June 17, 2024

Restaurant Business Insurance: Essential Coverage for Restaurant

“Get tailored Restaurant Business Insurance. Protect your business, employees, and customers with comprehensive coverage.”

Restaurant Business Insurance

For restaurant owners and food industry professionals, having the right restaurant business insurance is essential to safeguard their livelihood from unexpected events. Restaurants face unique risks, including property damage from fires, liability lawsuits from customer or employee injuries, and foodborne illness claims. Proper restaurant insurance coverage can provide financial protection against such operational risks that could otherwise threaten the business’s bottom line.

A comprehensive restaurant business insurance policy typically covers property damage protection, employee protection, and liability coverage for various operational risks. Understanding the different types of restaurant insurance and selecting the appropriate coverage is crucial for ensuring the long-term success and financial stability of any restaurant business.

Types of Restaurant Businesses

Common Restaurant Business Insurance Coverages

Restaurant owners need to consider various types of insurance to protect their businesses from potential risks and liabilities. Common types of restaurant business insurance include:

  1. General Liability Insurance: This coverage protects against claims of bodily injury, property damage, and personal injury (such as libel or slander) that may occur on the restaurant premises or as a result of the business’s operations.
  2. Commercial Property Insurance: This insurance covers the physical assets of the restaurant, including the building, equipment, inventory, and furniture, against risks like fire, theft, and natural disasters.
  3. Business Owner’s Policy (BOP): A BOP combines general liability and commercial property coverage into a single policy, often at a discounted rate. It’s a convenient option for small to medium-sized restaurants.
  4. Workers’ Compensation Insurance: This coverage is legally required in most states and provides medical benefits and wage replacement for employees who sustain work-related injuries or illnesses.
  5. Liquor Liability Insurance: If the restaurant serves alcoholic beverages, liquor liability insurance is essential. It covers claims arising from incidents involving intoxicated patrons, such as fights, property damage, or injuries caused by impaired customers.

Depending on the specific needs and risks associated with a restaurant business, additional coverages like cyber liability, employment practices liability, and food contamination insurance may also be necessary.

Property Damage Protection

Property insurance covers the costs of repairing or replacing physical property damaged by events like fire, water, theft, or vandalism. It includes coverages like:

  1. Commercial Business Property Insurance: This covers repair or replacement of damaged or stolen property, including the restaurant building, equipment, inventory, furniture, and other contents.
  2. Equipment Breakdown Coverage: This covers repair or replacement of damaged kitchen equipment.
  3. Water Contamination Insurance: It covers losses when tap water becomes unusable, impacting restaurant operations.

The average cost of property insurance for restaurants is around $175 per month for $1 million in liability coverage as of January 2024. Typical property coverages include:

Commercial Building Coverage

This protects the restaurant’s owned buildings, kitchen/front-of-house equipment, and other permanent items.

Commercial Contents Coverage

It protects non-permanent equipment and items like dishware, cookware, furniture, and POS systems.

Tenant’s Betterment Coverage

This coverage protects enhancements and upgrades made to a leased restaurant space.

In addition to property damage protection, restaurants can also opt for:

  • Business Income Insurance: It replaces lost income and covers expenses when the restaurant has to close due to property damage.
  • Business Interruption Insurance: This covers expenses like payroll and temporary location costs if the business has to close for a covered reason. Average annual premiums range from $750 to $10,000 with a $1,000 deductible.
  • Food Contamination Insurance: It covers costs associated with spoiled or contaminated food due to power outages, with average annual premiums of $1,800 and no deductible.

Overall, property damage protection is crucial for restaurants to safeguard their physical assets, income, and operations against various risks and potential losses.

Employee Protection: Restaurant Business Insurance

Workers’ Compensation Insurance

Workers’ compensation insurance is mandatory for restaurants with employees, covering medical expenses and lost wages for work-related injuries or illnesses, with a median cost of approximately $115 per month. This insurance helps cover medical expenses and lost wages if employees are injured on the job, and proper safety training and maintenance can help minimize workplace risks and lower workers’ compensation rates.

The key aspects of workers’ compensation insurance for restaurants include:

  1. Coverage for Medical Expenses: It covers the costs of medical treatment, hospitalization, and rehabilitation for employees who sustain injuries or illnesses while performing their job duties.
  2. Wage Replacement Benefits: If an employee is unable to work due to a work-related injury or illness, workers’ compensation insurance provides a portion of their lost wages during the recovery period.
  3. Legal Requirement: In most states, workers’ compensation insurance is a legal requirement for businesses with employees, including restaurants.
  4. Employer’s Liability Insurance: This is often included as part of workers’ compensation insurance and provides coverage for lawsuits filed by employees against the employer for workplace injuries or illnesses.

The average annual premiums for workers’ compensation insurance for restaurants are $2.25 per $100 of payroll, with no deductible.

Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI) protects restaurants against employee claims of discrimination, wrongful termination, or harassment. This coverage can help cover legal fees, settlements, and judgments related to such claims, which can be costly for businesses.

Employee Dishonesty Insurance

Employee Dishonesty Insurance covers losses from employee theft, embezzlement, forgery, or other dishonest acts. This coverage can be particularly important for restaurants, where employees handle cash and have access to valuable inventory and equipment.

By providing comprehensive employee protection through workers’ compensation insurance, EPLI, and employee dishonesty coverage, restaurants can safeguard their businesses against various risks and liabilities associated with their workforce.

Operational Risks

General Liability Insurance

General liability insurance provides protection against lawsuits related to food-borne illnesses, injuries on the premises, or property damage, with an average premium of approximately $40 per month for food and beverage businesses. It covers the business if a patron is accidentally injured or if the business is responsible for property damage, and it covers legal fees if the impacted party decides to sue. General Liability Insurance covers claims related to food-borne illnesses, injuries on the premises, and property damage, with an average cost of around $40 per month.

Liquor Liability Insurance

Liquor liability insurance is required for restaurants that sell or serve alcohol, covering legal costs, settlements, medical bills, and property damage related to intoxicated customers, with an average cost of about $55 per month. It covers the business if an intoxicated patron injures someone or damages property, helping pay for legal fees, medical bills, and repair costs. Liquor Liability Insurance protects against claims related to the sale of alcoholic beverages. Liquor Liability Coverage covers risks arising from serving and selling alcohol, such as accidents, assaults, alcohol poisoning, and DUIs.

Business Interruption Insurance

Business interruption insurance provides financial assistance when a restaurant has to temporarily close due to a covered peril, helping replace lost income and cover ongoing expenses. It covers lost revenue and expenses from disruptions to the business.

Cyber Liability and Data Breach Insurance

Cyber Liability and Data Breach Insurance safeguards against risks like data breaches and hacking, with an average cost for small businesses of around $145 per month. Cyber liability insurance covers the costs associated with cyber attacks, such as data breaches.

Other Essential Coverages

  1. Employment Practices Liability Insurance (EPLI): EPLI covers legal fees if an employee alleges workplace harassment or wrongful termination, and it also protects against allegations made by non-employees.
  2. Commercial Auto Insurance: Required if the restaurant owns vehicles for deliveries or catering, with average annual premiums ranging from $1,200 to $2,500 with a variable deductible.
  3. Product Liability Coverage: Covers foodborne illnesses caused by improper food preparation, including severe cases requiring hospitalization.
  4. Spoilage Insurance: Covers loss of food/beverages due to power outages or equipment breakdown.
  5. Food Contamination Insurance: Covers financial losses from food-borne illness outbreaks.
CoverageAverage CostDescription
General Liability$40/monthCovers lawsuits related to food-borne illnesses, injuries, property damage
Liquor Liability$55/monthRequired for restaurants serving alcohol, covers legal costs and damages
Business InterruptionVariesReplaces lost income and covers expenses during temporary closure
Cyber Liability$145/monthSafeguards against data breaches and hacking incidents
EPLIVariesCovers legal fees from employee allegations of harassment or wrongful termination
Commercial Auto$1,200 – $2,500/yearRequired for restaurant-owned vehicles used for deliveries or catering

Restaurants face various operational risks, including property damage, liability claims, cyber attacks, and business interruption. Many restaurant operators do not fully understand the risks and liabilities of running their business, including safety hazards, cyber attacks, and liabilities from serving liquor. Lack of proper insurance coverage can result in significant financial losses, fines, and legal consequences.

Additional Coverages: Restaurant Business Insurance

Umbrella Insurance

Umbrella insurance provides an additional layer of liability coverage beyond the limits of other policies like general liability and auto liability insurance. It helps cover damages that exceed the liability limits of the basic insurance policies, protecting against expensive medical bills and legal fees.

Food Spoilage and Contamination Coverage

  1. Food Spoilage Insurance: This coverage compensates for losses from spoiled food due to power outages or equipment breakdowns.
  2. Food Contamination Endorsement: It covers financial losses from serving contaminated food that leads to foodborne illness outbreaks.

Employment Practices Liability Insurance (EPLI)

EPLI covers legal claims and associated costs from employees alleging wrongful discrimination, harassment, or other employment-related issues.

Business Owner’s Policy (BOP)

A BOP bundles several essential coverages, including general liability, commercial property, business interruption, and other key protections, into a single policy package designed for small businesses.

Additional Auto Coverage Options

Depending on how restaurants use vehicles, they may need additional auto insurance coverages, such as:

  1. Hired and Non-Owned Auto Liability: Covers liability if an employee causes an accident while driving their personal vehicle for business purposes.
  2. Commercial Auto Insurance: Required for restaurant-owned vehicles used for deliveries, catering, or other business operations.
  3. Food Truck Insurance: Specialized coverage for mobile food trucks or carts.

Employee Dishonesty Coverage

This coverage compensates for financial losses due to employee theft, fraud, or dishonest acts.

Life Insurance for Business Owners

Life insurance policies can protect the business owner’s loved ones in the event of their death, with average annual premiums ranging from $300 to $24,000, depending on the coverage amount and other factors.

Additional CoverageDescription
Umbrella InsuranceProvides excess liability coverage beyond basic policy limits
Food Spoilage InsuranceCovers losses from spoiled food due to power outages or equipment failures
Food Contamination EndorsementCovers losses from serving contaminated food leading to illness outbreaks
EPLICovers legal claims from employees alleging discrimination, harassment, etc.
Business Owner’s Policy (BOP)Bundles liability, property, interruption, and other key coverages
Hired/Non-Owned AutoCovers liability when employees use personal vehicles for business
Commercial AutoRequired for restaurant-owned vehicles used for deliveries, catering
Employee DishonestyCompensates for losses due to employee theft, fraud, or dishonest acts
Life InsuranceProtects business owner’s loved ones in case of death

Restaurants face various unique risks and liabilities, making additional coverages crucial for comprehensive protection. Policies like umbrella insurance, food contamination endorsements, EPLI, and specialized auto coverages can safeguard against significant financial losses and legal consequences [1-11].

Conclusion: Restaurant Business Insurance

Running a restaurant involves numerous risks and liabilities that can threaten the business’s financial stability and longevity. From property damage and liability claims to operational disruptions and employee-related issues, comprehensive insurance coverage is crucial for protecting restaurant owners and their investments. By carefully evaluating their unique risks and selecting appropriate policies, restaurant operators can mitigate potential losses and ensure their businesses remain resilient in the face of unexpected challenges.

Ultimately, restaurant business insurance is an essential investment that safeguards not only the physical assets but also the livelihood of restaurant owners and their employees. With the right combination of coverages, including general liability, property insurance, workers’ compensation, and specialized policies like liquor liability and cyber liability, restaurants can navigate the inherent risks of the food industry with confidence, focusing their efforts on delivering exceptional dining experiences to their customers.


What are the common types of insurance needed for a restaurant? For a restaurant, the essential types of insurance include general liability insurance, property insurance, liquor liability insurance, workers’ compensation, business interruption insurance, food contamination insurance, and automobile liability insurance. These coverages help protect the business from various risks and liabilities.

What kind of insurance is required for operating a food business? Operating a food business, particularly in California, requires business liability insurance. This insurance is vital in protecting against costs associated with common claims such as third-party bodily injury and property damage. The Food Liability Insurance Program (FLIP) offers a straightforward way to obtain this necessary coverage.

Which insurance is critical for service-oriented businesses? Professional liability insurance, also known as errors and omissions insurance or malpractice insurance in certain fields, is particularly important for service-based businesses. This insurance is designed to address lawsuits that arise from the professional services provided by a business.

Is there a particular type of insurance that every business should have? Yes, every business should have general liability insurance. This fundamental insurance type is crucial as it provides protection against lawsuits alleging bodily injury, property damage, or harm to reputation caused by the business to individuals outside the company. General liability insurance is a foundational coverage for businesses of all types.

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