Restaurant Insurance: What It Is, Costs, and Companies

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Whether you’re running a pop-up restaurant, starting a neighborhood cafe, or purchasing a fast food franchise, you may be wondering what kind of insurance is required to protect your finances from the risks of operating your business. We’ll go over the basics of restaurant insurance, what it generally covers and costs, and what to look for when comparing restaurant insurance providers. Armed with information, you’ll be on your way to finding the best policy for your restaurant. 

Do I Need Restaurant Insurance?

If you’re a restaurant owner, you need restaurant insurance. A kitchen fire could damage your equipment, forcing you to shut down temporarily. A guest could sue you for slipping and falling in your restaurant’s dining room or contracting food poisoning. Or one of your workers could become injured on the job. The right combination of insurance policies can protect you from all of those risks. Some types of coverage may even be required by law in your state. 

You can keep your premiums low by only purchasing the coverage you need and comparing quotes across companies. Some insurers may offer discounts for bundling multiple types of coverage, and many will allow you to choose a higher deductible to keep monthly costs low. You should also take action to reduce your risk, such as offering safety training to workers. 

What Is Restaurant Insurance?

Restaurant insurance typically represents a collection of small business insurance policies that each protect against different risks inherent to the restaurant industry. Depending on the type of restaurant you have, you may need some coverages and not others. For example, a sandwich shop offering delivery will have different needs than a pub that serves beer. Here are common coverages that many restaurant owners need. 

Workers’ Compensation Insurance

Workers’ compensation insurance is required in most states for businesses with more than a certain number of employees. In some states, you’re required to carry it even if you have only one employee. Workers’ compensation insurance helps pay for your employees’ medical bills and lost wages if they become injured or ill as a result of performing their job duties. At the same time, it typically protects the restaurant owner from employee lawsuits. 

General Liability Insurance

Commercial general liability insurance helps pay for your legal fees and judgments against you if a customer files a lawsuit for non-professional negligence. That includes property damage—for example, a waiter spilling wine on a guest’s fur coat—along with physical injury, such as slip-and-fall accidents. It also covers the medical bills incurred by the injured customer. And it typically also covers lawsuits related to advertising claims, such as libel, slander, copyright infringement, plagiarism, and malicious prosecution. You should check that your general liability insurance includes product liability as well, which helps cover lawsuits related to food poisoning. 

Commercial Property Insurance

Commercial property insurance helps pay for repairs or rebuilding if your restaurant’s building or its contents, such as the kitchen equipment, are damaged by a covered loss. Common risks that are covered include fire and smoke, wind and hail, vandalism, some types of water damage, building collapse, and damage from aircraft or vehicles. 

If someone drives a car into your storefront, that would be covered, as would water damage from a leaking sprinkler. Earthquakes and floods are typically not covered, however, so some restaurant owners purchase separate policies for those risks. If you rent the space, you can often exclude the structure itself from your policy and only cover your equipment, but you should find out what the owner’s policy covers first. 

Inland Marine Insurance

If you have equipment or inventory that you transport off-premises, you’ll also need inland marine insurance. It covers business property that is transported, shipped, or stored off-site. If your property stays at your business location, you shouldn’t need this coverage. 

Business Interruption Insurance

Business interruption insurance helps replace your lost income after a covered loss. For example, if you were forced to shut down operations to repair damage from a windstorm, business interruption insurance would cover your lost income so you could pay your mortgage or lease, any due taxes or loan payments, and employee payroll. Business interruption insurance is often included as part of a business owner’s policy (BOP).

Business Owner’s Policy

A business owner’s policy includes general liability insurance and commercial property insurance in a bundled package. It also often includes business interruption insurance. It is designed for small to midsize businesses. You can also add on coverages to a BOP, such as equipment breakdown insurance. 

Spoilage Insurance

If the food at your restaurant spoils due to a power outage or equipment breakdown, spoilage insurance pays to replace it. 

Equipment Breakdown Coverage

If equipment such as your air conditioning or oven fails, your business operations could be forced to stop. Equipment breakdown insurance covers mechanical, electrical, and pressurized equipment breakdowns plus refrigeration and A/C units and computers. It may also cover lost income during repairs and the cost to replace food that spoiled as a result of the breakdown.

Food Contamination Insurance

Food contamination insurance helps pay for lost food due to contamination or equipment cleaning. If your restaurant is shut down, it can also help replace your lost net income. 

Liquor Liability Insurance

Liquor liability insurance helps pay for legal costs when your restaurant is held liable for serving someone alcohol. It also covers damage to your property and medical bills for an alcohol-related incident. Lawsuits regarding assault and battery or property damage by an intoxicated person, as well as drunk driving incidents, are also covered under a liquor liability insurance policy. 

Commercial Auto

If your restaurant owns a truck or other vehicles that it uses for deliveries or other business activities, you’ll need commercial auto insurance. It typically includes bodily injury and property damage liability, comprehensive and collision coverage, and often medical payments and uninsured motorist coverage for your commercial vehicles. 

Hired and Non-Owned Auto Liability Insurance

If you send an employee in their personal vehicle to pick up supplies for your restaurant, that is considered business use of a vehicle. Your business could be responsible for damages if the driver were in an accident. If you encounter situations where vehicles that your business does not own are being used for your business operations, or if you rent or lease vehicles, you’ll need a hired and non-owned auto liability policy. 

Restaurant Insurance Cost

The annual premium you’ll pay for restaurant insurance depends on the size of your business, your location, what you’re serving, and who you’re serving. It also depends on the types of coverage you need for your restaurant. 

For a package that includes a business owner’s policy, liquor liability insurance, and workers’ compensation, most restaurants can expect to pay around $4,000 per year. But some restaurant owners who need commercial auto coverage may pay more than that. On the other end of the spectrum, a business package with coverage for a rented space can start as low as $299 annually. 

Best Restaurant Insurance Companies

Best Overall: Huckleberry

  • Quick online quote and application process

  • Most policies underwritten by Markel or Chubb

  • Excellent customer reviews

  • Offers online chat support

  • Doesn’t offer employee benefits packages

Huckleberry offers business owners policies at a median of $62.50 per month ($750 per year) and workers’ compensation coverage at a median of $96 per month ($1,123 per year). You can get instant coverage from the company after a five-minute application process, and Huckleberry offers most coverages a small restaurant owner could need, except for employee benefits. Most policies are underwritten by two financially strong companies, Markel or Chubb, and policyholders have great things to say about the customer support team, which provides both phone and chat support.

Best for Quick Coverage: Next Insurance

  • Offers a live online certificate of insurance

  • Save up to 10% on bundled policies

  • 100% online application with assistance available

  • Liability insurance tailored to restaurants

  • Fewer specialized coverages, like food contamination insurance

  • No employee benefits packages

Next Insurance offers a quick online quote and application, and you can save up to 25% in discounts, including a bundling discount of up to 10% when you combine policies. What’s more, Next offers a live certificate of insurance, which is not common among insurance carriers. You can easily add additional insureds and share the certificate at any time. Next has an A- (Excellent) financial strength rating with AM Best.

Best for Cheapest Coverage: FLIP (Food Liability Insurance Program)

  • Policies start at $299/year

  • Backed by an insurer with an A+ AM Best rating

  • Offers cyber and liquor liability

  • Very limited property coverage

  • Doesn’t offer commercial auto or workers’ compensation

For small restaurants that operate out of rented spaces and don’t have expensive equipment, a $299/year policy from FLIP may be sufficient. The policy includes general and product liability coverage along with business personal property/inland marine for your equipment and coverage for damages to premises rented to you. However, you’ll need to get your workers’ compensation coverage elsewhere. 

Best for Financial Stability: BiBerk

  • A++ financial strength rating from AM Best

  • Excellent online customer reviews

  • 100% online quote and application

  • Customizable business owners policies

  • Doesn’t offer employee benefits packages

BiBerk is part of Berkshire Hathaway Group, and policies are underwritten by A++ rated insurance companies. The insurer is also well-reviewed on third-party websites and offers plenty of add-ons to its business owner’s policy that will appeal to restaurant owners. Plus, you can get instant coverage entirely online. Business owner's policies start at $500 per year. 

Most Flexible Coverage: Thimble

  • Purchase coverage by the job, month, or year

  • Occurrence-form coverage

  • Get coverage in minutes entirely online

  • Doesn’t offer commercial auto

  • Fewer specialized coverages

If you work events or have seasonal fluctuations in your coverage needs, Thimble allows you to purchase short-term coverage, pause your coverage, and easily make adjustments online. Coverage is also occurrence-form, which is more robust. It’s quick and easy to get coverage and Thimble’s underwriters have A ratings from AM Best. 

Best for Customer Satisfaction: Chubb Ltd

  • Rated second for commercial insurance by J.D. Power

  • Few complaints with the NAIC 

  • A++ financial strength rating from AM Best

  • Offers a wide range of coverages for restaurants, including workplace benefits

  • Must speak with an agent to start your policy

Chubb is both recognized for customer satisfaction by J.D. Power and had fewer complaints with the NAIC over the last three years than expected based on its market share. The company also has the highest available financial strength rating and offers most coverages a restaurant owner could need, from specialized add-ons to workplace benefits to umbrella coverage. However, coverage can’t be purchased entirely online. 

How Much Does Restaurant Insurance Cost?

Restaurant insurance companies set your premiums based on a variety of individual factors related to your business. Liability policies can start as low as $299 annually, but most restaurants will pay around $4,000 per year for a business owner’s policy, workers’ compensation coverage, and liquor liability insurance, according to data from insurance firm Huckleberry.

What Insurance Does a Restaurant Need?

Restaurant insurance protects restaurants from a variety of risks. The most important coverages that most restaurants need are general liability, property insurance, and workers’ compensation insurance. Some restaurants may also need liquor liability insurance and either commercial auto or hired and non-owned auto coverage. And it’s a good idea to add spoilage insurance, food contamination insurance, equipment breakdown coverage, and business interruption insurance to your package of policies. 

How Much Is Liability Insurance for a Restaurant?

A low-cost package of restaurant liability insurance with business personal property and rental premises coverages costs $299 per year. But your individual premium will depend on the size of your restaurant, your location, and other factors. The median cost of a general liability policy from Huckleberry is $700 a year, but some restaurants may pay less and some may pay more. It’s important to compare quotes from a few restaurant insurance companies to get the best price for your individual needs.

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