2020/07/31
Curtis Killen

Why Commercial Insurance for Your Restaurant is Important

Your restaurant opening is fast approaching.

It’s an exciting time, but it’s also a stressful one.

As you’re learning on the fly, opening a restaurant involves a lot more than just serving food.

You’ve acquired the proper licensing permits, built a marketing plan, hired staff, and tapped your accountant friend for help.

Now you’re wondering: do I need some type of business insurance?

We’re here to explain why you need it and how to get it.

As the great Anthony Bourdain once said, “without Montreal, Canada would be hopeless. It’s where the cool kids hang.” 

He was referring to Montreal’s restaurant scene.

With over 5,000 restaurants on the island, Montreal has a restaurant per capita of 744, which is the highest in Canada!

And so many of these restaurants are able to survive and thrive because they have the proper restaurant business insurance for Montreal.

In today’s blog we’re going to explore:

Why do you need restaurant insurance?

Restaurant insurance will protect your business from two main perils: 

  1. If your property is damaged
  2. If your business is sued

If your restaurant suffers property damage – the majority of restaurant claims paid out are caused by fire and water claims.

While restaurant fires are much less common than they were 50 years ago, they still account for the majority of claims paid out by insurance companies.

If we think about it logically, restaurants cook the majority of their foods in oil and butter.   

While these ingredients certainly make for a delicious meal, they’re extremely flammable and more difficult to extinguish; you can’t throw water onto a grease fire. 

This is one of the main reasons it’s important to clean your CO2 ducts cleaned on a regular basis, a point we’ll touch on later in this blog.  

The right insurance policy will cover your contents to full replacement value after a fire or water claim, which will put your business in the same position as you were prior to the loss.

A restaurant owner’s insurance policy will also cover your business in the event of a lawsuit.

You may be asking yourself: “what lawsuit could a restaurant possibly run into?!”   

Well, let me tell you from years of experience as a commercial insurance broker!

One common claim restaurant owners frequently deal with is “slip and falls” which can happen either inside or outside the establishment.

If a client slips and injures themselves, they will most likely seek financial compensation from your company to pay their medical expenses.

If the slip and fall occurs in a “grey area” such as outside during a snowstorm, multiple parties may be involved in settling the claim: you (the restaurant business owner), the landlord and perhaps even the snow removal company. 

The point I’m making here is that even if you are deemed “not responsible” for the slip and fall claim, you’ll still need to pay for the defence costs to prove it. 

And this is exactly what a restaurant liability insurance policy will cover 😊

Two other examples of common liability claims that are covered by restaurant insurance: 

  1. A client breaks a tooth while eating.
  2. A client falls due to a broken chair. 

What type of restaurant insurance do I need?

In the previous section, we covered why it’s important to carry small business insurance for your restaurant.

Now let’s look at the restaurant insurance requirements.

Commercial property insurance is pretty basic andcovers your business against theft, water damage, vandalism or a restaurant fire claim. 

It’s important to insure your contents, stock and equipment to full value when determining the amount of business insurance that you require. 

In other words, if you have $500,000 worth of food, alcohol, equipment and tables, we recommend purchasing $500,000 worth of insurance.

Pro tip: You also need to insure your betterments!!!

What are betterments, you ask? 

Betterments are physical “upgrades” made by your business. 

Example: You move into a building on Rue Notre-Dame in Montreal to open a new restaurant.

The $150,000 of renovations that you put into your business locale to make the restaurant all snazzy would be considered as a betterment; your business owns these improvements and thus needs to insure them. 

Restaurant liability insurance protects your business if it causes third-party damage.

If we take the example from earlier where a client slips, falls and injures themselves, liability insurance would pay out and cover your defence costs as well as the settlement. 

Restaurant business interruption insurance will cover your fixed costs, loss of profits as well as administrative payroll after a covered loss. 

Example: Your restaurant isn’t generating any income while closed for 6 months to conduct repairs after a fire.

Your property insurance would pay for the fire repairs, and your business income coverage would cover your lost profits. 

Restaurant establishments that refuse to take this protection run the risk of going out of business if they suffer from a large enough claim that takes months to repair. 

What is the cost of restaurant insurance?

As with all other insurance products, your restaurant insurance cost depends on multiple factors, such as: 

For example, restaurants located downtown Montreal will generally pay higher insurance rates than restaurants located in less congested areas. 

Why? 

Buildings downtown are generally older, typically not sprinklered and are more difficult for fire trucks to reach due to traffic.

On average, Montreal restaurants pay anywhere between $3,000 and $20,000 per year for their commercial insurance.  

Tips & restaurant insurance solutions

If you’re a restaurant owner in 2020, you’ve had to deal with COVID and rising insurance premiums. 

Here are some important tips that I share with my restaurant clients on how to keep their price down and prevent claims.

Fire prevention 

As discussed earlier on in the blog, fire prevention is a big one when it comes to risk management.

Make sure you clean the fire extinguishers located above the stove and cooking areas AT LEAST every 6 months.

Failing to clean the CO2 ducts on a regular basis will increase your chances of fire and having to submit an insurance claim. 

Keep your premises tidy

Keeping the restaurant area clean will ensure that clients don’t slip and injure themselves. This also includes the entrance outside.

During the winter, it’s extremely important to salt the outside areas around your building.  

Put warning signs up if you need to mop the floor during regular hours. 

Hide your cash vault

Yes, some clients still pay cash for their meals in 2020.

Keep your cash in a vault that’s in a secure area hidden from plain sight so as to minimize the risk of theft. 

Avoid making small claims 

Making small claims is a great way to increase the rate of your restaurant insurance cost over time. 

If you can afford to pay for a small damage out of pocket, we recommend doing so; clients who claim frequently raise red flags to insurers. 

Conclusion

It’s difficult to succeed as a restaurant owner, so make it easier for your business to flourish by following some of the tips discussed today. 

Make sure your contents and equipment are insured to full value, avoid making small claims and always be on top of fire prevention measures, such as cleaning your CO2 ducts on a regular basis and installing central monitored alarms.

Liability insurance will protect your restaurant in the event it’s held responsible for causing third-party property damage or bodily injury, and property insurance will cover your stuff in the event of a fire or water damage. 

Lastly, it’s important to include business interruption insurance to cover your loss of profits after a claim. 

We recommend shopping around for restaurant insurance coverage every few years to test out the market and see what’s out there in terms of insurance coverage and premium. 

Here’s a quick guide to remember the key points of today’s blog.

KBD is a commercial insurance broker in Montreal, and in many instances, we’ve saved restaurants thousands of dollars on their annual premium.

Feel free to get a free online quote by clicking here or give us a ring at 514-636-0002 to speak with our commercial insurance experts!   

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