Let’s cover a topic that’s on everyone’s mind who owns or operates a business: insurance. In prior years, the discussion was always focused on increasing insurance rates. But in today’s environment, it comes down to whether you can even find insurance for your establishment.
Recent news around insurance companies has been about the overall lack of profitability due to several different causes and this in turn leads to them taking a hard look at who and what they will underwrite and for how much.
We’ll take a look at the types of insurance you should have for your business so when you go to get quotes or are in a renewal cycle you know what you should be asking for and what to look for in the fine print. The days of simply looking for the next e-sign box and skipping the details of the contract are long gone. Keep in mind that insurance companies don’t like to lose money and can’t afford to lose money, so you need to read the entire contract and look at the exclusionary clauses very carefully.
We’re going to focus on the minimum viable insurance for your business; there may be other types of insurance that suit your specific needs, but in general, you want to have your general liability, owner’s insurance, property insurance, and insurance that effectively covers your employees and the organization. If you can afford a form of income replacement insurance if your business is knocked out of commission due to a fire or natural disaster, that would be a "nice to have." You need to talk with your insurance agent and lawyer to make sure you have the types of coverage you need. Keep in mind if you’re a golf resort or a restaurant on the water, for example, you will have specific needs tailored to your establishment.
Here are some other types of insurance to become familiar with and where an insurance broker can assist you with cost control: employee health and dental insurance, workman’s compensation (check your state laws as this gets into an area of compliance), and insurance specific to the types of products and services you offer.
Kitchens can be inherently dangerous, they’re high-traffic areas that can involve hot stoves and ovens, knives, and possibly fryers that involve incredibly hot temperatures, to say nothing about the grease traps over the cooking surfaces that result in many of the fires that occur in restaurants. These are all factored into the costs of the various forms of insurance for businesses in the hospitality industry.
General Liability Insurance for Bars & Restaurants
Let’s start with the most fundamental types of must-have insurance, which is your general liability insurance. When getting underwritten, this is one area where the costs can be steep depending on the type of establishment you have and your claims history. Other things that are taken into consideration by insurance underwriters are the following:
- How late is your closing time?
- How many police calls were generated over the last year?
- Have you had any failed compliance checks, such as serving alcohol to underaged patrons?
- How many DUIs can be contributed to your organization by law enforcement?
- Do you have private rooms and do you offer bottle service?
You know how many slip and fall claims you have had, and so does your insurance company. Any lawsuits that have involved a settled claim are public record and there for everyone to see, and that directly impacts your costs. There’s not much you can do about the past as that is now part of the record, but you can control your costs moving forward and limit your liability by being proactive and sharing with your insurance company the steps you have taken to have a safer workplace. Here’s a resource that can assist you as these are the things that an insurance underwriter will look at when they enter your profile into their pricing algorithms.
In all instances, you and your employees need to be focused on controlling opportunities of risk. Your best defense is a staff that is aware at all times of what is occurring on and around the business. Staff also needs to enforce your house policies regarding patron behavior as well as limit potentially risky establishment practices, such as higher volume of alcohol sales late at night or just before closing.
Other Insurance Coverages to Consider
In many cases, a business owner will wrap their general liability with an organization owner’s policy so that they are covered for things such as fire, natural disasters, and theft. And this is where you will want to pay attention and look at the exclusionary clauses in any of these policies. When talking about general insurance, there is a pretty good awareness that flood insurance is not normally included in policies, and there's normally an exclusion in a business policy for damages caused by floods. The same principle applies to bars and restaurants as there will be exclusionary clauses added that are specific to the industry.
A recent example that is coming up more frequently is the fact that if an establishment offers any form of THC sales such as THC-infused drinks, the general liability for alcohol sales then becomes nullified. This has potentially huge ramifications for a business.
Cocktails to-go is another hot topic for restaurants and bars, but just because you can do it doesn’t mean you’re covered. If you’re going to offer that type of service, then very carefully read through the fine print of your insurance and make sure there aren’t exclusions.
Questions to Ask and What to Look Out for in Your Insurance Policy
Questions to consider include:
- How far does your policy extend?
- Does it only cover the interior of the property or does it include the immediate outside, parking areas, public sidewalks, and common points of entry?
- If your employees are involved in delivery services, how does that impact your policy, and how does that impact your insurance costs? Or is that excluded from coverage?
Those are the types of questions you have to ask and those are the types of exclusions you will want to look for when reviewing a policy and before signing a policy.
When we talk about the bar & restaurant industry and liability insurance, all of these factors are reviewed in the underwriting process to determine new annual rates. "Less is more" is becoming a common theme in business, and many owners are finding they get less insurance for more money when they renew. When looking at year-over-year increases, one of the ways that insurance companies can make the pricing more acceptable is to either increase your deductibles or decrease your coverage. Or both. Compare your prior policies to any new quotes and ask questions regarding the level of coverage and the amount you are responsible for with deductibles and their corresponding out-of-pocket costs.
The most effective way to control your insurance costs is to control your liability; train up your staff, limit your exposure when and where you can, and know your coverage. No one wants to find out they are not covered when a claim gets submitted or that they are on the hook for more than they thought, so take the time to read your policies and ensure your employees are part of the solution in controlling your exposure.
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