Business Insurance for Restaurants

Person in suit switching on insurance button from off to on

Business insurance is designed to protect a business owner's financial assets and is an essential investment for a restaurant.

Recommended action box icon

Already know what you’re looking for? Find out how much the right coverage will cost you right now.

Get a Free Quote

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 RESTAURANT

Example 1: One of your employees fails to put out a sign warning of a wet floor after mopping. A customer slips and falls, breaking her arm. She demands that your business pay for her medical treatment. Your general liability insurance will likely cover this expense.

Example 2: A server is rushing through the restaurant to get drink orders when she accidentally bumps a customer and knocks him over. He falls to the ground and breaks his wrist. He sues you for damages. Your general liability insurance will pay for your legal expenses, including the cost of a settlement if necessary.

Example 3: A back-of-the-house employee is hauling in a delivery of supplies on a dolly when he loses control of it. The dolly smashes into the luxury vehicle of a customer. Your general liability insurance should cover the cost of repairing the damage.

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, 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:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • 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.

Recommended action box icon

How much will the right insurance cost you?

Find what business insurance will cost for your business right now

Get a Free Quote

Other Types of Coverage 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 restaurants should obtain:

 

Workers’ Compensation Insurance

Your state most likely requires that you carry workers’ comp insurance if you have employees. The policy you get will provide financial help if one of your employees is injured performing job-related duties. It will pay for medical treatment as well as help cover lost wages if the employee has to take time off of work to recover.

 

Commercial Property Insurance

It takes a lot of capital to acquire the kitchen equipment, dining room furniture, and other supplies needed to start a restaurant. If you were to lose a significant portion of your property to an unexpected event like a fire, it would be costly to replace. With commercial property insurance, you can file a claim and get money for replacement property if it is damaged by a covered event.

Types of Coverage Some restaurants May Need

In addition to the policies outlined above, there are a few other types of coverage your 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 Insurance

An umbrella policy is designed to pick up where a general liability insurance policy leaves off. If you are in a situation where the limits of your general liability insurance are exceeded, like if you lose a major lawsuit, then your umbrella policy will pick up the slack. It will pay the remaining damages up until the limits of the umbrella policy are reached.

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.