In 2020, restaurant sales hit $659 billion, down $240 billion from the level of expectation. The decrease in sales is due to the shutdown caused by the COVID-19 pandemic.
Now that COVID restrictions are starting to lift, many restaurants have reopened and business owners are taking this opportunity to open a new restaurant of their own.
Like any business, a restaurant needs business insurance to survive financially. With the many different types of insurance, it can be difficult to understand what your restaurant needs. We’ve got you covered.
Read on to learn how to shop for restaurant business insurance.
What Restaurant Business Insurance Do You Need?
To shop for restaurant business insurance, you need to understand the different coverages out there. You can often find commercial property and liability insurance coverages through a business owner’s policy or standard package policy.
General Liability Coverage
General liability insurance covers property damage or bodily injury claims made by a customer. This type of insurance is the basic necessity for a restaurant as it can also cover product liability.
This means if a claim arises due to food-borne illnesses, you can use this coverage for legal costs.
However, it is important to note that the food customers consume at your place of business won’t qualify as a product unless you have a Product/Completed Operations Hazard Redefined endorsement attached.
Food from your restaurant eaten on or off the premises will be covered with this additional attachment.
If you want damages covered, you need to ensure your liability policy includes the Damage To Premises Rented To You coverage. Often, this will already be included in the fine print.
This is especially important to have if you are a restaurant owner that rents the building you operate in. Without this coverage, your landlord can sue you for property damages.
This piece of coverage will have a limit to ensure that it is adequate for your restaurant needs. Some coverages will include this attachment without a limit.
It is important to note that general liability insurance does not cover your employees. You’ll need separate liability insurance especially if your business provides employee benefits like dental or health coverage.
If your restaurant sells liquor, this is additional liability insurance you’ll need. With this insurance, you will be covered if you caused or contributed to intoxication that led to property damage or bodily injury.
Employment Practices Liability
Torts dealing with harassment, discrimination, etc., are not covered by general liability insurance. If an employee sues you for such torts, you’ll need employment practices liability insurance to cover it.
Umbrella is another type of liability insurance. It works the same as general liability insurance but provides you with extra spending limits.
General liability insurance comes with a limit you can spend. If you don’t believe this is enough, you can get umbrella insurance to afford more expensive claims.
Commercial Property Insurance
There are various aspects of commercial property insurance that a restaurant owner may want to consider. We will go over some common and unique coverages here:
Sewer Backup Coverage
Sewer backup coverage is often added to a commercial property insurance policy through an ISO endorsement. This endorsement covers property damage or loss that happens because of a sewer, sump pump, or drain on the premises.
You will most likely have to shut down your business until a sewer backup is cleaned. This can cause income loss which leads us to our next point, business income insurance.
Business Income Coverage
Any physical loss that results in a shutdown of your business is covered under business income coverage. It may also be referred to as business interruption insurance.
Knowing how to shop for business insurance means taking income into consideration. Business income coverage will include net income and continuing expenses.
Utility Interruption Coverage
Your restaurant needs local utility companies for water, power, and communication services. If service is interrupted by peril, you can protect your business with utility interruption insurance.
Utility outages can lead to physical damage to the restaurant along with income loss. When getting restaurant business insurance quotes, check to see if this is included in your property insurance coverage.
If your equipment breaks down because of a utility outage, you may be dealing with spoiled food when the outage is over. To cover the cost of these losses, you can purchase spoilage coverage.
Extra Expense Coverage
Extra expense coverage will come in handy if a peril caused your restaurant to need repairs. If you continue to operate during this instance, you may need a temporary location or rented equipment.
These costs can add up. If you have extra expense coverage, these costs are covered.
This is something every restaurant owner should shop for because an equipment breakdown can lead to serious losses. If you don’t get equipment fixed right away, you will lose income, have extra expenses down the line, and may have spoilage.
With equipment breakdown insurance, you can cover the cost of repairs for machinery. This includes ice makers, boilers, steamers, ovens, freezers, food warmers, and refrigerators.
Fine Arts Coverage
This is not something every restaurant will need or want. However, if you have a high-end restaurant with art worth a lot of money, you can protect your investment with fine arts coverage.
Employee Theft Coverage
Employee theft can happen right under your nose. Employees at a restaurant have access to food, cash, and property that they can steal.
Employee theft is not covered under a general property policy. To cover the costs of theft, you’ll need to shop for employee theft coverage specifically.
Business Auto Policy (BAP)
A business auto policy can insure all businesses no matter how big or small. This auto policy is necessary for restaurants that employ delivery drivers.
The Business Auto Coverage Form consists of five sections. The first section explains the type of vehicles that are covered.
The second section explains commercial auto liability insurance. This policy covers third-party claims that occur because of an employee accident with a vehicle used by your business.
These are very expensive claims which is why a restaurant should always have a BAP. This policy is necessary if the business doesn’t own the vehicles they are using.
For example, a restaurant may use a rental car for their business or hire an employee who uses their own car for the business. If the drivers are at fault when on the job, your restaurant may be liable whether you own the vehicle or not.
Section three of the form provides commercial physical damage insurance. This coverage protects vehicles that your restaurant owns or hires.
It sounds similar to property damage insurance, but it covers your employees instead of a third party. Under this section, three types of physical damages are covered:
- Specified Causes of Loss
Section four talks about the condition that outlines your obligations if an accident or claim occurs. It will also go over how physical losses are looked over and paid.
Last, we have section five. This section is only definitions of key terms you’ll see throughout the policy.
Workers’ Compensation Insurance
General liability insurance covers claims that occur from customers if they slip and fall at your place of business. If your employees injure themselves at work, they are only covered through workers’ compensation insurance.
In most states, a restaurant and every other place of business are required to have this policy. Even if your state does not require you by law to have this coverage, it is highly recommended.
Without this insurance, you are putting your restaurant at high financial risk. You can face a lawsuit for injuries that happen at work. If you don’t have this insurance when it is required by the state, you will also be fined.
Restaurants are a dangerous place for employees. It is easy to slip and fall in the front or back of the house among dealing with other potential injuries.
Not only does this coverage protect your employees, but your business is also protected. If an employee receives benefits they won’t be able to sue you for wages lost or injuries.
Start Shopping for Restaurant Business Insurance
The key thing to note about how to shop for restaurant business insurance is the different types of insurance coverages out there. It is essential to understand these policies before jumping in headfirst.
Once you know the policies your restaurant needs, you can find a reputable insurance company to work with. At EPG Insurance Agency, we pride ourselves on providing businesses with a better insurance experience.