6 Types of Business Insurance for Restaurants (and Why They’re Important)
Attending a birthday party last March, a 10-year-old boy suffered burns to his throat after drinking apple juice at the Star Buffet and Grill in Lancaster, PA. Lab tests later revealed that the apple juice had caustic lye in it. Lye is usually found in products used to clean ovens or unclog drains.
The boy and his 4-year-old sister were hospitalized for two weeks. Previously diagnosed with cystic fibrosis, the burns exacerbated his condition. Now needing around the clock care, the boy’s father is unable to maintain full-time employment and cover their basic living expenses. As a result, the father recently filed a civil lawsuit against the restaurant owner.
Of course, nobody likes to imagine that this type of accident could happen at their restaurant. But the reality is when you run a restaurant you are taking on a certain amount of risk. That’s why business insurance is a critically important topic for restaurant owners.
Why restaurants need to business insurance?
For many restaurant owners, business insurance is a low priority. And it’s understandable because insurance can feel like a very big expense for little to no return.
And here’s the truth: insurance can be expensive. It’s expensive up until the day you get sued or your restaurant catches fire in the middle of the night. After that, insurance is worth its weight in gold.
You never want to skimp on insurance for your restaurant. Insurance can protect your restaurant from a number of problems. It will protect you if one of your employees gets hurt at work and it will reimburse you for broken equipment.
Here are six types of insurance for restaurants you should look into:
1. Worker’s comp
As anyone who has ever worked in a restaurant kitchen can attest, employees face their fair share of potential hazards at work. Even if every single employee does purchase those non-slip shoes it’s still quite easy to slip and fall. Not to mention there are many other opportunities for injury.
Worker’s comp is usually required by state law. It will protect your business if one of your employees is injured at work. It will cover your legal fees if one of your employees sues you. It will also cover any medical expenses for your employees.
2. General liability
General liability is an absolute must for restaurants owners. Let’s be honest, even if your restaurant never makes a single mistake, a customer can still decide to sue you.
This type of business insurance will protect you from some of the most common customer complaints. For example, if one of your customers falls and is injured in your store, general liability would cover it.
3. Commercial property insurance
If you have a mortgage on your business or own any kind of equipment, you will definitely want to look into property insurance. This policy protects your property from fire and other unplanned events.
You should note that this may not protect you from a flood or other natural disasters. You will want to check with your insurance broker to make sure that you are fully covered from all potential hazards.
4. Business income insurance
This policy would cover any income lost if your restaurant had to close for a period of time.
For example, if your restaurant were flooded during a storm you would have to close until all the damages are repaired. Business income insurance will make up for lost income so you can continue to make payroll and meet your monthly expenses
5. Liquor liability
If you carry a liquor license, most states will require that you purchase liquor liability. After all, drinking and driving is a big problem.
Can you guarantee that one of your employees won’t serve a customer too much alcohol? This policy will protect you if a customer has too much to drink, drives home, and injures themselves or someone else.
6. Food contamination
Food contamination is a big risk that all restaurants face and the financial fallout can be devastating. Your general liability policy may cover some claims of food contamination but most have certain exclusions. You should look into a food contamination policy to fill in the gaps.
Of course, this list is not all-inclusive and the type of insurance you will need depends on the type of business you run. Your best bet is to work with an experienced insurance broker.
An insurance broker will know what insurance you are required to carry based on local laws. They will also be able to make recommendations based on the type of restaurant you run, your location, how many employees you have, and what kind of equipment you use.
Want to learn more about business insurance? Check out this library of insurance guides.