Business Interruption Insurance for Restaurants: Do You Have Enough on Your Plate?
Independent restaurants operate in an extremely competitive environment. You work hard to attract customers to your establishment and even harder to entice them to return. It takes time and effort to train and develop the right staff that will represent your brand the way you intend.
Aside from serving good food your most valuable assets are your employees, your reputation and the character and ambience your restaurant provides.
Purchasing property insurance to cover your assets such as your building and business personal property are a pretty straightforward process.
The same is not true when it comes to business income coverage. As a restaurant owner you need to give some serious consideration to protecting perhaps your most important asset: the revenue stream that comes from your daily operations.
Some insurable exposures that can cause a business income loss:
- Equipment Breakdown
- Property Loss
- Power Service Interruption
- Income Support Property
- Special Event Cancellation
- Food Contamination
- Civil Authority
- Violent Acts
You purchase insurance to transfer the risks that you cannot afford to take yourself. You trade a liquid asset today for the insurance companies promise to pay in the future.
You expect that if you have a serious loss the insurance company will be there to restore your business and provide the funds you need to get back on your feet.
There are some potentially devastating inadequacies in what many restaurant owners have in terms of coverage when it comes to insuring their business income.
Restaurants rely upon many elements to maintain their business operations and many policies do not cover or provide very limited coverage for direct damage and loss of business income when it comes to equipment breakdown or utility service interruption to:
- Computer systems including POS,
- Refrigeration, HVAC and cooking equipment.
- Lighting and sound systems
- Water and communication lines
- Fire Detection Systems
- Electrical Distribution Systems
- Security Systems
Restaurants operate on a very thin margin. Any interruption of business, damage to your reputation or loss of business once you have reopened can have a devastating impact on your bottom line.
Some questions to ask yourself when reviewing your policy:
- If I do have a loss that closes my business or damages my reputation will my insurance cover any loss of income I sustain after I reopen and how long will the insurance company continue to pay.
- How long will the insurance company continue to cover my ordinary payroll expenses during the period of restoration and after I reopen
- Does my policy include coverage for my employees tips during the period of restoration and after reopening and for what period of time.
- Will my policy pay for advertising cost to attract customers back to my business after I reopen
- Does my policy offer any protection for my loss of income if my reputation is damaged due to a crisis event such as food contamination
- Will my policy pay for the services of a public relations firm to assist me in dealing with the media to preserve and restore my reputation
- Is there a waiting period before my business interruption coverage begins to pay
- What if my key supplier has a property loss and cannot deliver the goods I need to operate my business
- What if a neighboring business who drives clients to my doors is shut down or a civil authority prevents access to my premises due to direct physical loss or damage to a neighboring property
- Will my policy pay for direct damage from electrical disturbances and other perils typically excluded by my property policy to the equipment I rely on to operate my business and the resulting loss of income
Look for business income insurance provisions:
- That do not contain a co-insurance clause
- That do not have a waiting period of greater than 24 hours, if any
- That will pay for your continued loss of income after reopening for at least 60 days
- That will pay your advertising cost including the cost of a crisis management firm to help restore your reputation
- That covers power interruption and equipment breakdown with no limitation on the distance to the source and which includes damage to overhead transmission lines
- That covers food borne illness during and after the event with adequate limits
- That covers income support properties and action by civil authority
- That covers off premises special event cancellation
- That will pay for your server's tips during a closure and after reopening
A thorough review of your business income coverage provisions and how your policy will respond to 1st party claims is essential to protecting the property and income.
Don't wait until after you have had a loss to find out what is actually covered by your policy.