Restaurant insurance: The top types of coverage every restaurant needs

We get it. You decided to start a restaurant business because you love food, not legal talk. Perhaps you’re a taco aficionado, pizza prodigy, or vegan-menu virtuoso. That doesn’t mean you know every kind of insurance coverage that your new restaurant may require.

That’s why we’ve put together this handy list of 11 types of insurance coverage every small- or medium-sized restaurant should have. And we’ve broken everything down in plain terms, so you’ll know exactly how it applies to your restaurant.

Or, go straight to the insurance coverage you need:

1. Workers’ Compensation Insurance
2. Business Owner’s Policy
3. General Liability Insurance
4. Business Property Insurance
5. Business Interruption Coverage
6. Spoilage Insurance
7. Food Contamination Insurance
8. Liquor Liability Insurance
9. Employment Practices Liability Insurance
10. Hired and Non-Owned Auto Liability Insurance
11. Employee Dishonesty Coverage

Sidebar: Want to learn more about how much restaurant insurance costs? You've got Qs. We've got As.

1. Workers’ Compensation Insurance

What it is: A workers’ compensation insurance policy pays for medical expenses and lost wages if one of your workers has a job-related injury or illness.

Why your restaurant needs it: First—and most obviously—it’s required by law just about everywhere. But it also protects your business in some very important ways.

Imagine that one of your restaurant employees mishandles a knife during a lunch rush and seriously injures their hand. Without workers’ comp coverage, you—the employer—would be liable for the cost of medical care and rehabilitation for that injury. If the injury is very serious, you might also be on the hook for the cost of job retraining or long-term disability payments. That could get seriously expensive. It could even put your restaurant out of business.

With workers’ comp? The insurer will pay for the cost of the injury. You can continue running your restaurant. That’s a much better scenario.

Important to know: Each state sets its workers’ comp requirements—and you can’t adjust them. That means there are no decisions to make, and every workers’ comp insurer sells the same product. How much your workers’ comp insurance costs will have more to do with your payroll (number of employees).

2. Business Owner’s Policy

What it is: A Business Owner’s Policy (often called BOP, or simply business owner’s insurance) is a bundle of handy small business insurance coverages designed to protect your restaurant from many different kinds of liability.

Why your restaurant needs it: A BOP allows you to run your business without fear of the unexpected.

A restaurant is a dangerous place with lots of sharp objects, slippery surfaces, and hot burners. There’s no way to predict what could happen at your business. There’s also no way to predict how and why someone might sue you. A BOP covers many of the unexpected financial hits that could otherwise put you out of business.

Important to know: A Business Owner’s Policy is a truly great buy for a small restaurant. It includes most coverages you might need, including liability insurance, property insurance, business interruption insurance, and many of the other coverages listed below. In fact, you can probably just buy a BOP and workers’ comp coverage, and that would make up most of your restaurant insurance policy. (Just make sure that your BOP includes all the industry-specific coverages included in a restaurant endorsement.)

3. General Liability Insurance

What it is: General liability covers your restaurant’s legal responsibility for any harm you may cause to someone else. That harm can be bodily injury, but it can also extend to property damage and advertising injury. (Yes, restaurant marketing comes with its own risks, too.)

Why your restaurant needs it: If a customer slips on a newly-mopped floor and gets a concussion, who pays for the physical, medical, and psychological damages? And who handles the legal fees and settlement? You do—unless you have liability insurance.

If you purchased liability insurance, your insurance company would step in to save the day.

Important to know: General liability is usually included in a Business Owner's Policy.

4. Commercial Property Insurance

What it is: Business property insurance covers the cost of replacing your building—or the stuff that’s inside your building—if something unexpected happens.

Why your restaurant needs it: If your restaurant burns down, property insurance will help pay for the cost of replacing the building.

(Less dramatically: If your pipes burst and destroy your newly reupholstered booths, property coverage will step in there, too. Same goes for vandalism and theft.)

Important to know: If you don’t own your building, you can opt out of the coverages that protect it specifically. You’ll just need the coverage that covers your business’s property.

5. Business Interruption Insurance

What it is: Business interruption insurance will pay out a financial benefit if your restaurant ever has to close for a covered reason.

It’ll cover expenses such as payroll and a temporary location while you work to get your business operational again.

Why your restaurant needs it: Let’s go back to the earlier example of the burst pipe and the damaged furniture. Sure, your property insurance will probably cover the cost of replacing the furniture, but who will pay for the costs associated with closing your restaurant for 2 weeks while you wait for new booths?

If you purchase business interruption insurance, your insurer will pay—a pretty sweet deal.

Important to know: Like property insurance and general liability, this coverage is usually included in a Business Owner’s Policy.

6. Spoilage Insurance

What it is: Spoilage insurance will pay out if you lose food or beverages to—you guessed it—spoilage.

Why your restaurant needs it: When your power goes out for 24 hours and takes all your freezers and refrigerators with it, you’ll be looking at a significant financial loss. If you’ve purchased spoilage insurance, though, your insurer will step in to help reimburse you for damages.

Important to know: A deductible usually applies for spoilage insurance, so before you purchase, be sure to have a chat with your insurer to ensure you can afford a deductible that makes sense for your restaurant’s financial situation. Consider, also, whether you want equipment breakdown insurance as part of your BOP.

7. Food Contamination Insurance

What it is: Food liability insurance helps cover financial losses if your food is ever improperly stored, mishandled, or carries an illness-causing bacteria.

Why your restaurant needs it: It’s every restaurant owner’s nightmare: You get a call one morning from a local authority who states that your customers are getting sick. They suspect E.coli, and you’ll need to suspend operations while they investigate the claim.

While there’s no way to make this a good situation, food contamination insurance will go a long way toward making it a better situation. It’ll pay out to clean equipment, replace ruined food, and reimburse you for lost income due to the shutdown. It can even provide funds for advertising to help restore your reputation with customers.

Important to know: This product liability coverage won’t cover expenses if the sick customers sue you for damages. That’s what general liability coverage is for. Get both of them for maximum peace of mind.

8. Liquor Liability Insurance

What it is: Liquor liability will cover legal costs, medical costs, and property damage if you serve alcohol to a visibly intoxicated person who then causes damage to someone (or something).

Why your restaurant needs it: You do your best to train your staff, but knowing for sure when someone is intoxicated can be tricky. Mistakes happen, and even the best employee can make the wrong call. If an intoxicated man punches another patron—and your bartender sold him his last 3 beers—you could be on the hook for a lawsuit. A liquor liability policy greatly reduces your risk.

Important to know: This policy is often required to obtain a liquor license.

9. Employment Practices Liability Insurance

What it is: Employment Practices Liability Insurance (often referred to as EPLI) steps in to protect your business if an employee ever claims discrimination, wrongful termination, or harassment.

Why your restaurant needs it: You might think you’re a great person to work for—but that won’t protect you from a lawsuit.

If you run a small- or medium-sized restaurant, you likely don’t have the robust employee handbook and documentation necessary to protect you. You also probably don’t have the budget to cover the legal costs. That’s where EPLI has your back.

Important to know: EPLI is great protection for your restaurant, but it isn’t a substitute for getting acquainted with federal and state employment law. Do your research so that you can avoid major pitfalls.

10. Hired and Non-Owned Auto Liability Insurance

What it is: Hired and non-owned auto liability protects your business from a lawsuit if someone associated with your restaurant causes damage with a vehicle that your restaurant doesn’t own.

Why your restaurant needs it: Let’s say you ask an employee to run out and pick up a few supplies the restaurant needs for dinner service. They use their own car and, on the way, get into an accident. If you don’t have non-owned auto liability coverage, your restaurant could be financially liable for any damages caused by the accident.

Important to know: This type of commercial auto insurance protects your business, not your employee. They’ll need to rely on their own auto insurance to compensate them for personal damages.

11. Employee Dishonesty Coverage

What it is: Employee dishonesty coverage compensates your restaurant for financial damages if an employee steals from you—directly or indirectly.

Why your restaurant needs it: If you haven’t had an unpleasant employment experience, you’re due. The U.S. Chamber of Commerce estimates that American businesses lose $50 billion annually due to employee theft and dishonesty—and it may take over a year to catch a dishonest worker. This coverage will help cover the financial cost of an employee who stole from you.

Important to know: We know this is an easy one to ignore, but you might be shocked to know just how common restaurant employee fraud is. Don’t pass this coverage up.

Need workers’ comp, general liability, or a Business Owners’ Policy? We can get you a small business insurance quote in about 5 minutes. Everything’s online. Everything’s easy.