Insurance for Restaurants and Bars
Many people who want to start a small business choose to open a restaurant or bar. After choosing what they will serve and where the location of their new business will be the next item on the agenda should be getting the insurance on the business in order. Restaurants and bars are unique from other types of businesses because many of them serve alcohol unlike any other business which is its own special hazard. Patrons of their business can drink too much and have a car accident on the ride home, or two people that have imbibed too much might start a fight in the middle of the bar. Insuring against these risks is an important part of owning just this type of business.
The Types of Businesses Insured as a Restaurant or Bar
A number of businesses are insured as a restaurant or bar even though the owners may not call their business one. This list includes pubs, taverns, night clubs, breweries, sports bars, and casinos. They can also be called cafes, cafeterias, diners, delis, lounges or fast food even. If you serve either food, alcohol, or both for insurance purposes you’re a restaurant or bar and that is the type of insurance you will need to look for.
General Liability Insurance
All types of businesses need general liability insurance, including restaurants and bars. This protects the business if there is a claim or lawsuit against the business due to a third party sustaining injuries on the businesses property, including both physical as well as damage to their property, or if there is an advertising injury claim. No matter how careful the owner and employees of a business are there will be times when someone gets hurt.
The common risks that a restaurant or bar have is someone slipping and falling causing bodily injury to them. Another risk is someone becoming ill from the food they ate at a restaurant and deciding to file a lawsuit against it. When this happens a general liability policy protects the owners of the business against losing a potentially ruinous amount of money.
Commercial Property Insurance
Commercial property insurance provides insurance on the property the business owns. In a restaurant or bar setting this includes the furniture, kitchen equipment, computer's, registers, and everything else in the location that is owned by the business. It also includes the food the business has on hand as well all of the liquor that is on the premises. If the business owns the building that houses it than that will also be included on the property insurance policy.
A property insurance policy insures against all the common risks a business faces such as fire, water damage, theft, and vandalism. For a restaurant or a bar that serves food, the policy should also include food spoilage. If the power goes out for an extended period of time and all of the food is spoiled that can be very costly for a business to recover from if they are not insured against this risk.
A property insurance policy can also include business interruption insurance . If the business can’t operate for a lengthy amount of time, like after a fire takes place, business interruption will provide money to replace the lost income until the business is up and running again. It will also cover ongoing expenses, like electricity, that continue to exist even when the business can’t operate. This coverage can usually be started 48 hours after the covered event occurred and generally provides coverage for up to one year.
Business Owners Policy
A business owners policy (or BOP) is a great policy to get for restaurants and bars who need general liability insurance, property insurance, and business interruption insurance. A BOP has all three of these packaged together. And, much like buying a combo at a fast food joint, a BOP is less expensive than buying each of these coverages separately.
Liquor Liability Insurance
A unique policy for restaurants and bars is liquor liability insurance. An establishment’s general liability policy specifically excludes covering claims arising as a result of the use of liquor. Many states require this coverage in order to even receive a liquor license.
Sometimes a business is held legally liable if they over serve alcohol to a customer. If that customer ends up hurting themselves or someone else, including both bodily injury and property damage, the expenses can quickly pile up into a huge amount of money especially if it’s a car accident. While there are some states where the business can’t be held legally responsible for a situation like this that is the exception to the rule in the United States.
One exclusion on a liquor liability policy is illegal activity. What this means for most restaurants and bars is that if they sell liquor to an underage person they will have no protection against lawsuits under a liquor liability policy. Depending on the insurance company, liquor liability insurance is either an addition to the general liability policy or it is a stand-alone insurance policy.
Commercial Auto Insurance
Businesses that deliver food in company owned vehicles need to have a commercial insurance policy. This policy protects the owner of the business if one of the drivers of their cars causes an accident. It covers the damage that they cause up to the liability limit on the policy. Optional coverages include uninsured/underinsured motorist which protects the occupants and vehicles of the business if they are hit by an uninsured or underinsured motorist, or are involved in a hit and run incident. Additionally, there is comprehensive and collision coverage in order to cover the business owner vehicles
Another thing to keep in mind is that if employees are driving their own vehicles in order to deliver a restaurant’s food they are very likely not covered under their personal insurance policy. Most insurance companies exclude food delivery as a matter of course. The employee will either need to find out if they can add this activity to their current insurance policy or they will need to find a company that will ensure food delivery drivers.
Business Crime Insurance
Restaurants and bars hire people to work in them, serving customers. Not all people are honest, in or outside the business. A business crime insurance policy will provide coverage if there is employee theft, employee forgery, counterfeiting, or if the business experiences a robbery. This can include somebody taking money out of the till, a safe being burglarized, funds transfer fraud, computer fraud, and other events caused by dishonest people.
Commercial Umbrella Policy
A commercial umbrella policy sits on top of the underlying liability policies. It provides further liability protection for the business owner in the event they have a claim which exceeds the liability limits on their general liability or commercial auto insurance policies. The amount of liability on a commercial liability policy starts at $1 million and can be increased in $1 million increments from there.
The vast majority of restaurants and bars have employees working for them. Workers Compensation is a must for every type of business that has employees and in many states it is required. These types of policies cover the medical costs if an employee suffers a physical injury while working for the business.
As anyone that has ever visited a restaurant or bar knows, the employees sometimes have to work and move very fast. The staff including waitresses, kitchen workers, bartenders, and others can experience an injury at any time. Common occurrences are slipping on a wet floor or getting cut by broken glass requiring a trip to the emergency room.
So How Much Is All This Going To Cost?
The costs for all of these different insurance policies are going to depend on a large number of factors. The state the business is in, the liability limits of the policy, the number of employees and/or vehicles used in the business, will all factor into what the premium will be on an insurance policy. The below numbers are generalizations just to give you an idea of what a business owner will be looking at.
A restaurant or bar will generally pay about $1,100 to $3,800 a year for a general liability policy with $1 million in coverage. The amount of revenue the company has largely influences what they pay as a business that is busier is also more likely to have a claim against them by nature.
The premium for a commercial property insurance largely depends on the amount of property they have to insure, especially if the business owns the location, as well as whether the property is insured on an actual cash value or replacement cost basis. In general, a bar or restaurant can expect to pay about $1400 to $3900 a year depending on their unique circumstances.
Business interruption is another insurance that can vary quite a bit in how much it costs. It’s largely determined by the risks the company has to such an event as shutting the business down for awhile as well as how much revenue the business generates. The cost could be anywhere from $750 a year for a small restaurant on up to $10,000 a year for one that is large and very busy generating lots of revenue.
A BOP policy as indicated combines general liability, property, and business interruption together in one package. Most bars and restaurants can expect to pay $2,600 to $7,500 a year for this policy. How much liquor liability costs is determined by what amount of revenue your business derives from the sale of liquor. Some restaurants don’t make selling beer, wine, and hard liquor much of a focus of their business and thus their liquor liability policies are not that expensive. Bars, where selling liquor is largely the whole point of the business, will pay a lot more. In general, a business owner can expect to pay anywhere from $950 to $3,500 a year for a liquor liability policy.
The cost of a commercial auto insurance policy largely depends on the number of vehicles insured, the coverages selected, where the business operates, and the motor vehicles records of the drivers. If choosing to have comprehensive and/or collision coverage the value of the business owners vehicles will also factor in. In very broad terms, a commercial auto insurance policy is likely to cost at least $1,200 a year for each vehicle and could be up to $2,400 a year. A good way to save money is to make sure each driver has no tickets or accidents in the previous three years.
Business crime insurance, like almost all commercial insurance, comes down to the size of the business and the number of employees. A policy that protects against up to $250,000 will likely cost somewhere between $500 and $1000 a year.
As there aren’t that many claims that exceed a business's liability limits, commercial umbrella policies tend to be relatively affordable. With a $1 million dollar limit of liability it will likely cost a business owner anywhere from $200 to $1000 a year depending on how much revenue their restaurant or bar generates.
At the risk of repeating myself, the cost of workers compensations rests largely on how many employees you have and the state you do business in. Looking at it from a per employee perspective, workers comp costs about 75 cents per $100 in employee wages in the state of Texas. The most expensive state is Alaska where it’s $2.74 per $100 in wages. Note this is for all occupations not just restaurant and bar staff. As people that work in restaurants and bars do move quickly and work around hot equipment they cost more to insure per person than someone working an office job would cost but less than how much it costs to insure those in more dangerous occupations like coal mining.
Where To Buy Insurance If You Own A Bar Or Restaurant
Any insurance agent that sells commercial insurance can provide a quote on any insurance policy needed by the owner of a restaurant or bar. It’s best to get all of the policies your business needs through just one agent as that greatly reduces the administrative headache of sourcing each policy through a different company. Having just one agent means that person knows everything about your business instead of spreading policies around to multiple agents with each just knowing one slice of it. The exception to this is workers compensation as there are states where that insurance is handled directly between the company and the state the business operates in.
When starting to shop for these policies it’s a good idea to have both captive agents and independent agents provide quotes. Captive agents, those working for a particular insurance company, can provide the exclusive quotes that company will charge your business. Independent agents can quote from a large variety of other companies that don’t have a captive agent workforce.