How Does Business Interruption Insurance Help Restaurants?

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However, if your establishment suffers physical damage because of a covered peril (like a fire) and you’re forced to close for weeks or months, you’ll need business interruption insurance to cover your losses.

How Does Business Interruption Insurance for Restaurants Work?

Business interruption insurance can be a financial lifeline to cover losses resulting from an insurable event to your business property that forces you to close for repairs, such as a fire.

It covers things like lost income, loan and lease payments, utility bills, and full-time employee payroll while the property is being repaired and restored.

However, you must have commercial property insurance to buy business interruption insurance for your restaurant. Commercial property insurance covers a wide range of damage and loss risks your eatery faces, including fire, water damage, a natural disaster, theft, and vandalism. 

One way to streamline your insurance needs is to consider a business owner’s policy, which bundles several types of coverage, including business interruption insurance, into a single, cost-effective package.

When deciding what coverage limits your business interruption insurance should have, consider the following factors:

• The length of time it could take to restore your restaurant’s operations after an insurable loss
• Your restaurant’s location and susceptibility to natural disasters, like wildfires, floods, major snow and ice storms, and other extreme weather events
• What your eatery’s fixed costs and financial needs are if you were forced to close for several months

A Zensurance broker can help advise you on what your restaurant’s business interruption insurance coverage limit should be. Also, business interruption insurance does not cover gradual damages to your business property resulting from a lack of property maintenance and upkeep or forced closures due to public health directives ordered by authorities, as we saw during the COVID-19 pandemic. 

5 Additional Types of Insurance to Protect Your Restaurant

In addition to including business interruption coverage with commercial property insurance, here are five other types of insurance you likely need to create a comprehensive restaurant insurance policy:

1. General Liability Insurance

General liability insurance covers costs arising from third-party bodily injuries or third-party property damages because of your restaurant’s operations. For instance, if a customer slips and falls and is injured in your dining room, general liability insurance may cover their medical and rehabilitation expenses.

2. Product Liability Insurance

Product liability insurance is vital for restaurants and businesses that manufacture, distribute, or sell food and beverages. It covers you if a customer becomes ill or suffers an allergic reaction after consuming the food or drink you prepared and served them. For example, if a customer gets sick from contaminated food or because of the improper handling of food, they could sue you. Product liability insurance can cover their medical expenses and other costs you incur related to the incident. 

If your establishment also serves alcoholic beverages, you need to include liquor liability insurance in your policy. That’s because your restaurant or employees could be liable for losses, damages, or other expenses arising from third-party bodily injuries, deaths, or damage to other properties resulting from an accident or incident caused by a customer your establishment served alcohol to if it is considered to be a contributing factor.

3. Cyber Liability Insurance

Cyber liability insurance is necessary for all restaurants operating online and that use POS systems, take online reservations, store customer information in the cloud, and use email and social media. Cyber insurance covers legal fees associated with electronic incidents, such as data breaches or cyber-attacks involving your technology systems and data.

4. Equipment Breakdown Insurance

If the equipment in your restaurant suddenly ceases to function (refrigerators, freezers, grease fryers, stoves, ovens, the HVAC system) because of an internal mechanical or electrical failure, the cost to get them fixed or replaced can be exorbitant and force you to close temporarily (another reason why business interruption insurance is a necessity). 

Equipment breakdown insurance covers such incidents. It provides financial support to repair or replace your equipment if damaged by power surges, electrical shorts, or mechanical breakdowns. However, it doesn’t cover equipment that stops working due to wear and tear. It applies to nearly any equipment in your establishment, including office equipment like computers and photocopiers.

5. Commercial Auto Insurance

You may need commercial auto insurance if your restaurant provides food delivery services or has a business vehicle to transport supplies to your diner or eatery. Most private-passenger car insurance policies do not cover vehicles used for commercial purposes. However, if your full-time employees use their cars to run business-related errands, or you rent a vehicle for such purposes, you may need hired and non-owned commercial auto insurance.

How to Get Low-Cost Restaurant Insurance Quickly

Whether opening a new restaurant or cafe and seeking coverage for the first time or renewing a restaurant insurance policy for your popular eatery, explore your options for better coverage at a lower, more appetizing price through Zensurance.

Fill out our online application for a free quote in less than five minutes and explore your options.

Our team of knowledgeable brokers will shop our partner network of over 50 insurers to find the low-cost policy you require, customize it to suit your specific needs, and address any questions or concerns you may have. Let us take the hassle of getting the right type of insurance your restaurant needs so you can focus on creating scrumptious dishes that delight your customers.