I am opening a restaurant, what Insurance do I really need? This is a question insurance agents get asked a lot. Not just from restaurant owners, but from all small business owners. The answer to this question is like many things in life; It depends. The answer to this question will be different if you are a Painter, a Dry Cleaner, or even an Artisan Contractor.
There are many variables that go in to running a restaurant and those variables bring on completely different risks.
First and foremost the restaurant owner needs to determine what class code their business will be in. To find this out you will need the help of an experienced insurance agent. It is very important to be open and honest with the agent about what your restaurant will and will not be doing. For example, if you are a bar that stays open until 2 AM you will be in a different class code than a diner that is open from 6 AM until 2 PM. The risks are different, so the businesses are classified different. Furthermore, if you are not honest with your agent about serving alcohol they may leave out Liquor Liability Coverage. If an incident occurs without coverage it may be a loss so large it forces you to close permanently.
So once a business is classified correctly there are seven main coverages every restaurant should carry. Some restaurants will need all of these coverages and more. Some restaurants will need only a few coverages. Again, that is where the help of an experienced commercial insurance agent is important. This list is a great starting point for protecting any restaurant.
- General Liability
- Liquor Liability
- Commercial Property
- Hired and Non-owned Auto
- Commercial Crime
- Workers’ Compensation
- Umbrella Policy
General Liability (GL) is often referred to as the first line of defense in any good business insurance policy. A GL policy protects a business against liability claims for bodily injury and property damage as a result of normal business operations. It also covers some types of advertising liability. This can be as simple as someone slipping and falling on the way to the bathroom to another business claiming you stole their advertising slogan. There are exclusions in every policy and not every carrier has the same exclusions. Reading your policy and consulting with your agent are important.
Liquor Liability is designed for businesses that sell or serve alcohol. If you do not plan on selling alcohol this is not necessary for your business. In many states, business are required by law to carry this coverage. Liquor liability covers liquor related instances including bodily injury, mental anguish, psychological damage, assault, intoxicated employees and property damage.
Regardless of whether you own or rent the facility your restaurant is located, property insurance is an essential part of protecting your restaurant from disaster. Commercial Property Insurance covers losses and damages to a companies property including buildings and permanent fixtures, inventory, furniture, equipment, personal property, signage, fences, and even landscaping.
Hired and Non-Owned Auto
One risk that many restaurant owners forget about is when their employees are using their personal cars for business purposes. This is where Hired and Non-owned Auto Coverage is necessary. Many restaurant owners think if they do not offer delivery services they do not need Commercial Auto Coverage. That is not always the case. Hired and Non-owned Auto Coverage kicks in when your employees use their own vehicle or a rented vehicle not owned by the the company. The employee could be using their vehicle for something as simple as going to get change at the bank. Regardless of how small the activity may seem, when the employee is using any vehicle to do business activity you are liable.
In today’s day and age the risk for credit and debit card fraud is very high at a Restaurant. You and your customers are putting a lot of faith in the people you hire to not steal their personal credit card numbers. For this reason it is necessary to carry Commercial Crime Insurance. This coverage provides coverage for criminal acts committed by you or your employees. These can include employee dishonesty, forgery, computer fraud , funds transfer fraud, kidnap, ransom, extortion and money laundering. Depending upon the policy it will pay to defend you at trial and some fines or judgments awarded by a court of law.
Workers’ Compensation Insurance offers coverage similar to General Liability. Workers Comp is designed for your employees instead of third parties. Work Comp Coverage is frequently referred to as the “exclusive remedy”. This means employees give up some rights to sue for injuries occurring on the job in exchange for guaranteed benefits like lost wages and coverage of medical costs. Employers gain the piece of mind that they will not be sued for most accidents occurring on the job unless the business is intentionally negligent.
An Umbrella Insurance Policy is a great way to provide an added layer of protection to your business. The coverage is a policy that goes over the top of other insurance policies for a rainy day. Basically, the Umbrella Policy will provided higher limits of coverage when a large claim occurs. Think about the size of a potential claim if your restaurant caught on fire while people were inside. This could easily lead to you reaching the limits for General Liability and Commercial Property Coverage. This type of situation could easily exceed a typical $1,000,000 occurrence limit for those underlying policies. This is when the Umbrella policy would kick to provide additional coverage over and beyond those limits.
In most cases these policies can be bundled together under a Business Owner’s Policy (BOP). Most insurance carriers like to offer policies in a bundle because it brings them more business and allows them to get better prices for the business owner. It also ensures business owner’s are completely covered with no gaps in their coverage. So when you go out looking for your restaurant’s insurance policy these are seven insurance policies to consider when protecting your restaurant.