Restaurant Insurance: What It Is, Costs, and Companies

Whether you're opening a pop-up restaurant, establishing a neighborhood café, or investing in a fast food franchise, you may be wondering what kind of insurance you'll need to safeguard your finances from the dangers of doing business. We'll go over the fundamentals of restaurant insurance, including what it normally covers and how much it costs, as well as what to look for when comparing restaurant insurance companies. Armed with knowledge, you'll be well on your way to determining the right insurance for your restaurant.

Do I Need Restaurant Insurance?

If you own a restaurant, you must get restaurant insurance. A kitchen fire could damage your equipment, requiring you to temporarily shut down. A customer may sue you if they slip and fall in your restaurant's dining area or get food poisoning. Or one of your employees could be hurt on the job. All of these risks can be mitigated with the right combination of insurance policies. Some types of coverage may even be required by state law. 

You may keep your premiums cheap by obtaining only the coverage you require and comparing quotes from several firms. Some insurers may give you a discount if you combine different forms of coverage, and many will let you choose a greater deductible to keep your monthly payments low. You should also take steps to limit your risk, such as providing personnel with safety training. 

What Is Restaurant Insurance?

Restaurant insurance is often a set of small company insurance plans that protect against various hazards associated with the restaurant sector. Depending on the sort of restaurant, you may require some coverage but not others. A sandwich business that delivers will have different requirements than a tavern that serves beer. Here are some of the most common coverages required by restaurant owners. 

Workers’ Compensation Insurance

Most states require workers' compensation insurance for businesses with more than a certain number of employees. In some states, you must carry it even if you only have one employee. Workers' compensation insurance covers your employees' medical bills and missed wages if they are hurt or fall ill while executing their job tasks. Simultaneously, it usually protects the restaurant owner from employee lawsuits. 

General Liability Insurance

If a consumer sues you for non-professional carelessness, commercial general liability insurance can help cover your legal fees and judgments. This encompasses both material damage (such as a waiter spilling wine on a guest's fur coat) and physical injuries (such as slip-and-fall accidents). It also compensates the harmed customer's medical expenses. It also often covers advertising-related cases such as libel, slander, copyright infringement, plagiarism, and malicious prosecution. Check to see if your general liability insurance includes product liability, which can help cover food poisoning lawsuits. 

Commercial Property Insurance

If your restaurant's building or contents, such as cooking equipment, are damaged by a covered loss, commercial property insurance can assist pay for repairs or rebuilding. Fire and smoke, wind and hail, vandalism, some types of water damage, building collapse, and damage from airplanes or vehicles are all common dangers covered. 

Water damage from a leaking sprinkler would be covered if someone drove into your storefront. Earthquakes and floods, on the other hand, are often not covered, so some restaurant owners obtain supplemental policies to cover such risks. If you rent the space, you may frequently omit the structure from your policy and only cover your equipment, but you should first find out what the owner's policy covers. 

Inland Marine Insurance

If you carry equipment or inventory off-site, you'll additionally need inland marine insurance. It protects commercial property that is moved, shipped, or stored away from the premises. You shouldn't need this coverage if your property stays at your business location. 

Business Interruption Insurance

Business interruption insurance compensates you for lost income following a covered loss. For example, if you were forced to close your firm to repair hurricane damage, business interruption insurance would replace your missed income, allowing you to pay your mortgage or lease, any owed taxes or loan payments, and employee payroll. A business owner's policy (BOP) frequently includes business interruption insurance.

Business Owner’s Policy

A business owner's policy combines general liability and commercial property insurance into a single policy. It frequently includes business interruption insurance as well. It is intended for small to medium-sized businesses. A BOP can also be supplemented with additional coverages, such as equipment breakdown insurance. 

Spoilage Insurance

If your restaurant's food spoils due to a power outage or equipment failure, spoilage insurance will pay to replace it. 

Equipment Breakdown Coverage

If your air conditioning or oven breaks, your business operations may be compelled to halt. Mechanical, electrical, and pressure equipment breakdowns, as well as refrigeration and air conditioning devices and computers, are all covered by equipment breakdown insurance. It may also cover missed wages during repairs and the expense of replacing ruined food as a result of the breakdown.

Food Contamination Insurance

Food contamination insurance compensates for lost food due to contamination or cleaning of equipment. It can also help compensate your lost net income if your restaurant closes. 

Liquor Liability Insurance

When your restaurant is held accountable for supplying someone alcohol, liquor liability insurance helps cover legal fees. It also covers property damage and medical expenditures resulting from an alcohol-related event. A liquor liability insurance coverage will also cover lawsuits involving assault and battery or property damage caused by an intoxicated person, as well as drunk driving occurrences. 

Commercial Auto

You'll need commercial auto insurance if your restaurant owns a truck or other vehicles for delivery or other business purposes. It normally covers liability for personal injury and property damage, comprehensive and collision coverage, and, in some cases, medical expenses and uninsured motorist coverage for your business cars. 

Hired and Non-Owned Auto Liability Insurance

It is considered business use of a vehicle if you send an employee in their own vehicle to pick up supplies for your restaurant. If the driver causes an accident, your company could be held liable for the damages. If you experience scenarios in which vehicles that your company does not own are used for business operations, or if you rent or lease vehicles, you will require a hired and non-owned auto liability policy. 

Restaurant Insurance Cost

The annual price for restaurant insurance is determined by the size of your business, its location, what you serve, and who you serve. It also depends on the type of protection you require for your business. 

Most restaurants should expect to pay roughly $4,000 per year for a package that includes a business owner's policy, liquor liability insurance, and workers' compensation. However, some restaurant owners who require commercial auto insurance may have to pay more than that. A business package including coverage for rented premises, on the other hand, can start as low as $299 per year.

Best Restaurant Insurance Companies

Best Overall: Huckleberry

Pros

• Quick online quote and application process
• Most policies underwritten by Markel or Chubb
• Excellent customer reviews
• Offers online chat support

Cons

• Doesn’t offer employee benefits packages

Huckleberry provides plans for company owners starting at $62.50 per month ($750 per year) and workers' compensation coverage starting at $96 per month ($1,123 per year). Huckleberry offers most coverages a small restaurant owner could require, except employee benefits, and you can acquire instant coverage after a five-minute application procedure. 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

Pros

• 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

Cons

• Fewer specialized coverages, like food contamination insurance
• No employee benefits packages

Next Insurance provides a quick online price and application, as well as discounts of up to 25%, including a bundling discount of up to 10% when you combine policies. Furthermore, Next provides a live certificate of insurance, which is uncommon among insurance companies. At any moment, you may easily add new insureds and distribute the certificate. AM Best rates Next's financial soundness as A- (Excellent).

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

Pros

• Policies start at $299/year
• Backed by an insurer with an A+ AM Best rating
• Offers cyber and liquor liability

Cons

• Very limited property coverage
• Doesn’t offer commercial auto or workers’ compensation

A $299/year FLIP coverage may be sufficient for small restaurants who operate in rented facilities and do not have pricey equipment. The insurance provides general and product liability coverage, as well as business personal property/inland marine coverage for your equipment and coverage for damage to rented premises. You will, however, need to obtain workers' compensation coverage elsewhere. 

Best for Financial Stability: BiBerk

Pros

• A++ financial strength rating from AM Best
• Excellent online customer reviews
• 100% online quote and application
• Customizable business owners policies

Cons

• Doesn’t offer employee benefits packages

BiBerk is a subsidiary of the Berkshire Hathaway Group, and its insurance plans are underwritten by A++ rated insurance firms. The insurer has also received positive feedback from third-party websites and provides a plethora of add-ons to its company owner's policy that will appeal to restaurant owners. Furthermore, you can obtain immediate coverage entirely online. Policies for business owners begin at $500 per year.

Most Flexible Coverage: Thimble

Pros

• Purchase coverage by the job, month, or year
• Occurrence-form coverage
• Get coverage in minutes entirely online

Cons

• Doesn’t offer commercial auto
• Fewer specialized coverages

Thimble allows you to acquire short-term coverage, pause your coverage, and simply make adjustments online if you work events or have seasonal fluctuations in your coverage needs. Coverage is also of the occurrence-form variety, which is more robust. It's quick and simple to obtain coverage, and Thimble's underwriters have AM Best A ratings.

Best for Customer Satisfaction: Chubb Ltd

Pros

• 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

Cons

• Must speak with an agent to start your policy

J.D. Power has recognized Chubb for customer satisfaction, and the company has received less complaints from the NAIC in the last three years than would be expected based on its market share. In addition, the organization has the best attainable financial strength rating and provides the majority of coverages that a restaurant owner could require, from specific add-ons to workplace perks to umbrella coverage. Coverage, however, cannot be purchased totally online.