Restaurant Insurance

Several factors can influence how much a restaurant pays for business insurance. Insurers evaluate your level of risk, the size of your operation, and the types of coverage you choose when calculating your premium.

Common factors that affect restaurant insurance costs during underwriting include:

• The types of food and beverages served: Restaurants that serve alcohol typically pay more for insurance because of the increased risk of liquor liability claims. Businesses that use open flames, deep fryers, or specialized cooking equipment may also face higher premiums due to the greater risk of fires and accidents.
• Restaurant equipment and property: The value of your kitchen equipment, furniture, inventory, and building can impact your insurance costs. Expensive or specialized equipment often costs more to repair or replace after a covered loss.
• Annual business revenue: Restaurants with higher revenue usually have greater customer traffic and larger operations, which can increase the likelihood of claims and lead to higher premiums.
• Location: Your restaurant’s location can affect insurance rates based on factors such as local crime rates, weather risks, fire protection services, and regional liability trends. For example, restaurants located in areas prone to hurricanes, flooding, or theft may pay more for coverage.
• Number of employees: Businesses with more employees generally pay higher workers’ compensation premiums because there are more opportunities for workplace injuries. Payroll size also plays a major role in determining workers’ comp costs.
• Your policy limits, deductible, and exclusions: Choosing higher coverage limits usually increases your premium, while selecting a higher deductible can lower monthly costs. Optional endorsements and coverage exclusions can also affect the overall price of your policy.
• Claims history: Businesses with prior insurance claims, workplace injuries, or repeated losses may pay higher premiums than contractors with a clean claims history.

Yes, most restaurants need licenses and permits to legally open and operate. Requirements vary by state and city, but restaurants typically need approval from local business and health authorities before serving customers.

Common restaurant licenses and permits include:

• A business license
• Food service or food handler permits
• Health department permits and inspections
• Building or occupancy permits for a restaurant space
• Liquor licenses for businesses that serve alcohol
• Outdoor dining or entertainment permits, if applicable

Many restaurants also need proof of insurance before they can sign a lease, receive permits, or open their doors. For example, landlords or local agencies may require general liability insurance for a dedicated restaurant location.

Some businesses may need additional permits depending on the services they offer, such as catering, food delivery, live entertainment, or alcohol sales.

Restaurant franchise owners may also be required to carry certain types of insurance under their franchise agreement. Franchisors often require minimum coverage limits for policies like general liability, commercial property, workers’ compensation, and liquor liability insurance.

Restaurant liability insurance can help cover food trucks, catering services, mobile kitchens, and other off-site operations, but coverage isn't always included automatically. Restaurants that operate outside of their main location may need additional coverage to fully protect their business.

This can include operations such as:

• Food trucks and mobile kitchens
• Catering and private events
• Outdoor dining patios
• Farmers markets and pop-up events

Restaurants that transport food, equipment, or supplies to off-site locations may also need inland marine insurance to protect business property while it’s in transit or temporarily stored away from the restaurant.

It’s important to review your policy carefully because incidents that happen away from your main restaurant location may not always be covered under a standard liability policy.

Some off-site operations may also require additional licenses or permits. Farmers markets, event venues, and local governments often require proof of insurance before allowing restaurants or food vendors to operate at their location.

To adequately protect your restaurant from several types of risks, you should consider the following restaurant business insurance options as part of your risk management plan:

• Employee dishonesty coverage can be added to a BOP to protect your business from cash register theft and other dishonest acts. Another option is to buy a fidelity bond that'll reimburse your clients for employee theft.
• Equipment breakdown coverage covers costs when a freezer, refrigerator, or other kitchen equipment suffers a sudden breakdown. It also protects your restaurant's computer hardware, electrical systems, production machinery, and other equipment from sudden and accidental malfunctions.
• Electronic data processing (EDP) insurance helps safeguard your business should a computer lose important data due to a fire or power surge. Also known as computer coverage or data processing coverage, EDP insurance can help protect your business income.
• Employment practices liability insurance (EPLI) pays for your legal costs if an employee accuses your business of wrongful termination or another violation of their rights. EPLI can be added as an endorsement to a general liability or business owner's policy.
• Hired and non-owned auto (HNOA) insurance covers vehicles not owned by your business, such as a personal car driven for work. HNOA is a key policy if you don't use business-owned vehicles for work, as a personal auto policy won't cover business use.
• Commercial umbrella insurance provides extra liability protection by increasing the limits of underlying policies like general liability, commercial auto, or employer’s liability insurance. This can be especially valuable for restaurants facing costly lawsuits or large claims.