Business insurance for a restaurant can vary dramatically depending on what type of cover is chosen to include in the policy. According to NimbleFins, restaurant liability insurance starts from under £1,000 for basic public liability and employers’ liability cover. Still, most restaurants will choose to add on other types of protection as well. Research and data-driven personal finance site NimbleFins gives a full breakdown of what insurance is needed for a restaurant and the different types of cover available (read more here).
The website explains certain factors that can increase the cost, such as having a deep fat fryer in the kitchen, being licensed, having an ATM, running public entertainment, and the number of employees.
It also advises restaurant owners to look for a policy that can be customised to be tailored to suit the needs of the business, read customer reviews, and compare prices before purchasing a policy.
With restaurant profit margins averaging only 2% to 6% in the UK, restaurants don’t have a lot of buffers to spend unnecessarily on insurance. For this reason, it’s important to choose the right cover and compare costs from multiple providers before buying a policy.
What is restaurant insurance?
Restaurant insurance is a type of business insurance specifically designed for those running a restaurant to provide the necessary level of financial protection. A basic restaurant liability policy offers public liability cover and employers’ liability cover, which are arguably the most important insurance types for many businesses.
Employers’ liability insurance is needed by law by any business that has employees. It protects the business if a member of staff falls ill or is injured while working and blames the company. In addition, the policy can pay the legal costs incurred when fighting against a claim and pay put any compensation awarded by a court.
Public liability insurance protects a restaurant if a customer or member of the public suffers an injury or becomes ill and sues the restaurant. This policy also funds the legal costs for defending against a claim and any pay-outs if found liable.
But a restaurant will often need and choose to have protection against other risks the business faces too.
Produce is vital to the running of a restaurant, and huge amounts of money are invested in it, so it can be crucial to have stock insurance to protect from the financial losses if the stock is lost or damaged. Though the frozen stock is often not included in these policies, restauranteurs need to check the small print.
Another important cover is contents insurance to protect important equipment such as ovens, till systems, fryers, and furniture if they are damaged, lost, or stolen.
Buildings also need protecting, so if the business owner is also the owner of the premises, then the cover of a commercial building would be essential in case of an event such as a fire, flood, or theft. In addition, the policy can pay for repairs or rebuilding if necessary.
Business interruption insurance also provides financial protection if the worst should happen, and the restaurant can’t trade for a period of time while repairs or rebuilding takes place. This can prove to be a lifeline for a restaurant unable to open to customers for some time or earn any money to pay ongoing costs.
Another type of insurance that’s very important for a restaurant to consider is product liability insurance. If a customer falls ill from consuming the food at a restaurant and sues, the policy will pay the legal costs and compensation. Product liability insurance is typically included with public liability insurance, but it’s wise to confirm this.
Restaurants may also want commercial vehicle insurance if they run a delivery service or transport goods or personal accident insurance for employees to cover if they suffer an accident and is unable to work.
What does business interruption insurance cover for a restaurant?
Business interruption insurance is a type of cover specifically designed for businesses faced with being unable to run or open for a length of time. This could be due to a disaster such as a flood, a fire, theft or even something like lightning. If the premises need to be repaired or rebuilt due to damage, the restaurant has to close, losing the chance to make an income and still incurring business costs.
Having a business interruption insurance policy can keep the restaurant on its feet, making it a popular type of cover for businesses that would otherwise face considerable financial difficulties if forced to close temporarily.
The policy is able to cover both the lack of income and other expenses. The cover is designed to financially support the business with the drop in turnover experienced after an incident and the money to get the restaurant back on track.
What can be claimed:
- Shortfall in income,
- Higher costs from relocating temporarily, replacing equipment or repairing damaged items.
What is covered:
- Damage from fire,
- Damage from flood,
- Damage from a storm,
- Breakdown of essential equipment.
What is not covered by business interruption cover is typically things such as viruses, either computer viruses (covered with cyber insurance) or, going forward, viruses that effect humans. However, some policies that were in place before the pandemic may pay out for restaurant closures.
Business interruption insurance can be very useful for any business that has a fixed premises, such as a restaurant. This is because any physical damage to the building where the restaurant runs from can take weeks to recover from, and that can have a substantial financial impact.
What does public liability insurance cover for a restaurant?
Public liability insurance provides protection for restaurants from members of the public making a claim. All businesses that deal with the public are at risk. If a public member suffers an injury, falls ill, or their personal property is damaged, they can sue the restaurant. A public liability insurance policy will fund the legal costs the come from defending against a claim and will also cover the cost of compensation should it be needed.
Restaurant insurance: www.nimblefins.co.uk/business-insurance/restaurant-insurance
Restaurant profit margin statistics: https://www.lightspeedhq.co.uk/blog/complete-guide-to-restaurant-profit-margins/
Business interruption insurance pay outs for small businesses: https://www.reuters.com/world/uk/uk-covid-19-business-insurance-payouts-top-one-billion-pounds-watchdog-2021-09-15/