What insurance does a restaurant need?

A restaurant mixes fire, customers, employees, alcohol and cars, so it rarely fits one policy. Here are the coverages most owners put together, in plain terms. Your broker will tailor them, and requirements vary by state and city.

General liability

This is the policy for claims that someone was hurt or their property was damaged because of your business. The NAIC says commercial general liability covers four categories of events: bodily injury, damage to others' property, personal injury including slander and libel, and false or misleading advertising. A guest who slips on a wet floor is the classic example.

Property and lost income

Commercial property protects against theft or damage to your physical space and equipment, the NAIC says. For a restaurant, think ovens and walk-in coolers. Business income coverage can then help with operating expenses while you are closed for repairs, Triple-I explains, though it may require a direct physical loss first.

Many small businesses buy property, liability and business income together as a businessowners policy, or BOP. Triple-I notes, however, that some types of businesses, such as restaurants, may be ineligible for a BOP and may need to buy individual coverages. Ask your broker which route fits you.

Liquor liability

If you serve alcohol, do not assume your general liability covers it. Triple-I states that if you serve liquor, a BOP's liability coverage does not cover that exposure, and the exposure is handled through a liquor liability endorsement. The NAIC glossary defines liquor liability as coverage for the liability of an entity serving alcoholic beverages to persons who have incurred bodily injury or property damage arising from an intoxicated person.

Workers' compensation

If you have staff, you almost certainly need workers' compensation. The NAIC says it is mandatory for most employers in every state except Texas. It typically pays employees' medical expenses and rehabilitation costs and at least some portion of lost wages. Kitchens are busy, hot and sharp, so this is not a policy to skip.

Autos and delivery

Triple-I says a BOP does not provide any coverage for vehicles, and that a vehicle used primarily in business is likely not covered by a personal auto policy. If you deliver food, run a catering van or send staff on errands in their own cars, ask about commercial auto and hired and non-owned auto coverage.

Questions to bring to your broker

• Do I need a BOP, or separate policies, given I am a restaurant?
• Do I have liquor liability, and what are the limits?
• What would the policy pay if a fire closed us for three months?
• Does the policy cover delivery drivers and staff using their own cars?
• What is my deductible on each policy?

How the pieces fit together

A restaurant's real exposure is the combination. A kitchen fire closes the dining room, which stops sales while rent and payroll continue. A guest injury leads to a claim that the general liability policy answers, while an injured cook goes to workers' compensation. A car crash on a delivery goes to the auto policy. Each policy answers a different question, which is why a gap in one is not covered by another.