The hotel industry is one of the industries with the highest risk of financial devastation. For this reason, the question of how much restaurant insurance costs arises because burns, food illnesses, slips, falls, or knife cuts can occur.
This is a sector that includes multiple commercial establishments, both public and private. There are different risks for customers and employees, which can be transferred to an insurance company through a comprehensive commercial insurance policy.
What risks should be considered in restaurants?
When we consider the risks that these types of businesses have, we find the following:
- Foodborne illnesses.
- Injuries to both customers and employees.
- Damage or loss of property and contents.
- Business interruptions.
- Cyber liability.
Things can always go wrong, and when they do, it will affect the bottom line. For this reason, the only way to mitigate these risks will be to purchase a comprehensive insurance policy to cover all the financial risks to which a restaurant is subject.
How much does this insurance cost?
Insurance rates may vary depending on the coverage offered by each policy. In addition, some factors can affect the cost of our insurance, among them are:
- Years of age in the business.
- The average number of clients served annually.
- Average annual income.
- The number of employees.
- Claims history.
- Age of the building in which the business is located.
- Fire and security system.
- Value of all equipment inside the restaurant.
The major insurers will offer a BOP policy, which will cost between $1,150 and $10,000 per year, depending on the size of the restaurant. These policies generally include general liability, property coverage, liquor liability, product liability, business interruption, and employment practices liability.
Minimum Coverages Needed for Restaurant Insurance
Most of the coverages a restaurant requires can be purchased in a packaged policy. Among the coverages that should not be missing are:
Alcoholic beverage liability
The vast majority of policies do not include this coverage and must be added by endorsement. This coverage will offer financial protection if a third party has an alcohol-related incident, such as an automobile accident after consuming alcoholic beverages in our establishment.
This coverage will pay if a customer becomes ill due to a foodborne illness.
Customer information stored in the cloud or on a hard drive may be vulnerable to hackers who can break into the devices. If data is leaked and sold on the black market, it will result in regulatory fines and loss of customers.
This policy will protect our business financially in the event of any attack and help pay for the losses.
This coverage will pay if one of the employees becomes injured or ill from work-related activities. This coverage will pay for medical expenses, lost wages, and funeral expenses in the event of the employee’s death.
Employment Practices Liability Insurance
Protects cases where an action is brought against the company for harassment, wrongful termination, and discrimination. These actions can be brought by current employees, former employees, and even non-hired persons.
Commercial Auto Insurance
Many restaurants have vehicles to pick up supplies or deliver meals; a personal policy will not provide coverage for these vehicles. So you should have a commercial auto policy that will provide liability coverage and pay for the repair or replacement of the vehicle after an accident.
When buying coverage for our restaurant, we will have to look very carefully at what is included in the policy package. It is also a good idea to ask for a quote from different insurance companies to always have greater efficiency.
It should be noted that BOP or commercial packages generally do not include coverage for commercial auto, workers’ compensation, or cyber liability. These add-ons must be purchased separately and cost $600 to $1,200 annually.
Extra coverages to consider
Depending on the location and size of your restaurant, it is always good to look for comprehensive protection. For this reason, additional coverages can be contracted, such as:
- Terrorism insurance is coverage that should be added as an endorsement or by purchasing a separate policy. Acts of terrorism will not be covered in traditional commercial packages.
- Umbrella: The vast majority of commercial policies contain liability limits of up to $2 million, which may not be sufficient if you have a large operation. With this policy, you can extend the limits to $5 or $10 million.
- Flood insurance: even if your restaurant is not in a flood-prone area, it will be good to take out this protection. More than 30% of the claims for this type of policy are made by people not located in an area prone to flooding.
We must consider that in this type of business, there are usually many risks for the clients, employees, and infrastructures. For this reason, it is best to hire an insurance company that is highly qualified to back us up when things go wrong.
It will always be better to have our business fully protected in case of an eventuality. Otherwise, the costs that will have to be assumed will be very high and would end up being borne by us.