So, you want to start a restaurant or you already have one, and struggling due to the recent pandemic. However, as life begins to get back to normal, and new ways of ordering food have become more common (delivery, socially distanced dining, home food business, and reservations) the restaurant industry is making a huge comeback.
There is also a greater number of government loan programs and low-interest SBA loans that you can apply for that can help you get your restaurant off the ground!
One of the most important things that many restaurant owners forget to incorporate into their budgeting and planning is restaurant insurance. Just like any other business, you'll need to at least have general liability coverage and other protections depending on your needs.
Restaurant insurance can help protect your business from the unexpected and ensure that not a single mishap breaks the bank. Not only is it smart to insure your restaurant business, but most city ordinances, landlords (if you rent your space), and banks (if you pay a mortgage on your space) require you to have your business and its property properly insured.
Below, we'll cover and answer some of the most commonly asked questions regarding restaurant insurance, its average cost, and the best companies.
Restaurant insurance policies are
It's a good idea for your financial safety net to have insurance. Even if you have a small home-based business that caters to small parties, having at least a basic general liability insurance policy is the best way to ensure that you never find yourself in over your head. Businesses in need of insurance coverage could include:
The most basic kind of commercial restaurant insurance is general liability insurance coverage, which helps cover any costs associated with a guest and other third parties being harmed in your place of business. Whether they trip and fall or get sick from the food, this coverage ensures that you won't pay their medical bills out of pocket. Commercial property insurance, workers' compensation insurance, and business interruption insurance are also crucial. So keep reading, because these are discussed below.
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Restaurant general liability insurance will cover personal injury and property damage claims from customers and other third parties. Basic general liability coverage for small restaurants provides $1 million up to $2 million coverage. On the other hand, large restaurants can apply for a general liability coverage offering more than $5 million. So how does general liability insurance work in practice?
General liability insurance will pay for medical expenses if a customer or any other third-party sustains injuries due to an accident on your restaurant’s premises
General liability insurance will provide reimbursements if a customer or any other third-party had his or her property damaged by your restaurant’s business operations
You can turn to general liability insurance for help if a customer or any other third party decides to take legal action after sustaining personal injuries or property damage. It will pay for lawyer fees, settlements, administrative costs, and other legal expenses
General liability insurance can provide enhanced protection. This restaurant business insurance has optional products liability coverage, rented premises liability coverage, and advertising injury coverage.
Products liability coverage - General liability insurance for restaurants and bars has an optional products liability coverage. Product liability coverage covers the medical treatment of customers who got sick after eating spoiled or poorly prepared dishes from your restaurant. Also, it takes care of attorney fees, administrative costs, and other expenses
Rented premises liability coverage - Only add this to general liability insurance if you’re renting a commercial space and using it as a restaurant establishment. Rented premises liability coverage will reimburse the landlord if his or her commercial space is damaged by fire
Advertising injury coverage - Advertising injury coverage will cover legal expenses if your restaurant is sued for slander, libel, copyright infringement, and other offenses considered as advertising or reputational harm
Generality insurance is one of the most important types of insurance for restaurants due to the likelihood of slips, falls, and other accidents. Slips and falls are the most common accidents that happen in restaurants.
In fact, according to the NRA ( National Restaurant Association ) customers, who slipped and fell, file the vast majority of general liability claims against restaurants. In addition, the NFSI ( National Floor Safety Institute ) states that restaurants pay $2 billion a year on average for slip and fall accidents customers and employees sustain.
Slip and fall accidents don't happen out of the blue, they may sometimes but this is not the point we’re trying to establish here. The restaurant environment highly contributes to the likelihood of slips and falls. Some common causes are
Leaky ice dispenser
Spill and sprays from the fryer
Unsuitable or poor floor construction (e.g using a material for the floor that heavily promotes slipping and falling)
Improper maintenance and cleaning of floors
Slips and falls in restaurants can also result in the death of customers. There is little to no research investigating this yet (none we’ve found so far). Still, many news articles feature restaurant-related customer deaths. Here are some examples:
A 75-year-old man died after slipping and falling on the premises of a well-known restaurant. The restaurant in question had to pay the family of the deceased a settlement fee as per the order of the court
Rochester, N.Y. - A 3-year-old customer died after falling into the grease trap of Tim Horton’s restaurant
Another one of the best insurance for restaurants is commercial property insurance. Commercial property insurance will protect your business’s tangible business assets. Here’s how it works:
|Commercial property insurance will recoup lost investment if your restaurant’s building gets burned into ashes or wrecked by extreme weather. The insurance money you’ll receive will be equal to the actual cash value or replacement cost of the covered building||If theft, burglary, vandalism, fire, extreme weather, and other covered perils damage your restaurant’s building, commercial property insurance will provide money you can use for repairs|
Insurance companies underwrite coverages you can add to commercial property insurance. These add-ons are:
Stocks and contents coverage - Stocks and contents coverage will reimburse your losses if valuable items such as lighting, interior decoration, and furniture become lost or damaged due to fire, theft, vandalism, and other covered perils.
Business equipment and tools coverage - Commercial property insurance, restaurants need, offers business equipment and tools coverage. This will reimburse losses if fryers, stoves, and other restaurant equipment become lost or damaged due to fire, theft, vandalism, and other covered perils
Note that commercial property insurance doesn't cover floods. To get protection, endorse flood insurance to commercial property insurance.
Property damage is one of the greatest enemies of a restaurant. Theft, vandalism, and other similar exposures will cause minor damage to your restaurant’s tangible business assets. On the other hand, major damage, those kinds that might result in bankruptcy, might be caused by natural disasters that are impossible to stop if not unpredictable.
And so, don’t get complacent and expect business to stay alive and blooming. It’s best that you become a bit paranoid about things. Assuming your restaurant will sustain some physical damage sooner or later won’t hurt.
Restaurants experience property damage mainly because of fires. According to the National Fire Protection Association (NFPA), US fire departments have responded to 1,388,500 fire incidents in 2020. The agency did not state how many restaurant fires happened in the said year. Nonetheless, another report from the same agency provides insight. The 2014 NFPA report suggests that 5,810 restaurant fires happen each year. In addition, the cost of property damage from all restaurant fires is $119 million. Look at the table to know the most common causes:
|Cause of Fire||Number of Resulting Fires||Contribution to Property Damage (in 2014 million dollars)||Contribution to Property Damage (in 2021 million dollars)|
|Electrical Distribution and Lighting||522||$24.99||$29.34|
For research purposes, here’s another table from the report showing the number of eating and drinking establishment fire accidents and their cost from 1980 - 2014.
|Year||Number of Fires||Number of Civilian Injuries||Cost of Property Damage as Reported on the Same Year||*Cost of Property Damage in 2021 Dollars|
Restaurants are not only susceptible to fire but water damage too. This is especially true for restaurants operating in US locations where flooding is common such as:
Water damage affects both the restaurant’s building and the objects inside. In severe cases, the owner will have to spend on sewage repair, piping repair, roof replacement, wallpaper replacement, flooring repair, and replacement of chairs, tables, carpets, etc.
The 2006 report from the American Institute of Research provides a clue on the cost of water damage that flood brings. Using the HAZUS simulation model, which provides accurate results through analyzing data from different sources, the researchers established the annual cost of water damage at $2 billion for those living in areas with high flood risk. In addition, the price of water damage per individual is $290 million up to $813 million.
With that said, water damage resulting from floods can be very costly. And so, it’s best to get flood insurance if your carrier offers it as an additional option to the commercial property policy. Flood insurance can be very effective. For example, there’s the National Flood Insurance Program that claims to mitigate the cost of flood damage by $1 billion annually.
You are very vulnerable to failure when business operations are interrupted. A decrease in sales can have a very profound impact because it results in difficulties in recouping capital - water bills, employee salary, food supplies, electric bills, gas bills, equipment maintenance and repair, and many more. It’s also a fact that restaurants sell perishable goods, which, unlike clothes or shoes, can never be sold at a lower market price.
Business interruption insurance for restaurants ascertains survival if business operations are halted. If you have to close temporarily to relocate, renovate your restaurant’s building, or wait for an economic crisis to pass by, business interruption insurance will provide the money to be used for paying employee wages, loans, taxes, and other operational expenses.
Restaurants have the liberty to decide whether to get business interruption insurance or not. Nonetheless, getting so is essential, and here’s research reinforcing this point.
A study published in the Journal of Foodservice and Research explored the effects of hurricane Katrina on the restaurants in Southern Mississippi, one of the areas the hurricane severely affected. Remember that Katrina is the most devastating hurricane in U.S history. Going back to the topic, the study clearly showed that the restaurants, which Katrina severely hit, suffered major losses. The figures are shown in the table below:
|Aggregate Income Before Katrina||Aggregate Income After Katrina||+Cost lof losses incurred (in 2006 dollars)||Cost of losses incurred (in 2021 dollars)|
|Restaurants in Pass Christian||$6,219,566||$1,493,464||$45,391,274||$62,581,417.79|
|Restaurants in Long Beach||$15,252,668||$9,169,260||$6,083,408||$8,387,257.37|
|Restaurants in Biloxi||103,036,968||57,645,694||$45,391,274||$62,581,417.79|
You should always opt to get workers' comp insurance. This is a legal requirement if one or more employees are working for you. Workers compensation insurance sees to it that your business won’t end up shouldering expenses if an employee experiences a work-related injury or illness. Here’s what it covers:
Employee Treatment/Medical Procedure
|Your restaurant business’s employee will need medical treatment/procedure after experiencing burns, muscle overuse injuries, heatstroke, or any other work-related injury or sickness. Workers' compensation insurance provides the money you can use to cover surgeries, medical therapies, and more.|
|Hospitalization will be required if your employee experiences severe work-related injuries or diseases such as amputations, norovirus, etc. Workers' compensation insurance will provide money you can use to cover hospital bills|
|Your employee will need medicines after sustaining a work-related injury or disease. Workers' compensation provides the money needed to make the purchase|
|Rehabilitation is required if your restaurant business’s employee has impaired bodily functions due to stroke, amputations, cuts, lacerations, etc. Workers' compensation insurance covers this. It will provide the money for therapist fees, rehabilitation equipment, and other associated expenses|
Lost Income Compensation
|Work-related injuries or illnesses will force your employee to stop working for a while. Of course, you have to cover lost wages. Workers' compensation insurance takes this responsibility off your shoulders by providing the employee a weekly allowance equal to two-thirds or 67% of the average weekly wage|
|Your restaurant business’s employee might die because of a work-related injury or illness. Workers' compensation insurance helps with this by covering funeral expenses and providing financial aid to dependents|
Restaurants belong to the group of businesses with high occupational risks. The Bureau of Labor Statistics provides the following facts supporting this claim:
There are 91,800 non-fatal injuries and illnesses in restaurants
Per 100 workers, at least 2 will suffer from an injury or illness because of work
27.2% of all fatalities and injuries resulted to days away from work
Per 10,000 workers, 77 will suffer from an injury or illness resulting in days away from work
The Center for Disease Control and Prevention enumerates the most common hazards and provides additional insights into restaurant-related injuries and illnesses, which are: :
Sprains, contusions, and strains
Cuts and lacerations
In addition, here’s a table showing the approximate medical costs of treating the injuries we mentioned on the above bullet:
|Sprains, contusions, and strains||$2,626.53|
|Cut and Lacerations||$5,531|
|Burns (moderately severe)||$152,224|
|Ergonomic injury (upper extremity only)||$1,353|
True enough, the cost of restaurant-related injuries isn’t cheap. Therefore, if an employee demands reimbursement for the cost of their treatment, a restaurant can easily lose significant losses if there’s no insurance coverage.
Does your restaurant offer food delivery, catering, or mobile food service? If your business uses any type of vehicle, then you'll want to purchase a commercial auto insurance policy for each vehicle. Whether you have your own food delivery cars, catering vans, or you operate a food truck, having your autos properly insured is vital. Commercial auto insurance for restaurant owners provides the following protection:
Physical damage coverage - Physical damage coverage has two types - collision and comprehensive. Collision physical damage coverage will cover parts repair or replacement if your restaurant’s commercial vehicle got damaged after causing an accident or getting involved in an accident. On the other hand, comprehensive physical damage coverage will cover parts repair or replacement if your restaurant got damaged because of fire, theft, vandalism, and other covered perils
Delivering food is a demanding job. Aside from driving fast, the driver has to transact with numerous clients all by himself. The result of this is fatigue and reckless driving behavior. Data from 2019 show that food delivery drivers were involved in 60 transportation-related accidents.
Usually, it’s rare for restaurants to use trucks or cars to deliver food to customers, primarily because these vehicles have very limited mobility as compared to motorcycles and other similar vehicles. The problem is motorcycles are more hazardous than cars despite having lesser risk of crashing. The latest data from NHTSA show that there are 5,013 motorcycle crashes in the United States and deaths are 29 times more likely to happen when using a motorcycle than an automobile.
Dram shop/liquor liability laws don’t only apply to bartenders, bars, and pubs but also to restaurants serving guests with alcoholic beverages. Customers can hold restaurants liable when they sustain injuries after getting drunk.
The penalty varies per state but in most cases, it will reach up to more than $100,000. Also, aside from penalties, restaurants might need to pay a settlement which can scale up to millions depending on the severity of the injury the customers sustained.
With that being said, to protect themselves against the drawbacks of liquor liability laws, restaurants should consider getting liquor liability insurance. This insurance policy provides coverage the moment a drunk customer files a claim and tries to indemnify a restaurant.
A business owner’s policy is an insurance product that combines general liability insurance and commercial property insurance. Many insurance companies decide to customize their BOPs to gain leverage against competition. And so, you’ll find a business owner’s policy having additional workers' compensation insurance, commercial auto insurance, etc.
Subway franchises can get covered through a restaurant insurance policy. However, the best protection is through a tailored subway insurance having general liability insurance, commercial property insurance, and stand-alone products liability insurance.
Tailored insurance for delicatessens has general liability insurance with products liability coverage, commercial property insurance, and equipment breakdown insurance. Workers' compensation insurance and business interruption insurance can be added at an additional cost to deli insurance.
Tailored insurance for dairy queen franchises offers general liability insurance, stand-alone products liability insurance having a $3 - $5 million limit, workers’ compensation insurance, and business interruption insurance. Other available dairy queen insurance policies can be added as endorsements.
Pizza shop insurance offers general liability insurance with rented premises liability and products liability coverage, commercial auto insurance, equipment breakdown insurance, and commercial property insurance. Business interruption insurance and workers' compensation insurance can be added.
The average restaurant liability insurance cost is $68 per month or $816 per year for a $1 million coverage.
|Cost per Month||Cost per Year||Best for|
|CoverWallet||$51||$612||Restaurant insurance quotes comparison online|
|Thimble||$53||$636||On-demand and short-term business owner’s policy for restaurants|
If you have a really small restaurant such as a corner deli, bakery or cooking business, coffee shop, pizza shop, or an in-and-out cafe that doesn't take up a lot of space or serve a huge number of customers, then you may only need a small restaurant insurance policy. Small restaurant insurance premiums could get as low as $50 a month in terms of cost!
For many of you who wonder how much is insurance for a restaurant, the average restaurant insurance cost per month is $171 ($2,052 per year total). Of course, the answer to the question 'how much does insurance cost for a restaurant?' could vary significantly, depending on the size of your business, the city, and zip code you're located in, the coverages purchased, and what type of restaurant you are.
Restaurants need a minimum of 1 million general liability coverage to protect themselves against customer personal injury claims. Owners/managers pay $2.15 per $100 payroll to provide workers comp to employees. On the other hand, restaurants will do fine having a commercial auto insurance policy offering $50,000 up to $250,000 coverage.
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You have many options when buying restaurant insurance. Here are some reviews that talk about the pros, cons, and pricing of the $1 million general liability coverage of the most recommended carriers.
Customizable insurance coverage
Online insurance agents ready to answer questions
Stable restaurant insurance cost
Only ensures small businesses
Coverwallet works similarly to NEXT. All of its insurance policies are tailored to small businesses and can be availed online. However, what makes Coverwallet different is that it allows customers to talk with online insurance agents immediately to get an idea of the best policies that fit their needs.
Best for: Restaurant insurance quotes comparison online
Average cost: $51 per month
Our rating: 10/10
Get insured online
Customer representatives can’t be reached by phone
Thimble’s restaurant insurance is an on-demand and short-term business owner’s policy that combines general liability insurance, commercial property insurance, and business interruption insurance under one roof.
Best for: On-demand and short-term business owner’s policy for restaurants
Average cost: $53 per month
Our rating: 9/10
Easy online insurance application process
Online proof of insurance
Only insures small businesses
NEXT insurance is great if you're running a small restaurant. Insurance policies from this company are tailored to the needs of small businesses. NEXT offers various insurance policies which can be bundled for a 10% discount. NEXT offers online certificates of insurance and an easy online insurance application process.
Best for: Small restaurants
Average cost: $55 per month
Our rating: 8/10
Generous amount payable
The amount payable is generous (you can save on premiums by increasing your deductibles
If you want to get insurance with a generous amount payable, Hiscox will be a great choice. While most insurance companies offer $1 - $2 million coverage only, Hiscox decides to change the game by offering coverages that cover more than $2 million for settlements and legal costs.
Best for: Large restaurants
Average cost: $67 per month
Our rating: 7/10
Click the “Get Quotes” button on this page to know which restaurant insurance brokers and carriers provide tailored protection. Also, our restaurant insurance quote generator allows you to compare the offers and average restaurant insurance cost of brokers and carriers for an informed buying decision.
Alan Ahlberg Insuranker
Policy Type: Business Insurance
Company name: CNA Business Insurance
Long term insurance claim denied for my mother after 31 years of paying. Please never give this company a dime. You will not get your money back!
Sandeep Walia Insuranker
Policy Type: Business Insurance
Company name: Embroker Insurance
Great platform. Terrible policy. There is no teeth behind it. No coverage. It's a fake policy that they sell. Sold us an EPLI policy that later we came to find out had no EPLI coverage. Amazing that they can get away with outright fraud. Check the positive reviews. They are all 'Anonymous' posted by Emroker staff. Stay away and find a real policy that will actually provide you coverage. We've been bitten by them and hope to find restitution via a lawsuit.
Policy Type: Business Insurance
Company name: Berkshire Hathaway GUARD Insurance Companies
Wow, just like just about everyone else here...extremely disappointed with this company. I have found them to be in violation of many laws for doing business in my state(Calif) according to my investigation at the California Insurance Commision. I dropped by today at their request to furnish them with with documentation for my case. These people are as crooked as they can get away with. They aren't stupid, and they know how to throw threats around. They prey on good folks who are ignorant of their rights, and don't know what the insurance regulatory agency expects of Insurance companies in each state. I challenged them to not pay, to not extend the rental, to deny repairs. Then I let them know what my regulatory commision says they must do. More than likely my case will end up in trail. My attorney is a rock-star! A trail attorney, so bring it on! The day after we receive payment for medical and attorneys, the case will be investigated and processed by the Insurance Commisioners Office.
Meredith Baldridge Insuranker
Policy Type: Business Insurance
Company name: Berkshire Hathaway GUARD Insurance Companies
I wanted to reach out to let you all know I will not be securing insurance through Berkshire Hathaway Guard. This company is horrible, I have not signed any documents and I am unable to get anyone on the phone.
Donna Werge Insuranker
Policy Type: Business Insurance
Company name: Simply Business Insurance
I never purchased the policy. The person I spoke with "Bruce" was condescending and argumentative. He kept repeating himself and talking in circles telling me what I HAVE TO DO, basically trying to bully me into purchasing commercial insurance. I wouldn't use this company if they were paying me!