What type of insurance do I need before opening a restaurant?
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Asked December 31, 2015
Businesses need at least as much protection as individuals, and often require a lot more. You have to insure against liability and casualty claims, provide unemployment insurance for your employees, and then protect the business against industry-specific perils. The specifics of your coverage will vary from company to company, but purchasing insurance for a restaurant will be similar from one operation to the next.
Start with a Business Owners Policy, or BOP. This is a special insurance package designed to cover the needs of most businesses. It includes casualty and liability insurance along with other types of coverages designed for your specific type of business. A BOP should address most of the needs of your company, including inventory protection, loss of business coverage, and protection against injury claims such as a diner who becomes ill after eating at your location.
Inventory protection covers you against spoilage and waste. If a power failure causes a loss of the meat in your freezer, for instance, the inventory protection portion of your BOP would pay for replacing the spoilage. Similarly, if you have inventory that remains unsold until it passes the expiration date, you could file the loss against your BOP in order to get the inventory replaced with fresh goods.
Business protection insurance, or loss of business coverage, will cover the costs if your business is incapacitated for a covered reason. For example, if a severe winter storm causes contamination to the local water supply, you can still be reimbursed for the regular expenses of the restaurant, including paying the salaries of employees. This type of insurance is a must-have for any business because it essentially gives you a do-over if a covered peril causes a problem.
If you have a qualifying number of employees, you will also have to supply Workers Compensation and Unemployment insurance. Under the ACA, any business with more than 2 employees will also need to make health insurance available. Note that you do not have to pay for the health insurance, simply allows an insurance provider to offer a plan to your employees through the workplace.
Answered January 12, 2016 by Anonymous