How much does restaurant insurance cost?
The cost of restaurant insurance will depend on a lot of factors.
What type of restaurant do you have?
What type of insurance policy are you looking for?
And how does your insurance company calculate rates for your restaurant?
In order for any restaurant owner to operate a business, they will need to carry a few specific insurance policies. There are also a few policies that might not be mandatory but should be looked at to best protect your business.
The best way to determine how much insurance will cost for your restaurant is to understand how each insurance policy is rated and what each policy covers.
Business Owner’s Policy
A business owner policy is made up of multiple parts of coverage and is the starting point that most businesses start with when looking for insurance for their restaurant.
This type of business policy will include coverage for general liability, property, and loss of income.
General Liability
Restaurant’s General Liability coverage protects your business against damage against bodily injury or property damage. For restaurant owners the biggest areas of exposure happen with slips, trips, and falls when entering or exiting the establishment. This will also protect the restaurant in the event someone gets ill due to your food.
Insurance companies that insure restaurants will rate this type of coverage based on one of two things.
- Gross sales or
- Square footage of restaurant
If your insurance company rates off of gross sales, then you are more likely to have to go through a liability insurance audit each year that can drive a fluctuation in insurance premium. The higher your annual sales, the higher your insurance premiums will be.
If your insurance company rates off of square footage, then your rates should stay more stable and it allows you to budget your insurance costs more efficiently.
Business Property
Business Property will cover the property you own or that you are responsible for. This may include the building (if you own it or are held responsible for it by the landlord) or the contents & equipment inside.
Another area of business property coverage you need to be concerned about is the money you invested in fixing or remodeling the space that you do not own. This is called betterments or improvements coverage.
This part of the policy is rated solely based on how much coverage is needed. If you own the building and need to insure it, the insurance premium is going to be higher than if you are just covering the contents you own inside of the restaurant.
It is important to make sure you understand how your specific insurance policy works and what you, as the owner, are responsible for so you know what coverage limits you need.
Loss of Income
Loss of Income coverage helps cover you in the event you have an insurance claim, and you are unable to operate your business while it is being repaired.
Lost income can be reimbursed to you over a specific time frame for the income you would have made during that same time period.
The higher your annual sales are for your business, the higher your insurance rates or calculation will be for this specific coverage.
Refrigerated Products
Most restaurant insurance policies have a sublimit built into their policies specifically for refrigerated products.
Each restaurant is different, so it is important to understand and realize what coverage limit you have for this coverage so you can make sure it is enough in the event of a claim.
The higher the limit you need, the more your insurance premiums will cost.
Worker’s Compensation
As a business owner in the State of New York, you are required to carry Worker’s Compensation when you have employees.
Worker’s compensation coverage protects if your employees are injured while on the job. It will cover the medical expense and partial lost wages.
The cost of Workers Compensation for restaurant owners in New York is rated on 2 main factors
- Annual Payroll
- Experience modification
NY Worker’s Compensation will start with a base rating set by the state and that rate will multiplied by the amount of payroll you have.
After you have been in business a few years, New York State Workers Comp Board will set an experience modification for you resulting in either a debit or credit to your policy.
Even though New York sets the base rate for each industry and employee classification, that does not mean that rates do not fluctuate from insurance company to company.
Each Insurance company can file for other rating factors that can increase or decrease your insurance premiums. Make sure you pay close attention to your rates so you don’t overpay when you don’t have to.
New York State Disability
New York is one of a handful of states that require employers to cover employees for injuries or illnesses that happen off duty with what is called a short-term disability policy.
A disability policy is required just as a workers compensation policy is the moment you have your first employee.
Disability benefits are temporary cash benefits paid to an eligible wage earner when they have been deemed unable to work by an off-duty injury or illness.
Short term disability policies now include a separate part called Paid Family Medical Leave (PFL Coverage) that was introduced to New York in 2018.
This policy is rated by two ways.
Number of employees both male and female is how the disability portion is rated.
Annual payroll is how the paid family leave coverage is rated.
Both male and females will have a different rate for your disability coverage due to the fact that females are allowed to take disability benefits during their 6-8 week maternity leave.
New York now only has a handful of insurance carriers left that will write both the disability coverage and PFL coverage.
Liquor Liability
Liquor liability insurance helps protect businesses that sell, serve, or distribute alcohol. This coverage can help cover claims of bodily injury or property damage that an intoxicated customer causes after a business served them alcohol.
If your business is sued, liquor liability insurance can help protect by covering expenses for
- Legal costs
- Property damage caused by the customer
- Medical bills to treat an injured person
- Settlements or judgments
This type of coverage can either be added to your existing business owner’s policy or purchase separately.
This usually depends and determines how much your liquor liability will cost.
To determine if your business owners policy will extend or add coverage for liquor liability will be based on what your percentage of annual sales is from selling alcohol. If the percentage is low you most likely can add this coverage to your policy and the rates will be much less than buying a separate policy.
If the percentage is high most likely you will need to purchase a separate liquor liability policy which will result in higher premiums.
So, a bar or tavern might pay a higher cost than a family restaurant or grocery store.
The Cost to insure my restaurant
As you can see, the cost of your restaurant insurance is based on many factors all stemming from the more sales, payroll, or property you have, the more the insurance is going to cost.
We touched on the main insurance policies that any New York Restaurant owner needs to have in order to own and operate their restaurant. But, you may want to look in a few other insurance policies as well to best protect your business.
These may include:
- Cyber Liability Coverage
- Employers Professional Liability Insurance (EPLI)
- Commercial Auto- Specifically Hired & Non-owned Liability Coverage
Understanding your insurance policies is important for any business owner but especially for a busy restaurant owner.
Knowing how your insurance policies are rated so you can properly prepare throughout the year as to what your insurance policies will cost will allow you to continue to grow your business.
Getting hit with unexpected increases or costs because of lack of knowledge is only going to hurt your business.
If you do not have a relationship with an independent insurance agent who helps keep your restaurant business covered and on track than reach out to the team at Crowley Insurance where we specialize working with restaurant owners to help make their insurance protection easy.
