Restaurant Insurance in Massachusetts 101

Whether your restaurant is making classic favorites or serving up something else, you’ll need insurance (and an independent insurance agent to lead the way). Your independent insurance agent will be an invaluable resource when it comes to basic things like types of coverage and more specific issues, like the risks that will influence your coverage.

Risks to Consider in Restaurant Insurance in Massachusetts

When it comes to insuring Massachusetts restaurants, a wide variety of factors come into play:

What you’re serving
How you’re serving it
How many employees you have
What those employees are doing
What property you’ve put inside the restaurant
What property you own or rent (i.e., the building)
What special property you have, like the sign
What kitchen equipment you have

Because all of these factors will affect costs in different ways, it’s important that you work closely with an independent insurance agent to ensure that each is accounted for and adds to your insurance coverage in a meaningful way. And, by educating yourself on the basic types of insurance you’ll need, you can work better with your agent to evaluate risks, protect your business, and do it for a price you can afford.

Property Insurance for Your Massachusetts Restaurant

Property insurance is the most basic of the basic insurance policies for a restaurant. After all, you have a building and a lot of expensive property inside it that you need covered. That being said, there are two broad categories of property insurance: (1) general coverage; and (2) specialty policies.

General property insurance coverage will take care of the replacement value of two things:

Your building
Movable personal property inside the building

Movable property is what it sounds like: It’s property that you can move. It’s furniture, dishware, décor and other things that you can pick up. That being said, there’s another category for immovable personal property. Immovable property is property that is bolted down or affixed to your building in some way. Typically, this is your kitchen equipment, or perhaps even a bar if it’s built-in. This will be covered under a separate policy, which is why it’s important to talk to your independent agent. When it comes to more specialized property insurance, there are a handful of different policies to consider. These include:

Spoilage: Seafood – even fresh seafood – can go bad if your refrigerator breaks down. If you use frozen food, a freezer malfunction can cause all of your food stock to go bad. Spoilage coverage would pay for the cost to replace the food you lose.
Equipment (business and machinery coverage): HVAC and electrical systems can break down or malfunction. If yours does, equipment coverage will pay for any damage caused by a system breakdown. This could be to wiring, an electric panel, or virtually any other component of these major equipment systems.
Lost business income: Whether you’re closed due to flood, natural disaster, or any number of other issues, lost business income keeps your business in the green while you’re closed. It provides money to pay expenses – including employee salaries – until you can reopen. Some banks might require you to purchase this coverage if you have a loan to ensure that your restaurant won’t go under due to a fire or another loss.
Signage: Some restaurants pay up to $100,000 for their sign. There are additional costs if you have a drive-through, too. Getting your sign covered is a great idea if you’ve spent a similar amount on it.

Liability Insurance for Your Massachusetts Restaurant

Liability insurance is also general or specific. General commercial liability insurance covers customers when they’re at your restaurant. This could be if they have an accident – like slipping on a wet floor – or if they eat something that is spoiled or badly prepared. Think of general liability coverage as covering almost anything that happens to a customer while on your restaurant’s property.

While general liability is self-explanatory, what some don’t realize is that liquor liability is completely separate from general liability coverage. Liquor liability is mandatory if you sell, brew, or distill alcohol. It covers not only the property damage that a customer might cause if they are overserved and then get into an accident but also any bodily injury. One important note about liquor liability is that it comes standard with a $1 million policy limit. However, most restaurants will increase the limit to $5 million. Your independent agent can help you determine whether this is the right choice for you.

Another type of specialized liability coverage is directors and officers liability insurance. This is for corporate restaurant entities when stockholders, employees, or even a city bring a lawsuit for an alleged poor business decision. This means that there doesn’t need to be any damage or injuries for the suit to be brought. The coverage will protect against the cost of litigation, which can really add up.

Employee Insurance for Your Massachusetts Restaurant

There are two types of employee insurance for your Massachusetts restaurant:

Workers' compensation
Employment practices liability insurance

Workers' compensation is legally mandatory in Massachusetts. If an employee is injured on the job, this will cover the cost of :

Medical expenses
Lost wages
Rehabilitation

The other type of employee insurance is employment practices liability insurance. If an employee brings a lawsuit because of any of the following issues, this insurance will defend the restaurant and any officers of the restaurant who are being sued:

Bad behavior
Sexual harassment
Hostile work environment
Discrimination

This insurance is better suited for a corporate restaurant chain than a smaller restaurant. However, your independent agent will be the best resource to help you better determine what you need.

Different Features of Your Massachusetts Restaurant Could Affect Insurance Costs

Not every feature will change the cost or coverage of insurance. However, there are some features that may affect how much workers' compensation coverage or liability insurance you’ll have. Some of the most common features to consider include:

Buffets: Underwriters don’t like buffets. They leave food exposed to the public and don’t have as many layers of protection against certain risks. If you’re one of the few restaurants left around with a buffet, this could mean that you end up paying more.
Drive-throughs: Many restaurant owners believe that drive-throughs mean a need for additional insurance coverage, but this isn’t true. The only way a drive-through could increase insurance costs is if you have an expensive sign that you want to get insured.
Dine-in vs. carry-out: Dine-in and carry-out restaurants differ only because you’ll need more employees if you’re working an entire floor rather than just preparing food and having someone at the cash register to hand it out. Workers' compensation is calculated per $100 of payroll, which is how it affects costs.
Delivery: Delivery services affect liability. If employees use their own cars to deliver food, it’ll change your liability coverage more dramatically than if you purchase vehicles that you then use for delivery. The difference is that the vehicles you purchase are likely to be newer and carry less risk than any vehicle an employee would use. Underwriters will tend to give you a better deal that way, too.

How Your Massachusetts Location Changes Insurance Coverage or Costs

Being in one state rather than another doesn’t significantly change a lot by way of insurance. All that factors in is the type of food you’re cooking and how you cook it. Massachusetts is famous for its seafood. If your restaurant is serving that seafood raw, underwriters will be concerned about the freshness of your food (for liability purposes) and how you’re preparing it. And food cooking techniques can be extremely risky.

If you’re deep-frying a lot of food, hot oil in the kitchen will increase the cost of workers' compensation because of the risk. Seafood typically requires sharp knives and a lot of knife skills, which could also increase the riskiness of the work environment. Another concern is spoilage. Fresh seafood needs to be kept super-fresh. If your refrigerator breaks down, you could lose a lot of money. Spoilage insurance will cover any loss in this respect.

Insurance Costs for Your Massachusetts Restaurant

Insurance can be very affordable or expensive, depending on the size of your restaurant, the risk of what you’re doing, and any number of the other factors we mentioned above. One thing worth noting is how you’ll pay for your restaurant insurance in Massachusetts. It’ll be split two ways:

Property and liability
Workers' compensation

Workers' compensation is paid for separately because it is calculated differently based on: (1) every $100 of payroll; and (2) risk classification. Remember, your restaurant will be deemed a higher risk if there are sharp knives, open flames, and hot oil in the kitchen. Property and liability insurance is different. They are combined and can cost as little as $1,000 annually or as much as $100,000 annually. The best way to think of the two extremes is a hot dog or taco stand on a corner vs. a large, multi-location restaurant with valuable personal property and more inside.

The taco stand probably has a handful of employees, little to no risk of injury to customers, and no building or personal property – other than the stand and minor equipment – to account for. The multi-location restaurant has buildings, personal property, liability for customers on the premises, and more employees to worry about. The difference in cost is due to all of these factors combined, and not just any one factor.

Keep in mind that if you have valuable personal property in your restaurant, you should get it appraised. Remember, property insurance covers replacement value. Without an appraisal, something that has value beyond its mere materials isn’t going to get you much money in return, should it be destroyed.

Why an Independent Insurance Agent is Your Best Resource

Restaurant insurance in Massachusetts doesn’t have to be complicated. The more you know, the easier it is for you to work with your independent agent to ensure that every potential risk is addressed through your property, liability, and employee insurance coverage. Independent insurance agents make the process better by working with a wide variety of insurers who can offer pricing and coverage that make sense for your Massachusetts restaurant. This ensures that you get what you need, don't pay for what you don't need, and pay a price that makes sense for your business.

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