Restaurants require protection against many different types of hazards. To address their various risks, General Liability, Commercial Property, EPLI, Cyber Liability, and Umbrella Liability are just some of the coverages that should make up a restaurant’s insurance program. But how do insurers determine the restaurant insurance cost?

The cost of a restaurant insurance program depends on the type, size, location, and operation of each establishment. Other factors include the type of fire and security system, hours of operation, number of employees, whether the operation sells alcohol, projected sales, inventory value, and the value of equipment.

Let’s take a look at how restaurant insurance costs are determined for several of the policies an establishment should carry.

Restaurant General Liability Insurance

In determining the cost of General Liability coverage, insurers look at the restaurant’s classification code and corresponding liability base rate. For example, a restaurant with a bakery on its premises has a different exposure from a restaurant without one. Restaurants with more than 30% in sales from liquor receipts will also have a different classification code from those that don’t generate as much in sales, ultimately impacting the rate on the General Liability insurance. Underwriters will also look at whether the operation has other exposures that drive up the cost of coverage, such as weekly or nightly entertainment, a dance floor, late-night hours, and drink specials (e.g., a happy hour offering two for one drinks or discounted drinks for a set number of hours, let’s say, from 5:00pm to 7:00pm).

Once the base rate is determined, underwriters will look at a restaurant’s management experience, safety practices, and claims history to help calculate the premium. The formula basically is “rate x exposure = premium.” Some carriers use square footage in lieu of gross sales to determine a restaurant’s base rate.

Commercial Property Insurance

Insurers look at a property’s occupancy, the type of building materials used, protection class, and exposure to risk when calculating a restaurant’s Commercial Property insurance.

Buildings made of fire-resistant materials, such as brick or stone, or with fire-resistant walls and doors, cost less to insure than wood frame structures. Because they can limit fire damages, new buildings and those with recent electrical wiring, plumbing, and HVAC system upgrades typically cost less to insure. Older buildings that lack updated plumbing, heating, and electrical along with roof repairs and/or a roof replacement will cost more.

A burglar and/or fire alarm system and a sprinkler system will help reduce an insured’s premium. Risks in the area where the business is located, such as criminal activity or the likelihood of accidents or natural disasters, will also impact a client’s Commercial Property insurance rates.

The cost of a policy will also vary depending on the policy’s coverage limits and deductible.

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 as well as 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’s covered with an insured.

The factors involved in determining the cost of EPLI include:

  • the number of employees on payroll
  • type of employees (full-time vs. part-time)
  • location (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

As we discussed in a previous article, cyber threats and attacks have increased making Cyber Liability insurance must-have protection today. Restaurants use online payment options, digital receipts, third-party delivery apps, and mobile payments. This makes them more vulnerable to cybercriminals looking to steal customer and employee information for profit. The cost of Cyber insurance depends on the size of the company and its industry[MB1] . The greater the number of employees using the company communications network, the greater the vulnerability.

The amount of sensitive data a business stores will also impact rates. An underwriter will look at what security measures have been implemented to help mitigate cyber risks. This could positively impact premiums.

Umbrella Liability Insurance

Today’s litigious environment, characterized by multimillion-dollar verdicts and settlements, calls for high-limit Umbrella coverage. The cost of Restaurant Umbrella insurance varies based on the purchased coverage limits and the level of risk the operation has. Business size and revenue will come into play in determining a restaurant’s premium. Underwriters will also review an operation’s prior claims history, including whether there are any prior large casualty losses.

Distinguished Programs can provide you with a Package policy for your restaurant clients along with Umbrella solutions.


Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs for Real Estate, Community Associations, Hotels, and Restaurants. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished Programs’ high-limit umbrella and primary insurance programs remain the clear choice in its areas of specialty for superior coverage, competitive pricing, and attentive service.

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