Over one million restaurants across the country employ 15.6 million workers, and they have suffered significant losses recently because of the COVID-19 pandemic. Despite this, passionate entrepreneurs are still operating.

Once the country returns to normal, the economy will begin recovering. As a result, new restaurants will hit the scene. However, many of these restaurateurs will lack extensive operational experience.

Keep reading for a deep dive into the four kinds of business insurance you’ll require to run a restaurant.

1. Commercial Property Insurance

Commercial property insurance is critical for a restaurant policy. Without it, you’ll have to pay out-of-pocket for damage to your business’s property and buildings.

Typically, a commercial property policy covers buildings (also known as real property) and Business Personal Property (BPP).

Under buildings, the policy covers all the fixtures, equipment, and machines you permanently install. Anything that isn’t attached to the building falls under the BPP category.

What if you own the building your restaurant operates in? The commercial property policy will cover both the BPP and the building. An experienced insurer should help you understand this vital distinction.

If you lease your space and make improvements, a commercial property policy will cover them. That’s as long as you paid for them and if they are not removable.

Additionally, such a policy covers property you’re leasing and legally mandated to take out insurance on. If there’s any property under your care, within the building your restaurant operates in or outside at a certain distance, the policy can cover it.

A good commercial property policy should also offer additional coverage. The extra protection helps you cater to certain losses that you’d otherwise pay on your own. For example, a good policy should include debris removal. Should the property suffer damage from covered perils, you’ll not pay to remove the debris from the covered property.

2. Employee Theft Insurance

As a restaurant owner, you don’t hire workers hoping they steal from you. The sad truth is that some staffers will steal from you, and you need to protect your business.

An employee theft policy will compensate you for your financial losses when employees steal from your business. The beauty of this policy is that it’s broad, giving you robust protection. The policy covers anything from funds transfer fraud, loss by forgery, and computer fraud. The only caveat is that losses from such acts are only eligible for compensation if perpetrated by employees.

However, there is an insurance condition under this policy you need to pay attention to. Under the “Termination As To Any Employee” condition, you or another business principal won’t receive compensation if you discover an employee is stealing.

Once you uncover that an employee has stolen something, you can’t file a valid claim for anything else the same employee steals in the future.

3. Employment Practices Liability Insurance

The restaurant business is labor-intensive, meaning you expose yourself to many employee-practices-related issues. The Employment Practices Liability Insurance (EPLI) policy ensures your restaurant doesn’t buckle under claims from employees feeling you’ve violated their legal rights.

For example, if an employee feels you fired them for the wrong reason, they can file a wrongful termination suit. Other issues that can lead employees to sue you include:

• Retaliation
• Wrongful discipline
• Discrimination
• Wrongful failure to promote
• Harassment

Once an employee files such a case, it doesn’t matter whether you are right or wrong. You will have to cover the legal costs to defend your restaurant. The policy reimburses you for these costs, including judgments and settlements.

It’s vital to note that the cost of EPLI coverage varies. For example, if your restaurant employs more workers, you’ll pay more than a similar business with fewer employees.

EPLI coverage can be purchased as part of your Business Owners Policy (BOP) or as a stand-alone policy. Your restaurant’s financial requirements will dictate that decision.

4. Workers’ Compensation Insurance

Did you know that 2.8 million employees in 2022 alone suffered work-related injuries and illnesses?

Businesses employing others are required to take up worker’s compensation insurance. With this policy, you can protect your workers in case of any workplace injury or illness.

What Workers Comp Covers

In the event your employee suffers an injury or falls ill on the job, the policy can cover their medical bills and other related costs. If they must stop working because of injury or illness, the policy will compensate them for their lost wages.

Workers’ compensation covers the related costs for workers who can recover but will need occupational therapy or other programs to nurse them back to health. There are also scenarios where an employee recovers from the injury or illness but can’t return to their old job. Workers’ compensation pays for workers’ training for a new job.

Should an injury or illness result in disability, workers’ compensation offers some options via temporary disability, permanent partial, or permanent total disability. A workplace illness or injury leading to a fatality will cause the family of the deceased to receive compensation. Typically, the spouse or kids of the deceased employee can be eligible for 65% to 70% of the late worker’s pay.

As an employer, workers’ compensation helps you avoid unpredictable financial hits. You won’t be responsible for an on-the-job injury or illness expense. If your restaurant operates in a no-fault state, an employee won’t need to prove you were at fault before getting coverage, making the policy even more critical.

Key Takeaways

Owning a restaurant comes with a unique set of risks and challenges, making comprehensive insurance coverage essential for protecting your business. From general liability and property insurance to specialized coverages like liquor liability and food contamination insurance, each type of policy plays a crucial role in safeguarding your restaurant against potential financial losses.

By understanding the various types of business insurance available and tailoring your coverage to meet your establishment’s specific needs, you can ensure that your restaurant is well-protected and poised for long-term success.

Consulting with an experienced insurance advisor can help you navigate the complexities of insurance policies, ensuring you have the right protection to focus on what you do best—providing exceptional dining experiences for your customers.