What types of insurance are necessary for your restaurant?
Developing an excellent menu, creating the perfect ambiance, hiring the best wait staff are all key parts of debuting a fabulous eatery.
Of course, it’s also important to take care of less exciting tasks such as buying restaurant insurance.
Proper business insurance can protect your establishment from a variety of risks such as customer complaints, equipment failure, and employee injury. Once you have the right restaurant insurance policies in place then you can get on with the fun of delighting your guests.
Why do you need insurance for your restaurant?
In the United States, restaurant owners invest an average start-up cost of $375,500 and sometimes pay as much as $750,000 to open their doors. That’s a big outlay before even serving one diner. However, if you try to cut corners on things like getting business insurance then you can hurt your operations in the long-run.
Even one liability lawsuit, frivolous or not, can eat up money that would be better used for daily operations or to pay down start-up debts. Unfortunately, without the correct business insurance to help you handle such a lawsuit you’d have to borrow money from your bottom line.
As you probably know, restaurants automatically come with a lot of hazards. From dealing with the general public to relying on specialized equipment, it’s important to recognize what could go wrong and why insurance for your restaurant is a great idea.
For example, a customer becoming ill or injured is generally the biggest risk in the restaurant industry. There are other dangers that can develop into a lawsuit such as choking, food poisoning, scalding, slip and fall, and breaking teeth.
Plus, you have to consider several other situations when restaurant insurance could help your business.
- Property damage
- Employee injuries
- “Dram Shop” (Liquor License) violations
- Equipment failure
- Complying with the terms of your mortgage or bank loan
Types of insurance your restaurant will need
Below are the standard policies purchased by most restaurateurs.
- Property Liability – mainly protects the physical building in case of fire or natural disasters like earthquakes or tornadoes
- General Liability – offers coverage when a patron or business associate experiences personal injury or property damage while on the premises
- Workers Compensation – this type of insurance is often a state requirement and is used to cover any employee injuries received while on the job
- Food Contamination – protects against the financial loss of food that becomes spoiled or contaminated
- Auto Insurance – protects your delivery truck or other business vehicles
Most business insurance policies are low cost in comparison to their robust benefits. In fact, many business owners pay only dollars a day for each of their restaurant coverages. That’s pretty amazing when you consider how one lawsuit can set you back thousands of dollars!
For example, in 2006 a Connecticut restaurant had to pay each of 12 diners a sum of $30,833 because the business was found negligent of causing food poisoning. This meant the restaurant paid out a total sum of $370,000.
In similar cases, restaurant owners are required to pay medical bills, out-of-pocket expenses, lost wages, and even pain and suffering. Not to mention coming up with hundreds of dollars per hour in attorney’s fees.
Of course, restaurant insurance may not be the most glamorous item on your to do list. Yet it can be the most beneficial thing you’ll ever do to nurture and grow your culinary dream.