Restaurant Insurance for Small Businesses

By Charles Munyi


Your restaurant business is exposed to a wide range of risks.

Food spoils. Kitchen fires happen. An employee slips and falls.

Restaurant insurance policies are designed to protect against common foodservice business risks and offset unexpected financial costs. 

In this guide, you’ll learn more about restaurant insurance, the types of coverage, and how you can save money on your next policy.

What is Restaurant Insurance?

Restaurant insurance isn’t a specific policy you purchase, but it’s instead a combination of policies restaurant owners get to protect their foodservice business. Each policy offers protection against a unique risk, and most restaurants will need more than a single policy for full protection.

Restaurant insurance helps minimize financial losses. It can help cover the cost to repair or replace damaged property or legal fees. Without proper insurance, you could owe costs out-of-pocket. 

Restaurant insurance is also necessary if you need to comply with regulations or contracts. For instance, your landlord may require proof of commercial property insurance before signing a lease. You may need proof of insurance before securing a contract or signing a commercial lease. 

Restaurant Insurance Coverage

No single policy will insure against all business risks. Restaurant insurance combines several types of policies to fully protect your business. Here are the common types of restaurant insurance: 

  • Commercial general liability: General liability insurance protects your business against third-party claims for bodily injury, property damage, medical expenses, libel, and slander. It also covers the legal expenses and compensation costs incurred during the claims process up to your policy limits.
  • Commercial property insurance: Commercial property insurance protects your restaurant business against loss and damage of its physical assets due to perils like fire, smoke, storms, vandalism, and civil disobedience. 

Restaurant insurance doesn’t cover all risks. A standard commercial property insurance policy won’t protect against losses from some types of risks such as floods or forced restrictions on operations. The same applies to your personal or customer property stored at your business.

Restaurant insurance won’t cover fraudulent and intentional actions by your business, such as self-inflicted injuries. You may need to purchase a policy rider to cover these additional risks.

How Restaurant Insurance Cost Is Determined

Restaurant insurance costs vary from business to business due to the unique risks each restaurant faces. Multiple factors impact the cost of restaurant insurance, including: 

  • Your business location: Your insurance rate often reflects the risk level of your business location. There’s a higher risk of property damage if your business is located in a hurricane or flood-prone zone, which means a higher premium on your commercial property policy. 
  • Prior claims history: An insurance company will assess your claims history when calculating the cost of your policy. You’ll pay higher premiums if your business has a history of many lawsuits for incidents of property damage, bodily injury, or reputation harm. 
  • Your business income: Insurers will look at your annual income when calculating your premium. You will pay a higher premium rate if your business records indicate a high annual income since the income lost following a business interruption may be huge.
  • Your policy limits: A higher limit for your restaurant insurance provides more coverage, so you’ll pay a higher premium. An insurance agent can assess your coverage limits so you don’t overpay for coverage.
  • Your policy deductible: The deductible amount for your policy will impact your restaurant insurance premium. You’ll pay a lower premium if you choose a higher deductible and vice versa. 

How Can I Save on Restaurant Insurance? 

Looking to save on restaurant insurance without gutting your coverage? Here are several ways to reduce your insurance premiums:

  • Shop around: Insurance policy costs vary among insurance providers. Comparison shopping among carriers who specialize in restaurant insurance will identify coverage options that best suit your budget. Request quotes from multiple carriers to compare how much coverage you’ll receive for a specific premium rate. 
  • Buy a package policy: Save on insurance premiums by buying a package policy that combines different policies into a single plan. You’ll pay a discounted price for buying a policy bundle rather than separate policies. The most popular option is a Business Owners Policy (BOP), which combines commercial liability, property, and some business interruption.
  • Raise your deductible: A deductible is the amount of money you pay out-of-pocket before your policy reimburses for a covered loss. You’ll pay a lower premium by choosing a higher deductible. 
  • Work with an insurance agent: An insurance agent is a great resource to help you understand your coverage needs. Assess your business with an insurance agent to ensure you’re only buying coverage you need. 
  • Ask for discounts: Ask if your insurance provider offers discounts since they may not disclose it outright. For instance, you may get a claims-free discount if your business has no history of filing claims. You could also get a discount for switching from a monthly to an annual premium payment plan.
  • Take measures to prevent losses: You may get a price break on your premium by implementing measures to reduce risks in your business. Run a workplace safety program, install a security alert system (CCTVs and alarm systems), or buy disaster protection equipment (fire extinguishers). 

Additional Coverages Restaurants Need

Depending on the nature of your business, you may need these additional coverages. Start with workers’ compensations insurance to cover medical treatment and replace lost wages for employees who are injured on the job. Add loss of income insurance to help replace income if your business operations are suspended.

Spoilage insurance pays for accidental inventory loss due to a power outage, mechanical breakdown, or refrigerant contamination. Supplement this with food contamination insurance to replace contaminated food and to clean equipment if the state health department orders your business closed.

Employment practices liability insurance can also help protect your business by paying to defend claims alleging discrimination in how you manage your business including hiring, firing, and payroll.

You may include liquor liability insurance to protect against claims of bodily injury or property damage an intoxicated person causes after your restaurant served them alcohol. Cyber insurance can also protect your restaurant business against data breaches, malware attacks, identity theft, and phishing.

Get Restaurant Insurance for Your Small Business

Restaurant insurance will protect your business against future risks. Contact your licensed insurance agent and ask them to get you a Pathpoint quote.