Wednesday, June 15, 2011

Sizzling Insurance Tips for Restaurants and Bars

What kind of insurance do restaurants need?
Restaurants have unique risks that create some interesting exposures.  Depending on the size and services a restaurant may offer, there are different insurance products that the restaurant may consider purchasing.

General Liability
If a customer trips and falls or even if a customer spills hot coffee on herself (review of famous McDonald's case here); liability insurance would pay for such a claim.  Other claims include: choking, food poisoning, burns, etc.

Quick savings tip: To save on restaurant liability insurance, it's possible to find companies that rate on square footage instead of sales.  If you are a smaller restaurant that has a high volume of sales, then you could be paying too much.
Don't let restaurant insurance upset your stomach

Property Insurance
This is insurance for your equipment, improvements, and building if you own it.  If you are a tenant, then you need to review your lease to see what you are responsible for in case of a loss.  For example, maybe the last tenant installed a kitchen, but the lease may still state that the only thing the owner is responsible for is the four outside walls. If there is a total loss, you will have to pay to create an entirely new kitchen.

Quick savings tip: It is often less expensive to rate tenant improvements and restaurant equipment (anything bolted down) separately from business personal property.  That way you get the building rate instead of the rate for the things that can be stolen easily.

Business Income  
If your restaurant has to shut down due to a fire or a covered loss, you need this coverage to cover your costs and to pay you what you would have made (minus expenses that you don't incur during the loss such as payroll).  It's important to have at least 12 months coverage, but 18 or 24 months is ideal.  In case of a total loss, you may need to wait for building permits, construction delays, and negotiations with the insurance companies to be settled.  For more info on this business interruption, see this blog I wrote on it.

Quick tip:  Watch out for long delays in getting paid.  Often policies will include a 72 hour waiting period before this coverage can take affect.  Can you afford to lose three days of business?  What if that's a Friday or Saturday night?

Workers' Compensation
This coverage is mandated by California law, meaning you have to buy it even if you only have one employee.  The premium is a percentage of total payroll.  Restaurant premiums are currently between 2% - 6% based on the size, loss experience, and other discount factors.  Click here for more information on workers' comp.

Quick savings tip: In California tips are excluded from workers' compensation, so make sure you don't add them to your payroll report.

Stay tuned for my next blog that will highlight some more advanced coverage for restaurants.  Here are some examples of some other coverages that restaurants should think about including: sexual harassment, assault and battery, delivery driver coverage, and more.


  1. I actually enjoyed reading through this posting. Many thanks.

    Restaurant Equipment

  2. Thank you very much for your comment. I really appreciate it!

  3. I love how you make your posts interesting and very informative! (often funny) I love how you tie your posts to actual situations like the McDonalds woman. Thanks for the In N Out picture too, now I am hungry!

  4. Thank you for the comment! I'm glad you enjoyed the post. Stay tuned for more great content. You can also read answers to some of my questions on Quora

  5. We must not forget the risk of poisoning or allergy. This is even the worst thing that can happen to a restaurant. The risk is always the same with regular customers. Thank for tips!

    1. Good point. Wouldn't you say that poisoning would be covered under the main liability limit?


  7. Thanks for the thoughts. Hopefully I get insurance in Naples fl that will cover all that you say!


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