About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
Learn more about the risks covered by general liability insurance.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A FAST FOOD RESTAURANT
Example 1: A customer comes into your restaurant while an employee mops the floor. The employee forgot to display a “wet floor” sign and the customer slips, fracturing their wrist. General liability insurance would cover the customer’s medical expenses and any other damages in the event of a lawsuit.
Example 2: While potential investors review your kitchen operations, one investor reaches for a top shelf and accidentally knocks several large boxes down on everyone. Your general liability coverage would cover any related medical costs and other potential damages stemming from the accident.
Example 3: Your restaurant recently added hot drinks to its breakfast menu. As your staff learns to use the new espresso machine, some drinks come out hotter than others. Unfortunately, a hot chocolate burns a customer as they sample the drink. General liability insurance would cover the customer’s medical bills and any other damages in the event of a lawsuit.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
Cost of General Liability Insurance
On average, fast food restaurants in America spend between $500 - $1,200 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
Other Types of Coverage Fast Food Restaurants Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all fast food restaurants should obtain:
Business Interruption Insurance
While you can quickly resolve most accidents at your restaurant, a fire, break-in, or severe weather could force you to temporarily close for repairs. In such situations, business interruption insurance can help cover some of your financial losses until you’re ready to open again.
Workers’ Compensation Insurance
Most states require restaurants to carry workers’ compensation insurance for their part-time and full-time employees. This insurance option covers medical costs and other expenses if an employee becomes injured on the job. Workers’ compensation insurance also covers disability and death benefits stemming from work-related incidents.
Types of Coverage Some fast food restaurants May Need
In addition to the policies outlined above, there are a few other types of coverage your fast food restaurant may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Commercial Umbrella Coverage
Operating a fast food restaurant poses numerous risks, and certain situations could lead to a lawsuit that exhausts your primary insurance limits. Commercial umbrella insurance provides coverage beyond your current policy limits in the event of an expensive accident or lawsuit.
Commercial Property Insurance
If you own the building in which your restaurant operates, you should consider investing in commercial property insurance to protect against common accidents caused by fire and severe weather. This type of coverage not only protects your building, but also the business-related contents housed inside like specialized kitchen equipment, computers, and furniture.
Additional Steps to Protect Your Business
Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
Frequently Asked Questions
What is included in a business owner’s policy?
A typical business owner's policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company's needs.
What is the difference between business insurance and general liability insurance?
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it's best to be proactive when it comes to protecting your assets. After all, you can't buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.