6 Common Mistakes to Avoid When Buying Restaurant Insurance

Running a restaurant can sometimes be full of mistakes and missteps. You can easily overspend in some areas while neglecting important obligations.

If you own or run a restaurant, buying a proper insurance policy is a must. But, with many policies available, knowing exactly what you need can be difficult.
Unfortunately, most restaurant owners are not careful about the decision to buy restaurant insurance and end up facing difficulties in the future. Here are pitfalls to avoid when buying insurance for your restaurant.

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1. Failure to Read Your Policy

This may sound obvious, but not many business owners read insurance policies carefully and restaurant owners are not exceptions. But, failure to read does not exonerate you from risks.

Be sure to read your policy so you can understand what’s included in it and what is not. Waiting until when a loss has occurred to look at your policy is disastrous as you can’t purchase coverage for a loss that has already happened.

If you have trouble understanding your policy, ask your attorney or insurance agent to explain it to you.

2. Automatically Choosing the Cheapest Policy

While saving money is a primary priority for most restaurant owners, selecting a cheap insurance policy can be costly in the long run. But because restaurant insurance cost varies from one insurance company to another, it makes sense to compare prices when purchasing insurance.

When buying restaurant insurance, ask your broker or agent to get quotes from multiple insurance companies. Buying a policy based on cheap monthly premiums could mean that you don’t have the right coverage when you file a claim. So be sure to compare quotes from different insurers by looking at the types and amounts of coverage included in each quote.

Your goal should be to obtain proper coverage at a reasonable price. Again, if you’re having trouble comparing coverages, ask your broker or agent for assistance.

3. Choosing Low Liability Limits

Virtually any business, restaurant included, can be hit with a lawsuit. As a restaurant owner, you can’t tell when you’ll be faced with a lawsuit, who will sue your business or even the amount of damages they’ll seek.

When buying general liability insurance, avoid gambling on low liability limits. Ask your insurance broker about how much insurance is right for your restaurant.

4. Purchasing Too Little Property Insurance

Property insurance protects your property in case of fire or vandalism. Most policyholders assume that property insurance will automatically cover the cost to replace or repair your damaged property. However, your policy will only pay up to your insurance limit.

Therefore, if the cost of repairing or replacing your damaged property exceeds your policy limit, your business will be required to cover the remaining amount.

You’ll also need additional coverage for natural disasters such as earthquakes and floods, not to mention that some lenders might require you to have property insurance policy before approving your mortgage.

You should also remember that most property policies include an agreed value provision or coinsurance clause, which can impose a penalty on you for underinsuring your property.

In the event of a loss and you don’t have the right insurance, your insurer will not cover the full amount of the claim.

5. Failure to Ensure Potential Income Losses

You may have insured your restaurant’s physical assets against damage or loss, but have you thought about what will happen when such damages happen?

Loss of income is a common consequence of physical damages or losses. If your restaurant premises are destroyed by fire or any other peril, you might be forced to stop operations at the restaurant until the damage is repaired.

During this time, you won’t be able to generate any revenue from your restaurant. Purchasing business insurance coverage is an excellent way to ensure that your restaurant survives after an incident.

Business income coverage reimburses you for the revenue you would have generated if the loss had not occurred. It also covers the necessary expenses (such as water or electricity) that need to be paid regardless of whether your restaurant is operating or not.

6. Not Adjusting Your Insurance as Your Restaurant Grows

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Insurance is meant to protect your restaurant. As your business grows, it increases in value. You should, therefore, update your policy from time to time to reflect the changes in your business.
Always update your insurance agent on the changes happening within your restaurant, and be ready to change your policy as needed. Purchasing new vehicles, hiring new employees, and expanding your space are some of the reasons why you need to update your coverage.

If you are interested in other smart tips, refer here: Smart Tips


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    Vivian

    Hi There! Welcome to Cooking Is Passio where I can tell you the things I love. My name is Vivian Carpenter. I am not only a foodie at heart but also passionate about cooking. I rely on the support of other cooking blogs like me to get new cooking tips as well as new recipes. This blog is the great way to share my experience and my love cooking with others. And I hope this blog can help you - the cooking lovers like me - cook your favorite dishes.

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