How much insurance does my business really need? What types of insurance do I need? What insurance can I get away without having? What is the bare minimum I can get away with for insurance? These are all very common question that insurance agents get asked when either a new business owner is looking to buy insurance coverage for the first time or a seasoned business owner is looking to renew their coverage. The answer to these questions is, like many things in life, it depends. There are many variables that go in to running a restaurant and those variables bring on completely different risks. How you want to go about protecting your business from those risks depends on what exact risks you face and how much risk you are comfortable with. Here are five tips to help you make sure you are ensuring your business adequately.
1. Is Your Restaurant Classified Properly?
First and foremost, the restaurant owner will need to make sure the business is classified properly for both workers compensation and general liability insurance. You can find this information from your state insurance regulating agency, but the best way to determine if you are properly classified is to ask for help from an experienced independent insurance agent. When speaking with an agent, it is very important to be open and honest with the agent about what your restaurant does and what your restaurant does not do on a daily basis. For example, if you are a bar that stays open until 2 a.m., you will be in a different class code than a diner that is open from 6 a.m. until 2 p.m. The risks are different, so the businesses are classified different. Furthermore, if you are not honest with your agent about serving alcohol, Liquor Liability Coverage may be left out. If an incident occurs without coverage it may be a loss so large it forces you to close permanently.
2. Consider Pay As You Go Workers’ Compensation
Workers’ Compensation Insurance is required by law in 48 out of 50 states. With most carriers, you must pay up to 25 percent of the total estimated premium up front to get coverage in place. For many restaurants, this is an enormous cost that could be better used on other business expenses. Pay as you go workers’ compensation is designed to help with this problem. It is a great option for seasonal or cash-strapped businesses. Pay as you go workers’ compensation insurance coverage can be a good option for new restaurants that do not know how much their payroll will be from month to month. It can benefit restaurants located in resort towns where a majority of the yearly revenue comes in during a short period of time. Pay as you go workers’ compensation allows businesses to pay their premiums each month based upon the amount of payroll, as opposed to an estimate of the monthly payroll. For many businesses, they can get coverage in place for as little as a few hundred dollars. This allows businesses to get coverage in place at a lower cost, and when they get revenue coming in to the business they can pay the additional premium monthly.
3. What Kind of Commercial Auto Insurance Does Your Restaurant Need?
Many restaurants do not think they need any type of commercial auto insurance. For some this is true, but for most it is not. If you have vehicles that are going to be used by yourself or your employees, you need commercial auto insurance coverage. If you have employees who run errands in their own vehicles, your business is liable for incidents that occur while they are travelling for work, even if they are only going to the bank to get cash for the evening. If your business does not own vehicles, you can cover this risk with a hired and non-owned auto policy. Hired and non-owned auto coverage kicks in when your employees use their own vehicles or rented vehicles not owned by the company.
4. Does your Restaurant need Data Breach or Cyber Liability Insurance
Data breach and cyber liability insurance are now needed for most restaurants, because breaches are no longer just a problem for large national chains. Data breaches are becoming one of the most dangerous risks that far too many businesses fail to protect themselves from. It does not matter the size or the scope of your business, hackers are targeting you. Several of the largest data breaches in history, such as those at Target and Home Depot, were by first accessed by hackers gaining access to a small business that had access to a larger business through a vendor partnership and internal computer systems. Sometimes the hackers gain access to smaller business for weeks and even months, but once they realize the business can give hackers access to the larger database, hackers go in and do the damage. In most cases, if the small business does not have proper data breach insurance, the breach causes them to close the doors of the business permanently.
Depending on the revenue of your business, most data breach policies can be purchased for only a few hundred dollars. This is important because according to a study done by IBM and the Ponemon Institute, the average number of records stolen in a breach is 24,089, resulting in an average cost of $3.62 million. These numbers are a little higher than most breaches because the largest breaches skew the data, but according to the same study, the average cost for each lost or stolen record was $141 in 2016. Just 100 customers falling victim to a breach could cost your business almost $15,000. Unless your business has tens of thousands of dollars lying around for a data breach, it may be wise to secure proper insurance coverage.
5. Consider Bundling Policies with a Business Owner’s Package
In most cases, all of these policies can be bundled together under a business owner’s policy. Most insurance carriers like to offer policies in a bundle because it brings them more business and allows them to give better prices for the business owner. If the carrier knows they are going to get multiple coverages from one customer, they are more aggressive offering additional credits and discounts. It also ensures the restaurant is completely covered, leaving no gaps. This is important when an incident does occur, because the carrier will just determine if the claim is covered or not. If you buy each policy individually, at best it will delay the processing of your claim while the insurance carriers determine which coverage is liable for the claim. In some cases, it will cause the claim to not be covered.