With so much invested in your restaurant, it is essential to plan for the unexpected. A variety of unforeseen factors can threaten your restaurant, and the proper protection can mean the difference between an unfortunate circumstance and a business crushing disaster. Here are three steps to determine your insurance needs:
- Know the level of coverage you can live with if an accident should occur.
- Take stock of all the people, property and possessions that are a part of your business.
- Consider outside sources that may impose a threat; this includes environmental hazards and customer liability.
Common Insurance Options for Restaurants
Property Insurance. Your restaurant’s property includes the physical facility that is mortgaged or leased and all of the contents within the property. All restaurant equipment and supplies are considered part of your restaurant’s property. Be sure to fully understand what your policy covers. Often times, there are exclusions for “Acts of God.” This is an insurance contractual term for any damage caused by a natural occurrence. This could include anything from rotten tree branches falling on power lines and causing power surges to volcanic eruptions or earthquakes.
Named Peril Insurance. This is a policy that covers specific causes of loss or risk. Damages caused by earthquake, flood, tornado or fire are often part of named peril policies. These policies can be purchased as supplements to your property insurance. Review your existing property policy and consider the risks that are excluded, but could occur in your area.
General Liability Insurance. This will cover your food service business if a customer is injured on-site or as a result of visiting your property. Coverage on this plan can include: slip and fall, food poisoning or any other hazardous accident. This is important coverage to have if a sue-happy patron threatens your business with a lawsuit.
Worker’s Compensation Insurance. This type of insurance covers employees with a predetermined level of medical expenses if they are hurt on the job. This relieves the process of litigation for business owners and provides immediate compensation for injured workers. Many states have legal requirements for business owners to carry this insurance for their employees. It is also considered best practice to post information on who your worker’s compensation insurance carrier is and how to contact them in case of a medical emergency. Learn more about Employment and Labor Laws
Automobile Liability Insurance. If your restaurant has delivery service or requires employees to use a vehicle for any part of their job duty, be sure to carry an insurance policy that covers the employee, the vehicle and any other involved party in the case of an accident.
Liquor Liability Insurance. This policy is often required by law for an establishment that applies for a liquor license. This is coverage for your business if a customer consumes too much alcohol on your property and sustains or causes injury to themselves or others as a result. This policy can be expensive and is often overlooked by restaurants who assume they can control alcohol issues internally.
Here are some risk factors to consider if your restaurant manufactures, sells, serves or facilitates the use of alcohol:
- Include an assault and battery coverage plan in your policy. The majority of claims against bars or restaurants are from injured parties involved in a fight.
- Include employees on the policy. Assume the risk of employees drinking on the job and cover your business from any residual effects of this misconduct.
- Look for limited damages listed in a liquor liability policy and consider how this could impact your business if a claimant files for damages outside of your insurance agreement. Such damages could include, “mental anguish” or “post traumatic stress.”
- Negotiate premium rates if you have a safe track record in your restaurant. Some insurance companies will offer safety training courses and can reward clients who prove their business as a low-risk environment. Contact certified trainers to assist in educating your staff about food safety, serving alcohol responsibly and more.
Food Contamination Insurance. This policy covers your inventory cost in the event that your food becomes contaminated due to a power outage or equipment malfunction. Food contamination insurance policies can also recover money lost on recalled food products. Inquire with your insurance provider to get the specifics of the coverage that is available to your restaurant business.
Life Insurance. Purchasing a life insurance policy for you and your partner is a preventative measure for whoever will inherit your business in the event of your death.
Loss of Income Insurance. This is a policy that will recover lost income in the event that an outside source caused interruption to your ability to conduct business. Occurrences such as natural disasters and industrial accidents (e.g. oil spills) are typically covered in this sort of policy. Consider investing in this insurance if your business is in a high-risk area.
Cover your business risks within reason and keep your head above water when unfortunate circumstances arise. Shop around for premium rates you can afford, but don’t skimp on coverage that won’t pay out when needed. Protect your assets and your dreams with the right insurance policies for your restaurant.