A fire destroyed a restaurant I'd been consulting with. The building was insured, but the owner had chosen a low-cost policy that didn't cover equipment replacement at current values. He received $30,000 for equipment that cost $120,000 to replace. He nearly lost everything. Insurance isn't optional, but neither is understanding what you're buying.
Essential Coverages
Property Insurance
- Building coverage (if you own)
- Equipment replacement cost (not actual cash value)
- Inventory coverage
- Business interruption coverage
Liability Insurance
- General liability (slip and fall, customer injury)
- Product liability (foodborne illness)
- Professional liability (advice-related claims)
Food Service-Specific Coverage
- spoilage coverage: Power outages, refrigeration failures
- Equipment breakdown: Covers repair/replacement of critical equipment
- Liquor liability: If you serve alcohol
Workers' Compensation
Required in most states. Kitchen work is high-risk—this isn't optional and you can't self-insure without significant capital.
Getting the Right Coverage
- Work with an agent who specializes in restaurants
- Review coverage annually
- Document everything (video walkthrough of equipment)
- Understand deductibles and exclusions
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