Restaurant insurance is essential to the day-to-day operations of your establishment. A quality restaurant policy, such as a business owner’s policy (BOP) or commercial package policy, will protect your business in the event of a loss. Restaurant insurance policies often include general liability, liquor liability, commercial property, and other endorsements and coverage extensions. Here are five factors that contribute to the cost of restaurant insurance policies.
ALCOHOL SALES AND TOTAL GROSS SALES
The percentage of alcohol sales relative to total gross sales at your restaurant will play a significant role in the cost of your policy. If a high percentage of the establishment’s total sales are alcohol-related, some carriers will decline to provide insurance. The insurance companies that will insure restaurants with high alcohol sales tend to charge higher premiums. Total gross sales also factor into insurance costs because insurance companies relate exposure to busier restaurants. While reviewing your restaurant policy, check if your carrier has assigned a rate to gross sales. If so, it will help you better understand and plan for your costs.
THE SIZE OF YOUR STAFF
Similar to gross sales, the size of a restaurant’s staff will give an insurance company solid insight into the exposure at the establishment. Carriers will consider the number of full-time and part-time employees, in addition to the total annual payroll. The number of staff will also determine the costs of your employment practices liability insurance, employee benefits liability, non-ownership automobile liability, employee dishonesty coverage, and others. Of course, not all BOP and commercial package policies contain these protections, so read yours for clarity.
PROPERTY VALUES
The cost of your policy will change based on the values of your property. When evaluating the commercial property to insure, consider the following:
The building
Restaurant equipment;
Furnishings;
Computers (point-of-sale-systems);
Art;
Signage;
Stock.
These are some property types to consider, and some restaurants may require others.
SQUARE FOOTAGE
Many insurance companies assign a rate per every 100 square feet of a restaurant. Insurance companies utilize square footage as a basis for premise liability exposure and, subsequently, insurance costs. The larger a restaurant in size, the more foot traffic, which causes a high premises liability exposure. When calculating the square footage, most carriers will request indoor and outdoor space accessible to patrons. We recommend that you READ your insurance policy and check in the declarations if the insurer has assigned a premium to the area of your restaurant.
TYPE OF RESTAURANT
Standard Industrial Classification (SIC) codes or the North American Industry Classification System (NAICS) assign several definitions to the restaurant industry. The code assigned to your establishment will determine insurance eligibility and factor into policy premiums. Examples include cafes, fast food restaurants, family-style restaurants, casual dining, and fine dining. We recommend that you provide a clear description to your insurance broker to ensure proper classification.
NEXT STEPS FOR A STRUGGLE-FREE EXPERIENCE
Fusco Orsini & Associates provides struggle-free insurance and risk management services for busy people. And we certainly understand the amount of time and dedication it takes to own and run a restaurant. Fill out the form below to connect with an associate of our agency, and we will help remove the burden of insurance and risk services from your plate.
