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13 insurance risk factors should be known by every restaurant owner

You’ve always wanted to own an eatery in a hip area of New York or New Jersey. Perhaps that dream even transported you to a coastal location with a view of Long Island Sound. You finally achieved your goal. Your beautiful establishment is well-known across the community, and it has a fantastic location and an impressive cuisine. However, starting a restaurant can be pricey, particularly in New York or New Jersey. There are so many unanticipated turns and unforeseen costs that you end yourself facing at the conclusion of the project. In order to get by for a few months until you can recuperate some costs, you choose a basic policy when it comes to acquiring restaurant insurance.

After all, what could possibly occur in the initial few months?

The building in which your restaurant is housed is well-maintained, it has a sprinkler system, and you will be present to keep an eye on things.

The truth is that having the proper restaurant insurance is just as important to your company as having fresh food, the right wine selection, and favorable customer reviews.

This definitely holds true for the restaurant industry. Every day involves a great deal of danger. Some dangers are fully avoidable, some can be avoided or at least minimized, and some are preventable.

Here are the top 13 things to think about.

  1. Food Spoilage or Contamination

For the restaurant industry, food safety is a top priority. According to the Centers for Disease Control (CDC), food poisoning is the restaurant injury that is most frequently reported.

Food deterioration may be brought on by a lack of power, a malfunction, or another occurrence. To avoid the risk of causing food illness to restaurant customers and losing money, the food must be thrown out.

The expense of replacing ruined food will be covered by food contamination/spoilage coverage. The majority of policies cover this, but you should check the maximum in your restaurant insurance policy to be sure it’s enough for your particular needs.

  1. A Workplace Accident or Illness

It is crucial to frequently teach your staff on workplace safety and to have a formalized safety program in place. But in practice, illness or damage aren’t usually avoided by doing it.

Because of this, most states mandate that businesses with employees carry workers’ compensation insurance. If one of your qualified employees becomes ill or injured on the job, workers compensation insurance offers benefits. It is crucial to maintain this coverage at all times because failing to do so could result in fines for each day it was not maintained as well as for any benefits a worker could have been entitled to in the event of an on-the-job injury or illness.

  1. Employment litigation

Three out of every five businesses are predicted to face a lawsuit from one of their employees. Like any other business, restaurants are susceptible to everything from employee layoffs to pre-hire screening. Any number of things, including someone interpreting a “joke” the wrong way and being offended, can give rise to claims.

A stand-alone policy called employment practices liability insurance (EPLI) shields your restaurant company from claims of sexual harassment, discrimination, and other employment-related offences.

Typically, your restaurant business, along with your directors and officers, will be covered by an employment practices liability insurance policy. Third party coverage is an additional choice that typically involves a policy endorsement and handles complaints filed by clients or suppliers against you resulting from staff actions.

  1. Equipment Failure

Running a restaurant requires the use of equipment including freezers, stoves, dishwashers, air conditioning, and computers. Your company may incur costly repairs and lost revenue if an equipment breakdown results from a power surge or mechanical issue.

Maintaining equipment breakdown insurance can allow you to restart your business without suffering monetary losses. To verify if you are covered for expenses and labor to repair or replace damaged equipment as well as for expenses to replace perishable products, check your insurance.

  1. Commercial Interruptions

The majority of insurance policies cover the lost wages when the unexpected occurs, such as a fire, flood, or gas explosion.

However, what if one of your restaurant’s essential suppliers is forced to cancel orders due to an unforeseen circumstance?

To safeguard your restaurant business against the loss of potential earnings caused by a key vendor’s failure to provide the goods you require, make sure you have business interruption insurance and that your policy contains contingent business interruption coverage.

  1. Ignoring Significant Improvements/Renovations

You improved your kitchen significantly and put a lot of time, effort, and money into it. But did you remember to get in touch with your insurance agent to talk about any changes to your restaurant insurance policy that could be required?

The majority of restaurant owners are aware that they should insure their property (such as tables and chairs), but they rarely consider the expense of the alterations they have made to their establishment over time.

If you have renovated your restaurant or are thinking about doing so, take the cost of such improvements into account when calculating your building limit (if you own the property) or contents limit (if you lease the building).

  1. Flooding

If you run a restaurant in New York or New Jersey, you are aware of the serious threat that flooding poses. Recent storms have taught us that even businesses not near a body of water can suffer significant damage from floods.

As long as the property is not situated in a high-risk flood zone, flood insurance can usually be put on by endorsement to a property policy even though it is traditionally not included. You’ll need a separate insurance if your property is located in a high-risk flood zone. Having coverage is crucial in both scenarios.

Make sure your contents are insured at “replacement cost value” rather than at the depreciated figure known as “actual cost value” while you’re at it.

  1. Sign Coverage

Your restaurant’s exterior signage is susceptible to weather, vandalism, and fire. Although most property insurance policies provide a sublimit of coverage for signs, this may not be sufficient to pay costs in the event of loss or damage.

Consider your sign exposures and whether your current property policy offers adequate protection. If not, you should consider raising the policy limit.

  1. Data Breach

There seems to be a significant data breach committed by someone (or people), frequently located in a remote location, every few months or so. Despite their best efforts to prevent such incidents, companies including Target, Home Depot, Michaels, JP Morgan, and even the IRS have been targeted and suffered significant data breaches.

It’s frequently not a matter of if but when you’ll have a data breach. By obtaining a cyber-liability insurance policy, you can receive coverage for costs related to regulatory defense and fines resulting from privacy law violations, hiring legal counsel to provide incident response advice, paying for credit monitoring services, and complying with laws requiring data breach notification.

  1. Auto Insurance

If your restaurant provides food delivery services, regardless of whether the drivers are operating company-owned vehicles or their own, you could be named in a lawsuit as a consequence of an accident or other harm the driver caused while making a delivery for your restaurant.

If the vehicles are company-owned, a business auto coverage must be kept in force. Employers should maintain hired and non-owned auto liability insurance if employees are driving their own automobiles. Both will represent you if a lawsuit is filed against you as a result of an employee’s injury while performing delivery duties for you.

  1. Workplace theft

Food and cash are the two items that your restaurant most likely always has on hand. Although you put your trust in the staff at the restaurant, there have been numerous instances where they have pulled con games to pocket cash or stole meals to take home or present to friends and family.

With the fantastic team you have assembled, it might not seem realistic, but in the restaurant industry, everything is possible.

Make certain that employee theft is covered by your insurance. If you have this kind of coverage, it may be able to assist you recover some of your financial losses.

  1. Valet Parking

Offering a valet service at your restaurant is a huge benefit for your customers, especially if it’s situated on one of New York City’s congested streets. But there is a very real risk that employing such service could result in damage to a car, property, or harm.

To shield your restaurant business from third-party litigation, get a general liability policy. Make that a garage keeper’s legal liability insurance is active and has sufficient limits to cover any physical harm to your visitor’s car or other on-site automobiles. Get a certificate of insurance from the independent valet service you are utilizing to confirm they have the right coverage and sufficient amounts. Ensure that their policy names your company as an extra insured as well.

  1. Liquor Liability

In the event that someone becomes intoxicated to the point where injuries or property damage occurs, any establishment that sells, serves, or helps with the purchase or use of alcohol may be held liable. You cannot exempt your eatery.

It’s crucial to safeguard yourself against potential financial damages by having liquor liability insurance coverage if you sell or serve alcohol as a business. The correct coverage in place could assist in covering your legal bills, court costs, and any civil or criminal damages resulting from a liquor-related incident.

The restaurant industry is distinct. Spend some time talking to an insurance agent who is knowledgeable about the unique hazards that restaurant owner’s face and who can provide suitable insurance solutions to cover those risks.



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