Whether you’re planning on opening your first restaurant or just scaling up your home bakery, restaurant insurance is going to be a crucial part of a successful business plan. That’s because if you find yourself facing a claim of negligence, like food poisoning, an employee suffering burns and being unable to work, or a lightning […]
Whether you’re planning on opening your first restaurant or just scaling up your home bakery, restaurant insurance is going to be a crucial part of a successful business plan. That’s because if you find yourself facing a claim of negligence, like food poisoning, an employee suffering burns and being unable to work, or a lightning strike that ruins your POS system, restaurant insurance can help keep your business running.
Restaurant insurance is a combination of policies that protect your assets against a claim and can help your employees if they get injured or replace your property if it is damaged. The most important policies to consider for your restaurant are general liability and workers’ compensation.
When looking to purchase your insurance, obviously the cost is an important consideration. Restaurant insurance costs will fluctuate based on several factors. However, for this article, we obtained multiple quotes from different providers. All of them were for a small restaurant with four or fewer employees and a yearly revenue of around $300,000.
| Type of Coverage | Coverage Amount | Estimated Average Annual Premium |
|---|---|---|
| General Liability | $1 million per occurrence and $2 million aggregate | $800-$2,000 |
| Business Owner’s Policy (BOP) | $1 million per occurrence, $2 million aggregate, and $40,000 commercial property with $1,000 deductible | $2,561-$7,520 |
| BOP with Liquor Liability | $1 million per occurrence, $2 million aggregate, and $40,000 commercial property with $1,000 deductible | $5,000-$6,800 |
| Workers’ Compensation | $100,000 per injury, $100,000 per illness, $500,000 policy limit | $2,300-$3,500 |
When determining the cost of a policy, providers will draw on their own internal data from years of insuring similar businesses. They also will pay attention to certain points of data about your business including the following:
All of that to say, it doesn’t mean you can’t find cheap restaurant insurance. Don’t be afraid to get more than one quote. You can also work with an insurance company that will sell insurance directly to the customer. One type of company like that is Next Insurance. By working directly with the customer, insurance companies can offer a lower premium because there is no upcharge for a broker or agent commission.
Restaurant insurance isn’t one specific type of coverage. Small business insurance just doesn’t work that way. It is several policies that cover different types of loss and, when combined, form a complete level of protection for your restaurant. What follows is a list of the coverages a restaurant should consider and a brief explanation of what they cover.
| Coverage | Quick Overview |
|---|---|
| General liability | Third-party claims of property damage and bodily injury |
| Hired & Non-owned Auto Liability | Vehicles used for your business but now owned by your business |
| Liquor liability | Similar to general liability but the claims arise from intoxication |
| Commercial Property | First-party property at a specific location |
| Workers’ Compensation | Injuries, illness, and death directly related to work |
| Food Spoilage | First-party coverage for spoiled food |
| Food Liability | Losses that come from improperly stored food |
| Inland Marine Insurance | First-party property protection for equipment not at a specific location |
| Commercial Auto Insurance | Third- and first-party coverage for a vehicle or food truck |
This is a key coverage for food business insurance. As the name implies, it provides the broadest level of liability protection for your business. General liability has three key areas of coverage: bodily injury, property damage, and claims of personal injury or reputational harm (think advertising).
Most general liability policies also include product liability—so, food poisoning. Along with damage to rented properties. So, if you are renting a facility for your restaurant and a fire damages it, general liability will usually include coverage of at least $100,000 for the property.
Usually, this is available as an endorsement for general liability insurance. This is important coverage for any restaurant that utilizes delivery drivers. It extends liability coverage to include vehicles that your business does not own but used for your business operations.
Please keep in mind: this does not cover any damage to your driver’s vehicle, only damage or harm they might cause.
General liability does not cover losses related to alcohol. So, if your business serves alcohol, liquor liability will be a crucial coverage and, in some states, possibly required. There are 43 states with dram shop laws that govern who can be held liable for a loss involving alcohol, and spoiler alert: the restaurant and bar is going to show up on that list—even if it was one stop among many that night.
This policy can be purchased as a standalone policy or an endorsement for general liability.
Odds are you’ve made a substantial investment in equipment for your property. If that is the case, you’ll want to insure it. And if you got a loan to purchase it, you may be required to insure it. That’s what commercial property is for: protecting your property. Usually, it covers named losses, like fire or theft.
One important element of commercial property is that coverage is limited to the listed location. So, this will not protect your property at off-site locations.
A great option for restaurants is a business owner’s policy or BOP. This is a combination of general liability, commercial property, and lost business income in one single policy. Often, it is more affordable than purchasing all three coverages on their own.
Out of all of the restaurant insurance policies, this is the only one that is likely required. Every state except for Texas and South Dakota has a law requiring workers’ comp, although the threshold for requirement changes by state.
This covers employees who become injured or ill on the job because of their work and helps them with wage replacement, payment for medical bills, and programs to help them return to work. In most states, this gives the employer liability protection, too.
This, and the next one, is a specialty type of food and beverage insurance. Basically, if you have food spoiled, say from a power outage, this is a special coverage for that loss. Most property policies may have coverage for something like food, but it usually has a low limit, sometimes in the hundreds. This helps cover all of that Wagyu beef steak that went bad when a power outage caused the freezer to fail.
This insurance, despite the name, is not for food poisoning. If food goes bad because it wasn’t handled properly, then you can file a claim not only for the cost of the food but also for the cost of cleaning up the contaminated area.
If you operate a food truck, catering business, or food cart, then you’ll want to check out inland marine insurance. This is a type of commercial property that follows the insured items around—meaning you can have coverage on your property at off-site, unlisted locations.
While the odds are unlikely that most restaurants need commercial auto, if your business has a corresponding food truck, you’ll need to insure the food truck. Commercial auto is the only way to insure the actual truck (not the business nor the equipment on it, but the vehicle). Auto insurance is required in every single state, so if you do have a vehicle, carrying the state-required liability is a must.
Commercial auto will have liability for damage to other people’s property or injuries if you’re at fault. You can also purchase coverage to fix any damage to the vehicle—regardless of liability. So, if you back your food truck into a concrete pole and crush the front bumper, you could use collision to replace or repair the damage even though it was your fault.
Yes, restaurant insurance is a business expense. And yes, you really do need it. To better help you understand how it works and why it matters, consider an important real-life claim from recent history.
A young girl was burned by her chicken nugget in 20191. The incident went to court, and the family of the girl won and was awarded $800,000. The burns she received were second-degree burns. Most restaurants do not have over $800,000 lying around. And remember: this was after paying the lawyers who defended the restaurant.
Restaurant insurance policies will investigate the claim and provide a defense in court, if necessary. And settlements can be paid out of a policy—up to the limits, if necessary.
Restaurant insurance is a policy or combination of policies that help keep your restaurant running by handling claims. These claims can be ones made against your business for liability, or for your business, like a smoke fire damaging the seating and curtains and shutting the business down.
Most business policies have a communicable disease exclusion. Unfortunately, this means that during the COVID pandemic, many businesses, including restaurants, were unable to make a successful claim for lost business income.
It depends on the type of your restaurant but generally, the two most important coverages are workers’ compensation and general liability insurance. If you serve alcohol, you will need liquor liability, too.
Restaurant insurance costs will fluctuate between different restaurant types and sizes even within the same zip code. General liability can be as low as $800 and run up to $2,000 annually.
You work long days. Prep starts an hour before the front doors open, and after the last bite has been taken, there are still hours of cleaning to go. Restaurant insurance can’t help you with any of that, but it can protect all of the blood, sweat, and tears you’ve put into your restaurant by helping pay for damaged items or handle claims filed against your business. In some cases, it will spare you from costly fines or penalties if you should be insured but aren’t.
Getting insurance is easy with many providers offering quotes online in just 10 minutes or less. Find the right restaurant insurance coverage today so that you can relax a little bit during those moments when the business is closed.
Nathan Weller is a licensed insurance adjuster, with more than a decade of experience in commercial insurance. He has helped build a claims department at an insurance start-up, and currently advises small business owners about insurance topics. In between his time working at different insurance carriers, he spent 8 years running a small, non-profit organization. Nathan understands small business pain points alongside the complexities of insurance.
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