Restaurants face a range of hazards that necessitate comprehensive insurance coverage. From General Liability to Cyber Liability and more, a restaurant’s insurance program should be tailored to its unique risks. However, determining the cost of restaurant insurance can be a complex process influenced by numerous factors.

In this article, we will explore how insurers calculate the cost of restaurant insurance. Factors such as the type, size, location, and operations of the establishment play a significant role. We will specifically examine General Liability, Commercial Property, EPLI, Cyber Liability, and Umbrella Liability policies and the key considerations that impact their costs.

Understanding the intricacies of insurance cost determination is vital for insurance brokers working with restaurant clients. By grasping the factors underwriters analyze, brokers can offer customized and cost-effective insurance solutions that address each establishment’s unique needs and risks.

General Liability Costs for Restaurants

When determining the cost of General Liability coverage for restaurants, insurers consider key factors that impact insurance rates. Firstly, the restaurant’s classification code and corresponding liability base rate play a significant role. For example, a restaurant with a bakery on-site faces different risks than one without, affecting the classification code and rate.

Restaurants with over 30% of sales from liquor receipts also have a distinct classification code due to increased liability. Other factors, such as weekly entertainment, dance floors, late-night hours, and drink specials like happy hour discounts, impact the insurance rate as well.

After determining the base rate, underwriters assess the restaurant’s management experience, safety practices, and claims history to calculate the premium. The formula is “rate x exposure = premium.”Some insurers use square footage instead of gross sales to determine the base rate.

Restaurant Commercial Property Insurance

When calculating a restaurant’s Commercial Property insurance, insurers consider several factors related to the property itself. These factors include the property’s occupancy, building materials used, protection class, and risk exposure. Understanding how these elements affect insurance rates is essential for insurance brokers working with restaurant clients.

The type of building materials used significantly impacts the insurance cost. Buildings constructed with fire-resistant materials like brick or stone, or those with fire-resistant walls and doors, generally have lower insurance premiums compared to wood frame structures. Fire-resistant materials can help mitigate damages in the event of a fire. Additionally, newer buildings or those with recent upgrades to electrical wiring, plumbing, and HVAC systems tend to be less expensive to insure. Conversely, older buildings without updated infrastructure, including plumbing, heating, electrical systems, and roofs, will typically result in higher insurance costs.

The presence of security measures such as burglar and fire alarm systems, as well as sprinkler systems, can contribute to reduced insurance premiums. Insurers consider the level of risk associated with the business’s location when determining Commercial Property insurance rates. Factors such as crime rates, accident likelihood, and susceptibility to natural disasters in the area where the restaurant is situated are taken into account.

The coverage limits and deductible of the policy also play a role in determining the cost. These factors vary from policy to policy and can affect the overall premium amount.

Employment Practices Liability Insurance (EPLI)

EPLI protects employers against employee-related workplace allegations of discrimination, sexual harassment, wrongful termination, failure to promote, retaliation, and other claims. Most policies will cover the cost of an out-of-court settlement, defense costs, and judgments if an employee lawsuit goes to court. However, it’s important to note that EPLI policies vary, so it’s critical to review what an insured covers.

The factors involved in determining the cost of EPLI include:

  • the number of employees on the payroll
  • type of employees (full-time vs. part-time)
  • location (the state in which the restaurant operates)
  • employee turnover rate
  • claims history
  • hiring and firing practices
  • employee training procedures

The amount of coverage and deductible size the insured purchases, of course, also impact pricing.

Cyber Liability Insurance

In our previous article, we highlighted the increasing importance of Cyber Liability insurance in today’s world, particularly for restaurants. These establishments heavily rely on digital technologies like online payment options, digital receipts, third-party delivery apps, and mobile payments, making them more susceptible to cybercriminals seeking to exploit customer and employee information for profit. As an insurance broker catering to the restaurant industry, it’s crucial to understand their unique vulnerabilities.

Restaurant cyber insurance costs depend on the size of the company, its industry, and the amount of sensitive data stored. The more employees using the company’s communication network, the higher the vulnerability. Underwriters assess the security measures implemented by the restaurant, with stronger measures leading to more favorable premiums.

Umbrella Liability Insurance

In today’s litigious environment, where multimillion-dollar verdicts and settlements are increasingly common, it is crucial for restaurants to have high-limit Umbrella coverage. The cost of Restaurant Umbrella insurance depends on the coverage limits chosen and the level of risk associated with the operation. Factors such as business size and revenue also play a role in determining the premium. Additionally, underwriters will assess the restaurant’s prior claims history, particularly looking for any significant casualty losses.

Take Your Next Step With Distinguished’s Restaurant Insurance

With 30 years of experience, Distinguished Programs offers superior restaurant insurance coverage that stands above the competition. Our comprehensive policies are tailored to meet the specific needs of restaurants, providing broad coverage options to protect your establishment effectively. We are your one-stop shop for a range of essential coverages, including General Liability, Commercial Property, EPLI, Liquor Liability, Cyber Liability, and High-limit Umbrellas.

To learn more about our restaurant insurance solutions, explore the following resources:

If you’re ready to obtain a quote, simply sign up with Distinguished and download our Restaurant Insurance Application form. Our experienced team is dedicated to assisting you throughout the process and customizing a policy that suits your unique requirements.

Choose Distinguished Programs for your restaurant insurance needs and experience the difference our expertise and comprehensive coverage can make in safeguarding your business.

About Distinguished Programs

Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.

View a full list of our programs and submit business with Distinguished.

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