It might not be the most exciting thing to think about when you're planning to open a new restaurant, but it's vitally important—you'll need insurance. It's one area in the restaurant business where you do not want to skimp.
Insurance can protect you and your business against myriad problems from broken equipment to liability lawsuits. Depending on where you live, you might be required to carry certain types of insurance for your restaurant. You'll also have to carry certain types of insurance to satisfy your bank loans and mortgage terms.
Property Insurance protects your premises in the event of fire and vandalism, but it might not cover natural disasters such as floods or earthquakes. You'll need additional coverage for that. If you have any mortgage on your business or your equipment, you should carry a property insurance policy and your lender might even require that you do so.
General Liability is the umbrella policy that protects you if someone slips and falls in your restaurant or gets sick after eating there, whether it was your fault or not. It is a must-have in today’s sometime sue-happy world.
Most states require that any establishment holding a liquor license carry liquor liability insurance as well. It helps protect you if a customer has too much to drink at your establishment then tries to drive and hurts himself or others.
If you have a company vehicle, you'll want automobile liability, too. It might be covered under your general liability policy but check with your insurance agent to be sure.
Workers compensation insurance protects you if an employee is hurt at work. Most states require that all employers carry some type of workers comp insurance.
Unemployment insurance covers employees who no longer work for you until they find employment.
Other Types of Restaurant Insurance
Depending on your mortgage and financing, you might want to carry a hefty life insurance policy to satisfy your lender. It's also a good idea to have life insurance, so your family isn’t left with a restaurant they don’t know how to run and bills they can’t pay if something happens to you.
There's insurance coverage for just about any object, action, or person you can think of so you're not limited to those mentioned here. You can purchase some other types of insurance if you have special concerns, but keep in mind that these extras will often cost you as much if not more than whatever it is you're insuring.
If you lose sales due to a specific cause, loss of business insurance can recoup some of that income. You might only break even given the premiums and the deductible, however, depending on how much you lose.
If you lose power because of fallen power lines or a storm and the entire contents of your walk-in and freezer spoil, food contamination insurance will pay to replace the food. Specific peril insurance covers many natural disasters that general liability insurance doesn’t. Damage caused by events like earthquakes, floods, or wind is covered under this type of policy.
The Bottom Line
Use a trusted insurance agent when you're buying insurance for a new restaurant. An agent will know the local and state laws regarding how much insurance you're required to carry and how much. He can help you decide how much more you might want to carry over and above the minimum.
Buying restaurant insurance might seem like a lot of money for little or no return, but it's always best to be prepared in case the worst happens.