. They also include a deductible, averaging at $1,000.
The last area is business income insurance. This is designed to help replace lost income due to business interruptions. It can also help cover the costs of moving to a new location, if necessary.
These business interruptions could come from a variety of reasons, like fire or flooding. The average annual premiums for business income insurance range from $250 to $10,000. There is also an average deductible of $1,000.
This type of insurance has been all over the news in 2020. Unfortunately, business income insurance has not covered the COVID-19 pandemic. Most policies contain clauses preventing a viral or bacterial outbreak as being a cause for a business interruption claim.
This has lead to major contention between struggling restaurant owners and their insurance agencies, but it is possible that a communicable disease “buy-back” option will be available in the future.
A business owner’s policy is a great starting place for restaurants to keep the basic protected. The actual terms of the policy can be customized to best fit your operations. Without this insurance, the business would be stuck footing the bill for these damages.
Liquor Liability
Liquor liability is important for those establishments that serve alcohol to the public.
In the event that a customer becomes intoxicated on your premises, you can be liable for the damage they cause. This includes committing a crime, injuring someone else, or damaging property.
The average annual premiums for this type of coverage range from $400 to $3,000.
Workers’ Comp
Additionally, any restaurant with employees is almost always required by law to have workers’ compensation insurance. This covers employees if they suffer an injury or illness resulting from working.
It pays them for a variety of costs associated with a workplace injury, including medical costs and lost wages. The premiums for this type of coverage average nationwide at $2.25 per $100 of payroll.
Automobile Liability Insurance
Especially due to the COVID-19 pandemic, more restaurants are offering delivery services than ever.
It’s important to remember that any company vehicle used for delivery or catering must have a commercial auto insurance plan. This protects against the costs resulting if the vehicle was involved in a car accident. Medical, legal, and repair costs are covered by this insurance.
The average annual premiums range from $1,000 to $2,500 and may include a deductible.
Other Options
There is also the option of additional coverages for business owners that can save large amounts of money in the long run.
Examples of this include:
- Food contamination insurance (average annual premium is around $800)
- Life insurance (annual average premiums range from $300 to $24,000, average deductible $1,000)
While not required, these additional insurance coverage areas can save business owners, and in the case of life insurance, their surviving partners, a lot of money in a tight situation.
Choosing Restaurant Business Insurance Near Me
When wondering how to choose restaurant business insurance, there are a few main considerations to keep in mind.
Primarily, it’s imperative that these companies are familiar with your state’s local laws and regulations.
Each state carries different regulations that govern the restaurant industry. Your insurance provider should be up-to-date with all regulations and requirements outlined by the state, as well as any applicable federal guidelines.
Furthermore, they should have a good reputation in your area. Especially in the restaurant industry, word of mouth is huge. It should be clear that they are a trusted choice when thinking about restaurant insurance near me.
More Information
It’s clear that a good insurance policy with a well-established company is one of the keys to surviving as a restaurant throughout the pandemic and beyond.
Even as COVID-19 concerns fade away, there are countless other dangers that pose a risk to your business. Luckily, an experienced restaurant business insurance agency can help.
They can make or break the security of your business. With their help, you can develop a customized insurance plan, tailored to the needs of your business. Contact an advisor today for a quote or more information!
