When you first decided to open a restaurant, it was likely because of your love of food or a great concept idea. But having the right protections in place is key to keeping your restaurant open in the long-term while minimizing risk for yourself, your partners, your employees and your family.

Every restaurant and food service business is different, which means each one will have different insurance needs. However, there are some crucial policies that every business in the restaurant industry should have.

Business insurance has largely remained stable through 2021. According to data from The Cost Guys, restaurant owners can expect to pay between $2,000 and $8,000 annually for coverage, depending on their size and scope and on the unique policies they may require.

There are a variety of policies available for restaurant and food service business owners, but these are the five must-haves:

A business owner’s policy (BOP) is a popular choice for newer restaurant owners because it packages several important coverages together, allowing them to save money while knowing they are not missing critical protections.

Note: Not all restaurants will qualify for a BOP because of their specific risks. You may have to purchase general liability, property and other coverages you want to include separately.

Your Business Owner’s Policy should include the following:

The second must-have policy is workers’ compensation insurance, which provides medical benefits and lost wages to employees injured on the job. This shields you from most employee lawsuits because workers’ comp benefits are usually the exclusive remedy for workplace accidents.

Note: Workers’ compensation insurance is required in most states if you have employees.

Examples:

• A server could spill a drink and then slip and fall on it
• A kitchen worker could have a mishap with a knife or industrial mixer

Recommended coverage levels:

• $1 million (industry standard)

An umbrella policy is basically insurance for your insurance. In other words, it covers you if you hit the limits of your general liability, workers’ comp or commercial auto coverage. An umbrella policy ensures you can protect the assets of your business from being tapped next if another type of coverage is maxed out.

Examples:

• A customer could sue after slipping on a dropped dessert, suffering a concussion and running up significant medical bills
• Your restaurant name could accidentally infringe on the copyright of a successful chain. If they get a lawyer, you could exceed your general liability limits on legal defense costs alone
• Your employee could be driving her own car to make a deposit for you at the bank and get into an accident. Several passengers in another car could be injured and sue your company

Recommended coverage levels:

• Typically $1-4 million, but varies depending on revenue, size of business and other factors

A liquor liability policy helps cover legal and medical costs if someone purchases liquor from you, becomes intoxicated and causes damages or injuries. This is a necessity for any restaurant that serves liquor.

Recommended coverage levels:

• $100K – $1 million depending on how much alcohol you sell

The fifth must-have policy covers the high costs of a cyberattack that could compromise the private data of your customers and employees. Cyber coverage allows you to rebuild your system, pay regulatory fines (sometimes several thousand dollars) and hire PR to do damage control. Unfortunately, the need for this type of coverage has only increased in the last few years as restaurants have grown their online presence.

Examples:

• Your customers’ credit card information and valuable personal data could be stolen when they participate in online orders, in-restaurant purchases or rewards programs

Recommended coverage levels:

• $100K – $1 million depending on the amount of data compromised

Covers the cost to repair or replace damaged equipment, including time and labor; Lost income; Spoiled inventory; Necessary expenses incurred during the restoration period 

Power Outage Loss Examples: 

• In this scenario, Equipment Breakdown coverage could cover: 
• Business income you lost while the power was out 
• The cost to repair your walk-in refrigerator and to replace a computer that were damaged by a power surge that occurred when the electricity was restored 
• Costs associated with the time and labor to repair and replace your damaged equipment 
• The cost to replace any spoiled food 

Recommended coverage levels: 

• Up to $5m depending on the size/scope of restaurant

Provides businesses and employees with coverage for claims made against them that can happen as a result of wrongful employment practices including: discrimination; harassment; retaliation; termination, constructive discharge; failure to hire, supervise and demote; and personal injury resulting from infliction of emotional distress and humiliation, defamation and invasion of privacy.  Coverage can also be extended to cover claims brought by 3rd parties for harassment and discrimination 

Examples: 

• Gender discrimination – A national restaurant chain paid $360,000 to settle a gender discrimination lawsuit brought by men alleging they were denied more lucrative server positions because of their gender. The restaurant was accused of hiring only women servers. 
• Fair Labor Standards Act – Several assistant managers formerly employed by a mid-sized restaurant chain filed a class action lawsuit against it. The suit alleged that since these employees were required on occasion to perform “non-managerial tasks” — such as bussing tables, running the cash register or serving customers — they should not have been classified as salaried employees who were not entitled to overtime pay. The court granted class action status to the group of former employees. At that point, the restaurant chain knew it could face legal fees in excess of $750,000 and an uncertain outcome if there were to be a trial. The restaurant chain decided to settle for business reasons. The matter cost more than $1.3 million to resolve. 

Recommended coverage levels: 

• $1m-$3m depending on the size/scope of restaurant 

Every restaurant is different and each one has specialized insurance needs. Because of this, NEWITY teamed up with Mylo Insurance to provide the best, most customizable coverage available, regardless of size or scope of the restaurant.

Mylo is part of Lockton Companies – the world’s largest independent insurance broker – with a 50+ year track record of connecting people and businesses to the right coverage. Mylo was further backed in 2018 by Guggenheim and has won a host of awards in recent years, including 2021 Insurtech 100, 2021 Insurtech Breakthrough Award, Insurance Business Hot 100 and 2021 Agent For the Future.

Because Mylo doesn’t sell their own insurance, they can give you a truly objective recommendation based on your specific needs. With access to more than 200 insurance companies, they provide many products that can be of interest to restaurant owners:

• Business Insurance
• Small Group Benefits
• Group Employer Home & Auto
• Life
• Individual Health & Medicare
• Auto
• Home

NEWITY + Mylo can help create the best plan to protect restaurants from unforeseen losses. Together, we can offer an objective recommendation and find the right coverage at the best value.