7 Factors to Consider When Buying Restaurant Insurance

customers enjoying their drinks in a restaurant

With roughly 50% of restaurants closing their doors in some capacity over the last three months, the industry is hurting. That hurt is prompting many to open up as quickly as possible per state guidelines.

As you open your restaurant's doors, it's important to assess the insurance coverage you have. It may be that your policies have lapsed during your closure or that your business has different needs due to the changes you've made.

Therein lies the purpose of this post on buying restaurant insurance.

Below, our team shares seven considerations every restaurant, new or old, should consider when buying new insurance, renewing their policy, or assessing it as part of their regular review process.

1. Your Location

Where you're located will have a profound effect on your insurance rates. Areas that are deemed to be more accident-prone or are more likely to be burglarized could be charged enough over standard rates that it could make sense to upgrade your area rather than paying the heightened expense.

While there's not much you can do about your location if you're already established, this point is valuable if you're in the process of picking a location for the first time. Call insurers and ask them how your policy is likely to change based on the areas you're considering. Weigh that information into your final decision of where to open up shop.

2. Legal Requirements Per Your Locality

While being as covered as possible no matter where you open is a good idea, different areas have different thresholds of how much insurance to carry.

For example, in some states, workers' compensation insurance may not be required. In most, it is and you could run into serious trouble if you're caught without it.

Work with a business attorney to determine which types of coverage you must opt into when buying restaurant insurance and what your policy limits should be.

3. How Much Equipment You Have

Speaking of policy limits, you'll want to get a good idea of what your restaurant's equipment is worth when liquidated. That's because insurance policies will only cover you up to the amount you disclosed upon signing your policy documents.

The more coverage you need, the more your monthly premiums will be.

You may be able to get a good estimate of what your equipment is worth on your own. If that's an issue, hire a valuation expert to come up with numbers you can work off of.

4. Alcohol Sales

While alcohol can be a large revenue driver for a restaurant, it can also be a huge bringer of liability. Alcohol consumption raises the risk of property damage and conflict between patrons which can result in a lawsuit.

Furthermore, in many states, if someone gets intoxicated at your restaurant and gets hurt off of your property, you may be held liable.

All of these variables make it so when you buy food insurance from PolicySweet or another provider, you must disclose that alcohol is served on your premises. This will heighten your policy premiums but will also give you the coverage you need to manage related fallout.

5. Lease Obligations

Very few restaurant owners own the buildings that they operate in. These locations are usually acquired via a lease agreement made with a local investment group.

When you sign your lease, your lease will almost certainly stipulate the kinds of insurance you must hold to legally work out of the building. Know these terms well as not complying could get you evicted and sued.

Lease stipulations surrounding insurance usually revolve around things that could pose a threat to the building. Some leaseholders will go further and stipulate miscellaneous types of restaurant insurance you must hold to reduce their risk of being sued by a patron that has trouble when dining with you.

6. Foot Traffic Your Restaurant Receives

Every person that comes into your restaurant represents as much risk as they do revenue. Policymakers know this and will want to get a read on what a typical day or evening looks like at your business.

If your insurer requests this information, the more accurate you can be the better. We've seen restaurants overestimate their crowds and end up vastly overpaying for their policies. Conversely, we've seen business owners underestimate and then find themselves locked in legal battles with insurers when trying to get compensated for claims.

7. Other Unique Factors

Not every restaurant is the same which makes it so unique policy riders should be considered.

For example, if you have a mechanical bull at your restaurant, your insurer will want to know about that. Even something as seemingly harmless as serving a dish table-side that you light on fire for the momentary effect could be a reason for an insurer to raise rates.

The bottom line is to always be forthcoming with your insurer and to work with an agent that knows which questions to ask. The more transparent you are, the less your chances will be of falling in a policy hole.

Buying Restaurant Insurance Should Never Be Considered a Luxury

As restaurants crack their doors open, we anticipate many looking for ways to cut costs. If you're going through that process, don't scale back your insurance.

Hard economic times inevitably bring cuts to policies which in turn, leaves financially vulnerable businesses exposed to greater financial hardships.

We hope our write up on options for insurance considerations helps shape your policy decisions and welcome you to read more of our content similar to buying restaurant insurance in our blog.


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