How Much Does Restaurant Insurance Cost? Factors That Affect Your Rate

Juggling inventory, scheduling staff, and ensuring smooth service are just some of the challenges restaurant owners contend with daily. What’s more, operating a restaurant involves managing a myriad of risks, and, as a restaurant owner, you’ll need to invest in the right insurance coverage to protect against potential losses.

Understanding the costs associated with restaurant insurance can be complex, as the amount and types of coverage you need will vary based on several factors. In this article, Central’s Director of Small Business Underwriting Anne Russo, shares her expertise on what influences restaurant insurance costs and what you should consider when purchasing this crucial coverage.

What Types of Insurance Does My Restaurant Need?

Understanding the basic insurance coverage that a restaurant needs is an essential first step in protecting your establishment.

Protecting Your Facility

If you own your restaurant’s building, you’ll want to invest in Commercial Property insurance, which will protect your building, fixtures, and attached equipment. This coverage typically includes protection against perils like fire or wind. As a restaurant owner, Commercial Property insurance will help ensure unexpected incidents do not lead to significant financial losses.

Protecting The Contents of Your Restaurant

However, if you rent a space within someone else’s building, commercial property coverage is still crucial. In this case, insurance protects against damages to your personal property within the facility, including furniture, cooking equipment, food stocks, paper products, and linens.

According to Russo, restaurant owners should also consider layering Equipment Breakdown insurance onto their commercial property policy.

“There’s a lot of equipment used in restaurants, and Equipment Breakdown insurance covers losses that typical property insurance does not,” Russo clarifies. “It basically includes sudden and accidental malfunction of things with an on/off switch.”

Did You Know? As of 2023, there are approximately 749,000 restaurants in the country, with the majority classified as single-unit operations.

Protecting Against Accidents On Your Property

Russo explains that “restaurants tend to have a lot of foot traffic, which increases your risk for slips and falls on sidewalks, in the parking lot, or inside the restaurant.” As a result, restaurant owners need to invest in General Liability insurance, which will protect your business in the case of a bodily injury, accident, or damage.

Learn more: Insurance for Restaurants: Three Key Policies to Protect Your Business

Protecting Your Digital Assets and Finances

For restaurants that conduct business online, Russo highly recommends Cyber Suite insurance. This type of policy provides comprehensive coverage and support for cyber incidents. For example, it can cover the costs to restore or recover lost or corrupted data, losses resulting from phishing or ransomware attacks, and expenses when a data breach occurs.

“A lot of restaurants are fully digital and use global ordering that integrates with third-party platforms for food delivery services,” Russo says. “If any of that went down, it could potentially cripple your business, so cyber protection is a must.”

Protecting Your Income

According to Russo, business income coverage is also an important investment for restaurants.

“Restaurants are the kind of businesses where you can’t typically shut down your location as it’s being rebuilt and resume operations somewhere else like you can with an office,” Russo says. “Our Small Business Program addresses this need of restaurant owners by offering coverage with no dollar limit. It gives peace of mind that if something were to happen, you could rebuild in 12 months, and you wouldn’t have to wonder if there’s enough income to see you through.”

Top carriers like Central often have simplified, comprehensive protection tailored to a restaurant’s needs. At Central, our Small Business insurance makes it easy and more efficient for restaurant owners to obtain the right coverage.

What Influences Insurance Premiums for Restaurants?

Restaurant insurance costs can vary widely based on factors such as the type of restaurant, coverage needs, and risk management practices. Russo explains that the following are common questions an insurance carrier will consider when determining your insurance rates:

Is your business set up as individually owned (where personal assets would be exposed) or an LLC? Are there different operations under the same owner?

Do you own or rent the restaurant space?

What type of cooking is involved, i.e. frying, baking, sautéing?

Do you offer food delivery services?

What is the layout of the premises and your average foot traffic?

Have you had a history of prior losses and claims?

Does your restaurant have a maintenance schedule for cooking equipment? Does your cooktop or frying station have an extinguisher system above it?

Do you serve alcohol? If so, have your servers and bartenders attended training on serving it responsibly?

How many employees do you have on payroll?

What is your business’s annual revenue?

While this list offers an overview of some of the most common factors considered when determining a restaurant’s insurance cost, Russo emphasizes every restaurant has different risk exposures. Yet the factors that carry the most weight are the value of the property and the revenue of the business. Central’s system can estimate the current building value from an insurance perspective, separate from the market value. The insurance value focuses on the cost of rebuilding or repairing the building and replacing its contents rather than what you could sell it for.

The type of restaurant you operate can also impact your insurance rates. Here are some examples of this:

Food trucks will require a hybrid of automotive and commercial package insurance

Delis that don’t use open flames or fry their foods will have less property risk exposure than typical restaurants, so their coverage rates will be lower

Restaurants with wok cooking with oils and constant frying will have a higher rate due to the increased fire risk

How Can Restaurant Owners Manage Insurance Costs Without Sacrificing Coverage?

Proactively managing your risk is the key to reducing restaurant insurance rates.

“We might know your restaurant is cleaned and inspected regularly, but is it done over and above the minimum? Have you installed a leak protection device or one that determines the moisture level in your walk-in cooler to eliminate possible spoilage loss? Things like that would definitely help any underwriter support a discount on a premium versus a restaurant owner who doesn’t invest in those kinds of proactive measures.” – Anne Russo, Director of Small Business Underwriting at Central Insurance

Don’t assume you can’t afford restaurant insurance coverage. When you work with an experienced insurance carrier like Central, you can feel confident that affordable restaurant insurance coverage is possible. Central has various limit options so businesses, especially smaller ones, can choose a limit that fits their exposure and desired level of protection.

Work With a Partner Who Understands Your Restaurant Business

From our helpful loss control consultants to our streamlined, 24/7 claims service, Central is here to safeguard your restaurant against unforeseen events so you can focus on delivering exceptional dining experiences to your patrons. Contact your local independent Central agent for more details about restaurant insurance or for an insurance quote.

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