Insurance is like taxes: we know it's necessary, but it’s still no fun to pay for. That’s especially true when you don’t know the rhyme or reason behind the premiums you’re paying and so feel powerless to find or choose a less-expensive policy.
The good news is that there are several steps restaurant owners can take to reduce their business insurance premiums without sacrificing quality of coverage. Read on for six strategies that might help you keep more money in the bank.
Lowering Risk to Lower Premiums
Insurance is a risk management tool. Because of that, riskier businesses pay more for insurance, and less risky businesses pay less. Many insurance companies have pricing models that reward risk reduction, meaning you can qualify for lower rates if you lower your risk exposure. To show your insurer you’re a safe bet, try the following.
1. Upgrade your alarm system. Alarm systems are great at preventing burglaries—as long as someone responds. When you upgrade to a central-station alarm, you get an alarm that sends a notification to a 24-hour monitoring center for immediate response. Many insurance providers offer a discount on commercial property insurance for restaurants that have this system in place. (Make sure you talk to your agent or insurer before investing in the alarm, though; you may have to meet certain criteria to qualify for the discount.)
2. Choose the right kitchen equipment. When you’re dealing with hot oil, high temperatures and crowded kitchens, safety is a top priority, and insurance companies usually require restaurants to use equipment that meets certain safety criteria. Often, insurance companies won’t write a commercial property policy unless the restaurant has UL-300 certification and follows the guidelines outlined by NFPA 96. (Read more about how UL-300 and NFPA 96 affect restaurant owners.) In addition to enabling restaurant owners to obtain insurance, these safety guidelines help minimize the chance of a costly fire or accident in the kitchen.
3. Train your servers. If your restaurant sells alcohol, it’s exposed to the world of liquor liability. Intoxicated patrons can wreak havoc while at your establishment and after they leave because in many states, restaurant owners can be held partly liable for such actions, just for having served the patron. Liquor liability lawsuits (like those involving injuries and deaths caused by drunk drivers) can get expensive, making liquor liability insurance an essential risk management tool for many restaurants. Luckily, many insurance carriers offer discounts on this coverage for establishments whose servers are trained in safe alcohol service. TIPS is one well-known program that trains servers to handle intoxicated patrons, avoid overserving and minimize exposure to liquor liability claims.
4. Prevent slips and falls. One way to demonstrate to insurers that you aren’t likely to have insurance claims is to show that you haven’t had many (or any) in the past. Preventing claims is often as simple as keeping your premises in good repair. That’s because slip-and-fall injuries can lead to expensive general liability lawsuits. If a patron trips and injures themselves on your premises, they could sue you for the resulting medical bills. The likelihood of that happening is much lower when you ensure that your premises are clear of tripping hazards (like loose rugs, wires and crumbling cement in the parking lot), well-lit (especially in hallways, staircases and outdoor areas) and well-maintained. Investing a little time and money in keeping up your property can pay big dividends in preventing lawsuits, which keeps your claims history clear and has the potential to lower your general liability insurance costs.
5. Bundle your policies. Most restaurants require two basic insurance policies: general liability (which covers lawsuits over third-party injuries and property damage) and commercial property (which covers certain types of damages to your premises and equipment). If your restaurant is small, it may qualify to bundle these policies together into a business owner’s policy (BOP). Like bundling cable and Internet, bundling insurance policies can provide savings that wouldn’t be possible with policies purchased separately.
6. Raise your deductible. This last strategy is a double-edged sword. Raising your deductible—the amount you pay out of pocket before your benefits kick in—typically lowers your monthly premiums. That’s a win. But your deductible should never be more than you can comfortably afford. If you can’t pay your deductible, you won’t be able to collect any insurance at all. So proceed with caution on this one, and consider talking with your agent before making any changes. They can help you make a decision that makes sense for your needs and your budget.
Business insurance is a key part of financial security for independent restaurants. The better you understand how your policies work, the better equipped you are to recognize a good bargain.
Ted Devine is c.eo. of Chicago-based Insureon, an online insurance agency for small and micro businesses.
