Types of insurance for the food business



Insurance is key for any restaurant or bar. Are you well covered?

Every business incurs a certain level of risk. Insurance gives you the peace of knowing that, should any unforeseen circumstance happen, you will not lose everything you've earned through hard work. Restaurants can be especially vulnerable since they work with a high volume of customers and are dependent upon their facilities running properly.

When determining what kinds of insurance you will want for a food and beverage or restaurant business, look first at what coverage is required by law, and then what types of insurance is required by your lenders. Once that has been established, look at what your special risks are and decide how much of this risk you want to assume, and what you need protection for.

Employee insurance
The law requires that you have workers compensation and unemployment insurance if you hire any employees. Workers compensation takes care of medical bills if employees are injured on the job. Unemployment insurance pays ex-employees until they become employed again. You may also want to consider accident or major medical or disability insurance as an employee benefit.

Property and casualty insurance
Lenders will want to cover their risk with insurance on the property itself, which will cover the building, contents, tenant improvements, glass breakage, and food spoilage that occurs because of a covered loss. This basic insurance normally covers damages from fire, theft and windstorm. It may also compensate for injuries that happen on the property.

Riders to the policy
You will probably want to consider adding a rider or two to your property policy. These types of coverages are not available in every state or on every policy and some may be too expensive for you.

  • Specific peril insurance covers flood, earthquake or other weather-related perils.
  • Employment practices liability protects you against things such as wrongful termination, sexual harassment suits and other employee lawsuits.
  • Food contamination and spoilage insures you if something such as a lightning storm shuts down the electricity for your coolers, resulting in food spoilage or contamination of your inventory.
  • Loss of business income insurance enables you to recover income from lost sales should one of the covered events occur.

Sometimes called breakdown and interruption Insurance, loss of business income insurance gives protection on a level your basic property policy does not. If an equipment malfunction or breakdown occurs, it can cost you more than just a repair bill. You may also lose your inventory and your earnings for a certain length of time. This insurance covers things like air conditioning, computers and cash registers as well as kitchen equipment, and is a valuable coverage for most restaurants.

General liability insurance
The reasons you will want this type of insurance is to protect yourself and your business in case someone sues you for something that happens while they are on your property. Your lender or your leaseholder may also require this coverage. General liability insurance covers lawsuits due to accident, injuries, or claims of negligence, covering the cost of legal defense as well as the medical expenses. You may also want an umbrella or excess liability policy to offer added protection to the basic limits of the policy.

Liquor liability insurance
If you sell liquor, your license will probably specify that you need to carry liquor liability insurance, which covers you in case a customer who has been drinking gets in an accident on the way home and hurts himself or someone else.

Automobile liability insurance
If your employees make food deliveries or otherwise use a company car, you may want automobile liability insurance to cover any lawsuits that may result when an employee, including you, drives a company vehicle.

Employee Dishonesty
You may not have considered it, but employee theft and dishonesty can be a serious drain to businesses, particularly restaurants. You may want employee dishonesty insurance to cover employee crime, which puts both you and your customers at risk.

Other types of insurance
Protecting yourself with life insurance and long-term disability insurance is also a good move. If you are killed or injured in an accident, you or your heirs may need to pay someone to run your business. Having this kind of insurance can help mitigate the extra expenses.

Some of the premiums may be expensive, especially if you buy the coverage in separate packages. All-in-one coverage sometimes helps to lower the cost of insurance. Consider what you’re gaining by adding each type of coverage. Trying to get by with inadequate coverage is an invitation to financial disaster. Make sure you have the right type and right amount of coverage.