Multiple dishes and bowls of food on a table.
Unsplash/Jakub Kapusnak

Things have gotten so unwieldy that even insurance agents are sometimes left confused.

Unexpected Gaps in Your Restaurant’s Insurance Recipe

Omitting one critical coverage can ruin an entire business. 

Restaurant owners know how important the details are. Overlooking one simple ingredient can ruin an entire dish. Insurance works the same way; omitting one critical coverage can ruin an entire business.

Unfortunately, it’s far too easy to overlook potential risks and be left with gaps in insurance coverage—gaps which small businesses may be unaware of until it’s time to file a claim.

Over the years, buying small business insurance has become an increasingly complex process. While the restaurant industry has evolved and new risks have emerged, the insurance industry has kept pace only through incremental, jargon-filled policy changes that compound their complexity. Things have gotten so unwieldy that even insurance agents are sometimes left confused.

Meanwhile, restaurant owners are left to piece together an assortment of coverages, sometimes from multiple agents and carriers. This messy, time-consuming system can lead to restaurants being dangerously underinsured if they cannot identify and secure the right coverages.

As the restaurant industry changes, and individual restaurants broaden their offerings—such as adding catering, special events, delivery services, digital reservations and more—new risks are introduced, as well as the potential for coverage gaps.

Here are a few key areas restaurant owners should be particularly mindful of to ensure they don’t have gaps in their insurance coverage.

Liability Insurance covers a business if it is sued by another party. While customer slips and falls used to be the primary risk, today restaurants face a range of liability risks, including allergy incidents, overserved patrons, employee harassment, and more.

Property Insurance may cover a restaurant’s physical premises, equipment and even food against a range of risks such as kitchen fires, storms and floods, theft or spoilage, depending on the terms of the policy.

Cyber Insurance covers one of the newest threats facing restaurants – incidents involving computer systems and data. As restaurants become increasingly digital, the risk of a cyber incident also increases. This might include theft of customer data, a ransomware attack, a compromised reservation system, or a disruption to inventory systems.

If only securing the right liability, property and cyber policies were as straightforward as it sounds. There are several areas where coverage under these policies may be restricted or excluded entirely. For example, your restaurant’s liability for an accident caused by an overserved patron might be excluded from a liability policy. Damage caused by a flood is typically excluded from most property insurance policies. And that new cyber coverage may cover the costs to investigate the extent of a cyber security breach, but not the damages claimed by your affected customers or suppliers.

With this in mind, the best thing restaurant owners can do to protect their business is assume nothing when it comes to their insurance program. Below are some key questions to consider when reviewing your coverage.

  • Am I covered for liability when performing all of the services my business provides? Be specific and think about all the services the restaurant provides (e.g. dining, catering, special events, delivery, etc.).
  • What property is covered (e.g. building, outdoor signage, equipment, food)?
  • Is that property covered both on-premises and also in-transit to another site, such as at a catering job?
  • What kind of event is my property covered against (e.g. fire, theft, wind, flood, spoilage)?
  • If I have Workers Compensation coverage for my employees, does it also extend to me, the owner?
  • Do I have cyber coverage?
  • What limits and deductibles apply in each situation?
  • What are my responsibilities to protect my property or notify my insurer in the event of a loss?

If all this seems like a lot to consider, that’s because it is. Asking these questions—and more—however, is vital. Just as when a chef inadvertently omits an ingredient from a recipe, the result will be different than intended, if a restaurateur omits coverage from their insurance, they may not have the protection they expected, and they may not know it until it is too late.

Dave Stanard is the chief small business advocate for THREE Insurance by Berkshire Hathaway.