7 Types of Insurance Needed for Restaurants and Food Service Businesses

Insurance for the food and beverage industry is a broad concept, covering a wide range of businesses such as restaurants, fast restaurant, cafés, bubble tea shops, bars, and takeout restaurant. Whether you are planning to start a restaurant or are already operating one, one crucial aspect that cannot be overlooked is purchasing the right and appropriate commercial insurance. The high customer traffic drive the businesses to significant risks. To manage these risks, business owners need to develop a comprehensive insurance plan. Here are several types of insurance to consider when operating a restaurant, along with a brief introduction:

• General Liability Insurance

• Commercial Property Insurance

• Workers' Compensation Insurance

• Disability Insurance

• Commercial Auto Insurance

• Liquor Liability Insurance

• Commercial Umbrella Insurance

Commercial General Liability Insurance

General Liability Insurance is a basic coverage for restaurant operations. It covers from customer injuries or property damage both inside and outside the restaurant. For example, if a customer slips and gets injured in the restaurant or the restaurant's food causes food poisoning, it may lead to legal claims. General Liability Insurance helps the restaurant manage these potential legal expenses and compensation.

Commercial Property Insurance

Commercial Property Insurance provides protection for the restaurant’s commercial personal property, including its interior renovations, kitchen facilities, equipment, furniture, inventory, and raw materials. The insurance covers property loss or damage caused by events such as fire, theft, storms, and natural disasters. Some policies also include business interruption coverage, providing income support if the business is temporarily closed due to unexpected events like fires or natural disasters. Additionally, certain Commercial Property Insurance policies may include Equipment Breakdown coverage, which protects against the failure of critical equipment such as refrigerators, ovens, and air conditioning systems.

Workers' Compensation

Workers' Compensation Insurance provides coverage for restaurant employees who are injured or become ill while working. For example, a chef was injured while working, Workers' Compensation policy will cover medical expenses and wage compensation. This insurance not only protects the rights of employees but also reduces the legal and financial risks that employers might face due to employee injuries. In the U.S., nearly all states require employers to purchase Workers' Compensation Insurance for their employees.

Disability Insurance

Disability Insurance provides financial support for restaurant employees who lose their ability to work due to illness or injury occurring outside of work. This insurance helps replace lost income when the insured is unable to work, ensuring they can meet their basic living needs during their period of disability.

Commercial Auto Insurance

If a restaurant uses vehicles for delivery or other business activities, Commercial Auto Insurance is essential. This insurance covers vehicle damage, accidents, and other related liability risks. For example, if the restaurant's delivery vehicle is involved in a collision while on the road, Commercial Auto Insurance helps cover repair costs and associated legal liabilities.

Liquor Liability Insurance

If a restaurant serves alcoholic beverages, Liquor Liability Insurance provides coverage for accidents or injuries caused by customers who have consumed excessive amounts of alcohol. For example, if a customer causes an accident while driving under the influence, the restaurant may face legal action. Liquor Liability Insurance helps cover these potential legal expenses and compensation claims.

Commercial Umbrella Insurance

Restaurants often purchase Commercial Umbrella Insurance for two reasons. Sometimes, the landlord of a leased commercial building requires tenants to carry a certain level of liability insurance, which standard commercial liability insurance may not meet. In such cases, higher-limit umbrella insurance is needed to fulfill the landlord's requirements. More importantly, Commercial Umbrella Insurance provides additional protection against significant financial risks and high-value claims, ensuring the restaurant is covered beyond the limits of its primary insurance policies.

The insurance types mentioned above are standard for opening a restaurant. However, the specifics and coverage details of each insurance policy should be determined based on the actual circumstances and needs of the restaurant.