Running a restaurant can be rewarding, but food service is also a high-risk industry that presents many hazards. It’s important to maintain a comprehensive range of insurance coverage to protect your business from common hazards such as fires, theft, injuries for which you could be held liable, and more. With appropriate insurance, you can feel secure knowing that your business would be protected in the event of a disaster.

What insurance coverage do I need for my restaurant?

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

General Liability Insurance

General liability insurance covers incidents of third-party property damage, bodily injury, personal injury, and advertising injury. This coverage is essential for restaurants since there’s always a chance that a diner could be injured. Incidents caused by customers tripping or slipping and falling are common, particularly in establishments where alcohol is served. In addition, customers may have allergic reactions to food ingredients, eat improperly cooked food, or burn themselves on hot coffee. 

Although there are steps you can take to mitigate these risks, such as training your employees, keeping walkways clear, promptly cleaning any spilled liquids, and providing allergen information, 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 restaurant.  

General liability insurance includes coverage for product liability, which is critical for restaurants because it covers injuries caused by your products, such as the food you prepare. If a customer falls ill after eating your food, 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 slips on spilled water and falls down a staircase, sustaining broken ribs and a broken arm. Your general liability insurance would pay for medical expenses and legal fees if the customer sues.
• Property damage: One of your servers spills coffee, damaging a customer’s expensive coat. Your insurer would cover the damages.
• Personal and advertising injury: Your restaurant’s new advertisements use designs that unintentionally look very similar to a professional illustrator’s work. The illustrator sues for copyright infringement. Your insurer will cover the lawsuit and any resulting settlement. 
• Products and completed operations: A restaurant customer becomes very ill after eating food contaminated with E. coli. She sues the restaurant. General liability insurance would cover legal fees and settlements. 

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. Since restaurants have a high risk of property damage, this is a crucial coverage. 

Restaurant equipment such as stoves, refrigerators, or grills could cause a fire to break out. Although you can reduce your risk by frequently inspecting wiring, keeping kitchens clean, making sure equipment has fire protection items such as hoods and filters, and ensuring that you have adequate fire extinguishers, there is still always a possibility that a fire could occur. 

Recovering after a disaster can be costly and difficult. Commercial property insurance can provide financial support to help you replace or repair business property that is damaged by common perils, including windstorms, hail, fire, 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 fire breaks out in your kitchen’s deep fryer and spreads to other areas of the building. Your commercial property insurance would pay to replace your damaged equipment and repair the damage to the building. 

Business Interruption Insurance

If adverse circumstances force you to temporarily close your restaurant, recovery can be very difficult. In addition to losing income, you 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 restaurant is forced to close due to a covered peril, such as fire, storm damage, or other property damage. This coverage is typically available as an addition to your commercial property insurance and covers the same perils.

Example: 

• After a fire, your restaurant must close while repairs are completed. Business interruption coverage would pay for your rent and other expenses until you are able to reopen. 

Workers’ Compensation Insurance

Workers’ compensation insurance provides financial and medical benefits for your employees or their dependents in the case of a work-related injury, illness, or death. Most states legally require all companies with employees to provide workers’ compensation coverage. This coverage is key for restaurants since restaurant work leads to many common injuries — employees may slip and fall, cut or burn themselves while cooking, or injure themselves while lifting heavy items, among other risks. 

Workers’ comp will pay for medical expenses, lost income, and rehabilitation for injured workers, and will provide death benefits and funds to cover funeral costs in the case of a work-related death.  Regulations for workers’ comp benefits vary widely by state, so it’s important to make sure that your business is complying with local laws. 

Example: 

• An employee in your kitchen accidentally cuts herself severely. Your workers’ compensation insurance would pay for her medical expenses and a portion of her lost income if she is unable to work for a time. 

Liquor Liability Insurance

If your restaurant serves alcohol and a customer drinks too much and causes bodily injury or property damage, you could be held liable. You could be sued if a customer leaves your restaurant while intoxicated and causes a car collision or starts a violent altercation with another person and injures them. Many states have “dram shop” laws that hold businesses liable if they serve an intoxicated customer who later causes an accident or injury. 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 visits your restaurant and drinks several strong drinks over a short period of time, becoming clearly intoxicated. After leaving the restaurant, the customer strikes and kills a pedestrian with his car. His blood alcohol level was found to be well over the legal limit. Family members of the pedestrian sue your restaurant. Your liquor liability insurance would cover the lawsuit and any resulting settlements. 

Equipment Breakdown Insurance

Restaurants rely heavily on equipment such as refrigerators, freezers, ovens, and commercial stoves. If the equipment breaks down, it can have a substantial impact on your ability to operate your business. Although some business owners may believe that commercial property insurance would cover these situations, equipment breakdowns are typically excluded from commercial property coverage. Equipment breakdown insurance can step in to provide funds to repair or replace damaged equipment, cover lost business income while the equipment is out of commission, and replace spoiled food. 

Example: 

• Your seafood restaurant’s refrigerator fails overnight and you must throw out large quantities of seafood. Your insurer would pay for you to repair your refrigerator and replace the affected food. 

Commercial Crime Insurance

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. Since restaurants typically handle large amounts of cash and have many employees, commercial crime insurance is an important consideration. 

Example: 

• One of your servers steals $1,200 from your restaurant’s cash register at the end of a shift. Your insurer would cover the loss. 

Business Owner’s Policy

A business owner’s policy (BOP) could be a good option for many restaurants. This type of insurance combines general liability, property, business income, and extra expense coverage together in a single package. A BOP can help smaller companies 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. Many insurers will add additional insurance coverages to a BOP by endorsement. 

Additional Coverages

• Cyber liability insurance can cover financial losses that result from cyber events such as data breaches, hacking, viruses, denial of service attacks, and more. This is an important consideration for restaurants since they take a high volume of credit card transactions, may take orders through online systems, and may provide a guest wireless network for patrons. 
• Commercial auto insurance is necessary for any business that owns one or more vehicles titled under the business’s name. It covers bodily injury and property damage if the driver of the vehicle is at fault in an accident, as well as the value of the vehicle itself if it’s damaged by a collision or another peril.
• Hired and non-owned auto insurance covers liability that occurs when employees drive personal vehicles for work purposes. If your restaurant offers delivery service, and employees use their own vehicles to deliver food, this is an important coverage to purchase. 
• Bailee’s insurance covers client property while it is in your care, custody, or control. This may be relevant for restaurants 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.

Pricing and Quotes

Pricing for restaurant 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 restaurant 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 restaurants:

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

Business Insurance and Coronavirus

COVID-19 has had a major impact on restaurants, and restaurant owners may be unsure about how their business insurance will handle this situation. 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 after visiting 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

Running a restaurant can be rewarding, but restaurants face many risks as well. It’s a good idea to make sure you have appropriate business insurance in place in the event of disasters or lawsuits that may arise in the course of doing business. With the financial support insurance can provide, you can rest assured that your restaurant will survive unexpected catastrophes, whether it’s a fire, a customer injury, or theft.