How2Day: Restaurant Insurance Issues

Restaurants can be great businesses, but they generate lots of potential liabilities. In addition to all the normal life insurance and disability coverage normally needed for any kind of small business owner, restaurants have a number of unique characteristics that require additional coverage and planning. Restaurant owners are frequently sued over workplace injuries, sexual harrassment, injuries to patrons, food-borne illnesses and victims of drunk drivers headed home from a restaurant or bar.

In most cases, state law requires you to provide workers compensation insurance. This is state-mandated insurance designed to pay for the care of any injuries workers sustain on the job. This insurance protects you, as well, since any benefits covered by workers compensation are benefits that won't have to come directly out of your pocket.

If you work actively in your restaurant, you may need disability insurance to replace a fraction of your income if you are sick or hurt. You may wish to provide this coverage for your workers as well, as most of them rely on their continued good health for their livelihoods.

This is a variant of disability insurance. Business overhead insurance covers the expenses of keeping a business open in case the owner is disabled. The policy can pay enough to cover leases and keep key staff in place for up to one or two years, or until the disabled owner can sell or liquidate the business.

Liability insurance protects you from losing your business to a lawsuit over ordinary error or negligence. It typically does not protect you in the event you commit outright fraud or are sued over deliberate criminal behavior. But business liability insurance can help you pay court costs and offset any judgments due to lawsuits from people who claim to have been injured, harrassed, or otherwise wronged by your business or its employees.

You can provide health insurance to all your full-time employees on a group basis or restrict the benefit to the owners or an executive class of employees. If you offer group insurance, you will generally need to fund at least half of the premiums, and get at least half of your employees to sign up. Be mindful of your turnover when offering health insurance. Group insurance may not be economical for very high turnover businesses.

Most business owners need life insurance to compensate their dependents and business partners if they should die. You can use life insurance to fund a buy-sell agreement with any business partners that guarantees the families of any deceased partners that the business or remaining partners will buy out their share of the company for cash. This also protects the surviving partners against having a new partner in the business who has no interest or expertise in running a restaurant. You may also consider life insurance on a key employee, such as your head chef, if it will cost you a great deal to hire and train a replacement.

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