Nightclubs and lounges can be hazardous businesses to run, with risks arising from the possibility of injured patrons, theft, disasters such as fires, and more. Purchasing a broad range of insurance coverages can financially protect you from these and many other common hazards.

What insurance coverage do I need for my nightclub?

There are many types of insurance coverage to consider, but these policies are particularly relevant to nightclubs and lounges:

General Liability Insurance

General liability insurance covers incidents of accidental third-party property damage, bodily injury, personal injury, and advertising injury. Nightclubs and lounges are frequented by large numbers of customers, serve alcohol, may be dimly lit, and may have a dance floor—all factors that can elevate the risk of guest injuries or property damage. If patrons trip or slip and fall, you could be held liable for their injuries. 

You can decrease the likelihood of incidents occurring by cleaning up spills promptly, keeping floor coverings clear and in good condition, clearly marking steps that might be hard to see, and training employees and bouncers in dealing with unruly guests. However, it’s impossible to prevent all incidents. General liability insurance can step in to cover medical bills and lawsuits if a customer is injured or has their property damaged at your nightclub. 

General liability insurance includes coverage for product liability, which can cover injuries caused by products you sell, such as drinks or food. If a customer falls ill due to food or drink you served them, general liability insurance may cover the claim. General liability insurance also covers personal and advertising injuries, which can include libel, slander, and copyright infringement.

Examples:

• Bodily injury: A customer steps on a broken glass before your employees have a chance to clean it up. The customer requires medical attention for her cuts. General liability insurance would provide medical coverage for the customer and legal expense coverage if you are sued.
• Products and completed operations: A customer severely burns his mouth after drinking hot coffee served at your lounge. He sues your business. General liability insurance would provide coverage.
• Personal and advertising injury: Your nightclub creates a new advertising campaign using designs that unintentionally look very similar to another company’s work. The other company sues for copyright infringement. Your insurer will cover the lawsuit and any resulting settlement.

Commercial Property Insurance

Commercial property insurance protects the value of your business’s property, providing funds for repairs, replacement, or rebuilding if property is damaged or destroyed by a covered peril. For nightclubs and lounges, property and fire risk may be elevated if your business has a kitchen or allows customers to smoke in certain areas. Commercial property insurance can provide financial support if your property is damaged by common perils, including fire, windstorms, hail, vandalism, and water damage.

Commercial property insurance covers the following:

• Buildings belonging to or leased by your company
• Contents of the building, including furniture, equipment, and tools
• Property of others while it is under your care, custody, or control

Example:

• A grease fire breaks out in your nightclub’s kitchen, causing severe damage to your cooking equipment and the kitchen itself. Your commercial property insurance would pay for repairs.

Business Interruption Insurance 

If an incident such as a fire or storm causes major property damage, you may be forced to temporarily close your nightclub or lounge. Recovery can be very difficult in this situation—you would lose the income your business relies on and may still be required to pay ongoing expenses such as rent and employee payroll. 

Business interruption insurance can step in to reimburse you for lost income and operating expenses if your nightclub is forced to close due to a covered peril. This coverage is typically available as an addition to your commercial property insurance and covers the same perils.

Example:

• After a storm damages your nightclub’s roof, you must close temporarily while repairs are completed. Business interruption coverage would pay for your rent and other expenses until you are able to reopen.

Liquor Liability Insurance

Liquor liability insurance is a key coverage for nightclubs and lounges since their business revolves around selling alcohol. Many states have “dram shop” laws that hold businesses liable if they serve an intoxicated customer who later causes an accident or injury. Even in states without these laws, you could still be held liable for the actions of drunk patrons, such as when a customer leaves your club while intoxicated and causes a car collision or starts a violent altercation with another person and injures them. 

Liquor liability insurance will step in to cover any claims that arise as a result of the actions of patrons to whom your business serves alcohol. Commercial leases or liquor license laws may require you to have this coverage.

Example:

• A customer has many strong drinks at your establishment and becomes visibly intoxicated. He then attempts to drive away and strikes another car, causing the occupant serious injuries. The injured person sues your nightclub. Your liquor liability insurance would cover the lawsuit and any resulting settlements.

Commercial Crime Insurance

Nightclubs and lounges often have a high volume of cash transactions, are frequented by large amounts of patrons, and have many employees. This means that there is a higher risk that your club could become the victim of a crime.

Commercial crime insurance provides financial protection from losses caused by theft, fraud, robbery, burglary, forgery, or other crimes. Coverage applies both to crimes committed by outside parties and crimes committed by your own employees. 

Example:

• At the end of a busy night, someone steals $3,000 from your club’s cash register. Commercial crime insurance would cover the loss. 

Workers’ Compensation Insurance

Workers’ compensation insurance covers employees’ medical expenses and lost income if they suffer an injury or illness because of their work. Workers’ comp also provides financial benefits for an employee’s dependents in the case of a work-related employee death.

For employees of nightclubs and lounges, there is a risk of injuries from slips and falls, cuts, burns, and lifting heavy objects. It’s also possible that employees may be injured by intoxicated patrons. In almost every state, workers’ compensation insurance is required for employers, and there may be serious fines and penalties for companies that do not secure adequate coverage.

Example:

• An intoxicated patron trips on a step and grabs your employee for balance, knocking the employee down. The employee breaks her wrist. Your workers’ compensation insurance would pay for her medical expenses and a portion of her lost income while she is unable to work.

Business Owner’s Policy

A business owner’s policy (BOP) could be a good option for many nightclubs and lounges. This type of insurance combines general liability, property, business income, and extra expense coverage together in a single package. A BOP can help you pay less in premiums while obtaining a wide range of coverage since the cost for a BOP is typically lower than the price of buying each policy individually.

Additional Coverages

• Bailee’s insurance covers client property while it is in your care, custody, or control. This may be relevant for clubs and lounges that offer a coat check or valet service.
• Employment practices liability insurance protects your business against lawsuits by prospective, current, or former employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
• Equipment breakdown insurance covers the repair or replacement of malfunctioned or damaged equipment and many of the costs associated with the breakdown of equipment, including spoiled inventory and losses to business income. If your club depends on equipment such as refrigeration systems, this coverage can help if there are any malfunctions.

Pricing and Quotes

Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a nightclub with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for nightclubs and lounges:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Business Insurance and Coronavirus

COVID-19 has had a major impact on establishments such as nightclubs and lounges, and many have been forced to close. As the situation continues, business owners may be wondering how insurance can provide coverage during the pandemic.

It’s important to understand that you cannot purchase a new policy to cover coronavirus-related losses that have already occurred; insurance policies will not cover losses that have already been discovered.

In the majority of cases, business interruption insurance policies you have in effect will not cover losses caused by coronavirus. These policies typically only cover losses caused by a direct physical loss or damage, like a fire or theft. Some business interruption policies will include coverage for losses caused by “communicable or infectious diseases,” but this is rare.

How workers’ compensation insurance handles coronavirus cases varies widely depending on the state. If you have employees who contract coronavirus on the job, they may be eligible for workers’ compensation payments in some states.

If your business continues operating and a client or other third party sues you claiming that they contracted coronavirus from your business, some commercial general liability policies will provide coverage, depending on your individual policy and the laws of your state.

Consult our FAQ on coronavirus and business insurance for more information.

Final Word

When you run a nightclub or lounge business, it’s necessary to prepare yourself for the particular risks that your business will face, from injured patrons to fires. If your company must cope with an expensive accident or lawsuit, it could be difficult to continue operating. With a comprehensive range of insurance policies to provide financial support, you can ensure that your establishment will be able to survive any unexpected disasters that arise.