5 Mistakes Restaurants Often Make With Their Insurance Policies

Running a restaurant can be exciting and fulfilling -- but it's also very complicated. Restaurants are required to maintain high levels of insurance to make sure that employees, equipment, customers and the physical structure of their building are all protected. This can get overwhelming very quickly. 

1. Paying Workers' Compensation Incorrectly

It can be fairly easy for a restaurant to file workers compensation forms incorrectly. Workers compensation policies are paid based on the amount of employees, how often they work and how much they make. Restaurants have very high churn; employees are constantly coming and going and there may be dozens of employees each pay period. Still, the employer needs to be very conscientious about their records to make sure that workers compensation is accurate.

2. Avoiding Employee Liability Insurance

Employee liability insurance is designed to protect a company against employee lawsuits. Many restaurants, especially family-owned restaurants, assume that their employees are like family and will never sue them. But lawsuits do happen and can bankrupt a business that is not properly protected.

3. Forgetting About Out-of-Business Coverage

The out-of-business coverage of a policy will support the restaurant's revenue while it is out of business. For a cash-based business like a restaurant, this is absolutely vital. If a restaurant's kitchen is out of service, for instance, the out-of-business coverage will cover their projected revenue over that period of time. If the restaurant does not have this coverage, they may not be able to open again at all.

4. Not Getting Umbrella Insurance

An umbrella insurance policy will extend the coverage of all other insurance policies. Many business owners assume that only large businesses require umbrella coverage -- but it's a good addition for even small to mid-sized businesses because it affords an additional level of security.

5. Hiring Two Independent Agents

Some companies attempt to get the best deal by hiring multiple agents. This can be tempting because the agents themselves don't cost any money; agents are paid out by the insurance companies rather than the policy holders. Still, it's likely just to lead to confusion -- as well as just be a waste of time. A single independent agent is usually more than enough to secure a business against liability.

Restaurants worried about the possibility of being under-insured should make an appointment with their independent insurance agent as soon as possible so that they can discuss their current policies and the benefits of business insurance. Being under-insured is incredibly dangerous for businesses that operate on narrow margins, as restaurants often do. 

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