Q&A: Insurance for restaurant owners

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If you’re a typical restaurant owner, running your operation is all consuming. But the daily grind shouldn’t distract you from periodically reviewing your insurance coverage, the crucial safety net in case of mishaps, accidents, and liabilities.

For instance, are you covered if a cybercriminal hacks your customer loyalty program and makes off with customer credit card numbers and birthdays? Or if a smash-and-grab robber plows into your building and hauls away equipment? Not to mention the less dramatic, but very costly, claims that ensue when a customer twists an ankle in the parking lot or is burned by hot coffee at the drive-thru window.

Paying out-of-pocket for such incidents can be ruinous. Hence the wisdom of checking with your insurance agent to see if your coverage matches the needs of your restaurant, which may have changed in recent years.

“The restaurant industry has made a lot of changes to adapt to the new normal,” says John Cassetta, who works as a restaurant insurance solutions leader for CoverWallet, a commercial insurance broker. “If you bought the policy before the pandemic, don't assume what you have is still appropriate today.”

NRN: What types of insurance are “musts” for restaurant owners?

John Cassetta: The policies I would consider non-negotiable if you’re doing business are a business owner policy and workers compensation insurance. The latter covers an employee’s lost wages and medical treatment in the event of work-related injury.

The business owner policy is for general liability, and property and business interruption coverage. This is critical because you're responsible for any number of things that can happen to customers—slips, trips, falls, food poisoning, and so on. On the property side, say you have a kitchen fire that destroys your equipment, you are protected. Another reason to have adequate property coverage is the rising number of smash-and-grab robberies with stolen cars. In that case, you have property damage and potential business interruption. You’re taking a gamble if you assume personal auto insurance will cover property damage caused by a car used in a crime by somebody other than the insured driver.

Business interruption coverage helps with cash flow if an incident forces the business to close for a time. You still have to pay your rent, your insurances, and your employees, but you won’t have a pile of delinquent bills when you reopen.

NRN: Many restaurants have been doing greater takeout and delivery business since the pandemic. How does that affect insurance needs?

John Cassetta: In many cases, the traditional sit-down restaurant that serves all its food on the premises has become a to-go outlet and may even have a drive-thru window. Now your liabilities vary greatly depending on the scenario. First, consider how the food leaves the building. Is somebody coming inside the building to pick it up? If you deliver to customers, are your employees driving your vehicles or their own vehicles? The discussion changes if you are contracting with a third-party delivery service such as Uber Eats or Grubhub. So again, review your coverage.

NRN: How advisable is it for a restaurant owner to have cyber liability insurance?

John Cassetta: Restaurants are one of the industries most targeted by cybercrime. I think many owners need to realize how big a target they are. If you have a loyalty program that stores customers’ credit card numbers and birthdays, or you keep payment information for online ordering, that could be breached in a cyber attack. And employee information is at risk, too. If somebody hacks into your payroll company or HR service portal, and steals social security numbers, it can be very damaging. These claims can have extremely high reputational and monetary impact. And if you don't have insurance coverage, guess who's paying for it? It could be enough to drive you out of business.

NRN: What is the case for having a “pay as you go” premium payment plan for workers compensation insurance?

John Cassetta: Pay-as-you-go workers-compensation payment plans allow operators to pay their insurance premiums based on their actual payroll figures rather than an annual estimate. This can be helpful for operators who have seasonal fluctuations in their business. Your premium is based on the payroll reported for that defined period. This means if business fluctuates, your payment is appropriate, and there are no surprises.

CoverWallet can help you choose the right insurance for your restaurant in a way that meets your budget. For more information, visit www.coverwallet.com.