Make Sense of the Menu of Restaurant Insurance Coverage Options
If the idea of selecting restaurant insurance coverage makes your head hurt, get to know the restaurant coverage types
Q. I'm a chef and I'm in the process of opening my own restaurant. When I research restaurant insurance, it makes my brain hurt. Can you tell me what kind of insurance restaurant owners like me should consider?
We posed this question to Larry Little, a Farmers Insurance® agent based in Chandler, Arizona. Here's what he had to say about restaurant business insurance.
A. Here's the shortest answer to your question (and hopefully it doesn't hurt your brain). Here are some insurance options that you may want to consider as a restaurant owner:
- Property insurance
- Fire coverage
- Personal property coverage
- Business expense coverage
- Workers' compensation insurance
- Specialty insurance coverage
But as you've discovered, it gets complicated from there. Restaurants – especially businesses serving alcohol, making deliveries or offering valet parking – have unique risks. The type of insurance coverage you may select can be different, based on things like whether you rent or own the building or space the restaurant is in.
Within those types of insurance, you can get coverage for injuries, accidents and other losses that can happen in a restaurant in two important categories: 1) buildings and equipment and 2) liability.
"What about building and equipment coverage?"
Whether you rent your building or own it, you’ll want property insurance that protects the full value of the restaurant. If you rent, you may also want to consider property coverage that includes:
- fire damage to the property;
- personal property, such as appliances, chairs, tables and dishware;
- additional business expense coverage, in case you need to relocate while the building is being repaired after a covered loss.
"Are there coverage options that I may not even be thinking about?"
Whether you rent or own the building, you may also want specialty insurance coverage. This type of insurance is customized coverage for losses that are unique to your business or industry. For example, some clients who own restaurants add sign and glass coverage, because outdoor signs and building glass are expensive and an easy target for vandals. One customer owns a restaurant filled with valuable sports memorabilia — autographed photos, collectible jerseys, balls signed by winning teams. These items are difficult and expensive to replace. He has additional fine arts coverage, which provides coverage against loss for these items.
If you rent the restaurant space and have made improvements to the building that your landlord didn't reimburse you for, such as upgrading the commercial ventilation system, you may want to consider coverage for those investments in case one of these upgrades or improvements is damaged in a fire or other accident.
"I've heard restaurant liability coverage is important. How does that work?"
Liability provides coverage if your business is at fault for an accident, and a person is injured or property is damaged in the accident. If the person or property owner sues your restaurant, liability insurance can cover the lawsuit and may cover other related expenses, such as medical costs. Here are a few example scenarios that could occur at your restaurant or that may impact your business:
- If a customer trips on an uneven or slippery surface in your dining room
- If you own a food truck, and you or an employee hits another vehicle
- If an employee suffers a back injury from unloading delivery boxes
- If an employee sues you for discrimination
- If a customer suffers from a food-borne illness
- If an intoxicated customer who was served by your bartender injures a person
- If credit card information is stolen in a cyber security breach
In these scenarios, legal fees alone could be costly, even if the court finds you did nothing wrong. You can help protect your business with liability coverage, even if you're not at fault. As a restaurant owner, you should talk to an insurance agent to discuss these types of scenarios to understand the insurance coverage you currently have and to find out more about the insurance options available for your business.