There are many factors that determine cost.
Whether you’re thinking about opening a restaurant for the very first time or you’re a veteran restaurant owner, you will need to put in place a quality restaurant insurance program. Here is the most common question that we receive from both current and future restaurant owners:
How much is restaurant insurance?
This isn’t necessarily an easy question to answer, but it’s ultimately a very important question. The cost of restaurant insurance can vary widely, which is a direct result of each restaurant’s uniqueness. We will attempt to give you some guidance on the major items that will influence your total restaurant insurance premium.
The following is a list of factors that will play a role in the cost of your restaurant insurance program:
Physical location characteristics
There are many different characteristics of your restaurants physical location that will play a role in answering the question, “How much is restaurant insurance?” These characteristics include, but are not limited to:
- Do you own the building in which your restaurant is located?
- What is the construction of the building?
- Where is the building located in relation to fire hydrants and fire stations?
- Are there other tenants in the building?
- How big is the building?
- What types of safety features is the building have?
- and many more.
Each characteristic of your physical location has a varying degree of impact on the premiums that you will pay for your restaurant insurance.
Total revenue/liquor sales
The primary way in which an insurance company determines the volume of business your restaurant does is through total revenue and liquor sales. Each insurance company is going to tier their pricing differently depending on the size, scope and type of restaurant they are looking to write.
If you do sell alcohol, every insurance company is going to want you to carve out liquor sales from food sales and any other revenue that you may bring in. Different insurance companies have varying appetites for the percentage of revenue that they’ll allow for liquor sales. It’s very important to find an insurance company with the appetite for liquor sales that best suits your specific restaurant.
Hours of operation
As the saying goes, “nothing good happens after 1 AM”. Most insurance companies share this thought. If your establishment is open late night and into the early morning hours, you’re going to pay higher premiums than restaurants that serve a lunch and dinner crowd and are closed by 10 PM.
In some instances, certain insurance companies may not even offer coverage to your restaurant after specific hours. As with all the characteristics on this list, it’s important to find an insurance company with the appetite for restaurants that matches your hours of operation.
Types of entertainment
Not all restaurants have live entertainment included as part of their operations. For those that do, certain insurance companies use types of entertainment as an underwriting characteristic.
There are certain types of entertainment that some companies will not provide coverage for. Those insurance companies that are willing to take on a restaurant that provides live entertainment to their patrons may add an increase in premium associated with offering live entertainment.
Number of employees
Another characteristic of your restaurant is the number of employees you have. The total number of employees and their associated wages has a direct impact in the amount of premium that you will pay for workers compensation insurance.
Number of employees is also an indication of what size business you have, as more employees are needed to staff larger operations. Keeping an accurate number of your total employees as well as the wages that you pay them is crucial to properly answering the question, “How much is restaurant insurance?”
Length of time in business
The length of time that your restaurant has been open may seem like an arbitrary characteristic in determining your restaurant insurance premiums. It has been proven through countless insurance industry studies that businesses older than three years tend to stay in business.
Insurance companies want clients who are going to remain in business over the long haul. This is why establishments that are just beginning or in the early stages of growth may actually pay more for their restaurant insurance than their more established peers.
Claims history
Every insurance company is going to look at the claims history of your restaurant before they decide to offer you insurance and determine the premium that you will pay for your insurance. Your claims history is like the report card for your business. Again, insurance industry studies have shown that restaurants with frequent insurance claims tend to be more prone to have more insurance claims.
By limiting the number of insurance claims your business submits to the insurance company, (proper safety and health is a big part of this and we can help click here to find out more), you can also keep your premiums as low as possible.
Corporate credit history
Many states across the country, New York State included, have begun to look at the corporate credit history of all businesses in determining the cost of insurance. Insurance industry studies have shown that organizations with poor credit history tend to pay late, not pay at all, or go out of business more often than their peers with a good credit history.
In an effort to cover the cost to the insurance company for these actions, most insurance companies will charge a higher premium to organizations with a bad credit history.
So How Much is Restaurant Insurance?
The honest to goodness truth is that it all depends on the unique characteristics of your restaurant. Terrible answer, I know.
These are just a few of the characteristics that are taken into account in answering the question, “How much is restaurant insurance?” The good thing about each of these characteristics is that most of them are very manageable. By understanding that they impact the cost of insurance, there are actions that you can take to ensure that you are paying the lowest possible premium for your unique restaurant, bar, tavern or eatery.
At The Murray Group, we’ve been providing quality comprehensive restaurant insurance programs to New York State restaurants for over 40 years. We’ve developed specific relationships with the most competitively priced, highest-quality New York insurance companies who are looking to write restaurants, bars, taverns and eateries.
We’re dedicated to helping New York State restaurants operate at their fullest potential. This is why we created the Restaurant Safety Newsletter, a free resource for restaurant owners, professionals and management to help ensure that you are providing the safest and healthiest eating and working environment possible. Simply enter your name and email in the form below for instant access.
If you have questions about your restaurant insurance program or if you would like to receive a comprehensive review and proposal for your restaurant insurance program, please give us a call at 518-777-7777 or you can click here to begin the process by email.
Thank you and good luck,
Ryan Hanley, CIC
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