The Complete Guide to Restaurant Insurance in Canada

Running a foodservice establishment is hard work — and we know that the topic of insurance only adds to that stress. So, we’re here to help you get the restaurant insurance policy package you need to ensure your business continues to thrive.

In our detailed guide below, we’ll cover everything you need to know about restaurant insurance. We guarantee insurance won’t be so confusing afterward.

 

Insurance Coverage for Restaurants

Canada is home to over 97,000 restaurants. From food trucks to five-star fine-dining establishments, our country is filled to the brim with countless tasty dishes to try.

Providing top-notch food and service is your career and life-long passion. And with recent events in mind, we know that you understand how much the unforeseen can impact your business.

Therefore, our LiabilityCover team is here to help you get the coverage you need to survive unprecedented times. We work with Canada’s top insurance providers to bring you customized coverage solutions.

 

What Is Restaurant Insurance Coverage?

Restaurant insurance is designed to protect restaurant owners like you from the unique risks related to serving food and beverages.

No matter how careful you are, accidents beyond your control are likely to happen — for instance, allegations of food poisoning or severe allergic reactions after eating at your establishment.

Plus, restaurants house potentially dangerous items like commercial gas stoves, knives, and more that could easily injure an employee or other third party.

Regardless of whether you’re a sit-in or take-out restaurant, you need a comprehensive insurance package to adequately protect your business.

 

Common Restaurant Insurance Claims

Consider these five real-world examples to understand just how vital restaurant insurance truly is:

 

Example One: Alcohol-Induced Slip-and-Fall Claim

One of your bartenders overserves alcohol to a customer. As the customer stands up to leave, they fall and hurt their wrist.

Your customer decides to sue for bodily injury and is successful. Fortunately, your liquor liability and commercial general liability insurance work together to cover the medical and legal fees, equalling $10,000.

 

Example Two: Mechanical Fault Claim

You have one commercial fridge in your restaurant’s kitchen. A mechanical fault occurs, causing you to lose almost all of your food order stock and forcing you to close your business for a few days.

In this situation, two policies come into play — equipment breakdown and business interruption insurance.

Your business interruption policy covers your lost income and pays your staff, equalling $5,000. Your equipment breakdown insurance funds the replacement of the broken fridge, totalling $6,000.

 

Example Three: Delivery Claim

You run a take-out restaurant. One of your delivery drivers accidentally knocks over a beautiful vase on your customer’s porch.

The customer sues your take-out restaurant for property damage, and their claim is successful. Thankfully, your commercial general liability insurance covers the cost of replacing the vase, equalling $2,000.

 

Example Four: Fire Property Damage Claim

A fire breaks out in your restaurant on one of the hottest days of the year, damaging the kitchen wall and plenty of your building’s contents.

You claim on your commercial property insurance and receive the money you need to fix the damage and replace the burnt utensils.

 

Example Five: Foodborne Illness Claim

A customer orders your highly acclaimed seafood dish. Your chef has served out-of-date seafood without realizing it, and your customer suffers from food poisoning.

Your customer decides to sue your restaurant for bodily injury. Luckily, you purchased a product liability insurance policy that covers the legal and medical fees associated with the case.

 

What Does Restaurant Insurance Cover?

Restaurant insurance refers to numerous insurance policies that combine to give you comprehensive business coverage. Usually, it includes:

  • Commercial general liability (CGL) insurance coverage — Otherwise known as slip-and-fall insurance, it protects you against daily operational risks that can happen when running a restaurant. Typically, claims include third-party injury and property damage that occurs at your foodservice establishment.
  • Commercial property insurance coverage — Sometimes called business property insurance, the policy protects your physical restaurant and its contents from uncontrollable risks such as fire, storms, theft, and vandalism. You need the policy whether you own or rent your commercial space. Many liken the protection to residential property insurance coverage as the policy’s endorsements and terms are similar.
  • Equipment breakdown insurance coverage — Its coverage extends to the repair or replacement of your professional equipment that’s broken or damaged due to a mechanical or electrical fault. Since kitchens house many high-cost items, the insurance negates the worry of paying out of pocket when your equipment fails. However, keep in mind that it doesn’t cover damage from external events (you need property insurance for that).
  • Commercial auto insurance coverage — The policy is fundamental if you are a delivery-only restaurant or offer deliveries as part of your service. It’s similar to personal auto insurance, but it protects business-related transportation and driving activities. Anybody who drives your company vehicles should be named on the insurance policy.
  • Product liability insurance coverage — This coverage protects against claims alleging third-party bodily injury property damage due to a product you sell, distribute or manufacture (in this case, food and beverages). Food poisoning and allergic reactions are the most common claims covered under this type of policy in the restaurant industry.
  • Cyber liability insurance coverage — Even though the key parts of your restaurant business are conducted in-person, you likely store customers’ data and take reservations online. If so, you need cyber liability insurance. It covers the costs (legal fees, notification costs, and containment fees, to name a few) involved with electronic incidents like cyber hacks and data breaches.
  • Worker’s compensation insurance coverage — If you employ staff, you must obtain worker’s compensation insurance. It protects your employees from financial upsets related to work-related illnesses or injuries. The program is administered provincially and compensates your employees for the time taken off due to occupational diseases or injuries.
  • Liquor liability insurance coverage — If you serve alcohol in your establishment, you must have liquor liability insurance. It protects you from loss or damages due to injuries or accidents caused by the alcohol you served. Your commercial general liability insurance policy doesn’t cover any alcohol-related incidents, making this policy essential.
  • Business interruption insurance coverage — Typically included in your commercial property insurance coverage, it compensates you for any net income lost due to an insured event. Some policies may also cover your employee’s wages and overhead costs for the same period. But please be aware that it doesn’t cover temporary closures caused by pandemics, infectious diseases or those enforced by the government.

 

Do You Need Restaurant Insurance?

Any business serving food and drink needs a restaurant insurance policy package to ensure it survives for years to come.

We work with all kinds of food and beverage establishments to find the coverage they need, including:

  • Bars and pubs
  • Catering companies
  • Food trucks
  • Cafes
  • Coffee shops
  • Dine-in restaurants
  • Fast food and take-out restaurants
  • Food vendors
  • Bakeries

 

How Much Does Restaurant Insurance Cost?

For small or medium restaurants that don’t serve alcohol, you can expect to pay at least $2,000 per year for a comprehensive restaurant insurance package. However, since there are so many different kinds and sizes of restaurants, the policy prices vary wildly.

The best way to determine the cost of your premium is to complete our quick inquiry form. Then, we can give you accurate quotes from the top, highly experienced insurers in the country.

Usually, insurers take the following factors into consideration when calculating your premium price:

  • Your experience — Insurers are more likely to award you with attractive insurance rates if you’ve operated in the restaurant industry for a long time. With that being said, the other factors on this list may play a more significant role, so don’t worry too much if you’re relatively new to the game.
  • Your coverage limit — The higher your limit, the more expensive your policy premium. For example, a CGL policy with a limit of $5 million costs more than the same policy with equal terms but a limit of $2 million.
  • Number of policies — The policies you need adding to your restaurant insurance package, the pricier it will be. Although, you shouldn’t pass on a necessary policy that could save your company’s life just to lower your premium.
  • Your business size — The further your business reaches, the more you’re exposed to risks from third parties and members of the public. If you serve a plethora of areas, anticipate spending more on commercial insurance.
  • Your restaurant location — Different areas come with varied weather severity and crime rates. If you own a restaurant in a place prone to adverse weather conditions or exceptionally high theft or vandalism rates, expect your insurance to be pricier. The top places most affected by severe rainstorms, snowstorms, and strong winds are as follows:
    • Moncton, New Brunswick
    • St John’s, Newfoundland
    • Hamilton, Ontario
    • Regina, Saskatchewan
    • Halifax, Nova Scotia
    • Saint John, New Brunswick
    • Vancouver, British Columbia
    • Abbotsford, British Columbia
    • Québec City, Quebec
    • Trois-Rivières, Quebec
    • Sudbury, Ontario
    • Guelph, Ontario
    • Oshawa, Ontario
    • London, Ontario
    • Calgary, Alberta
  • Your annual and forecasted revenue — A highly profitable restaurant means third parties will likely request more compensation during lawsuits because they know you can handle the hit. Insurance premiums increase in such cases.
  • Your insurance claims history — Having a clean business insurance claims record gives you a better chance of receiving lower insurance premiums.
  • The number of employees — The more people working for your business, the more likely somebody will make a mistake, causing lawsuits. To cover the added risk, insurers typically increase your price.

 

Special Insurance Considerations

So far, we’ve discussed restaurant insurance as a whole. But now, we’re splitting up the two main categories — dine-in and take-out.

Depending on which type of restaurant you own, you’ll need to consider different insurance policies. Find out more in the following sections:

 

For Dine-In Restaurants

As a starting point, you’ll need commercial general liability insurance and commercial property insurance.

CGL insurance can cover your full-time employees during claims of third-party property damage or bodily injury. It’s worth noting that your policy limit applies to all your employees and not each person. We can help you figure out whether it’s more beneficial to request your employees carry their own liability insurance coverage.

If your dine-in restaurant serves alcohol, you can’t forget to purchase a liquor liability policy. It tends to cover alcohol-related accidents, damages, and injuries excluded by your commercial general liability coverage.

Alongside that, equipment breakdown insurance covers any mechanical or electrical faults experienced by your appliances. Kitchen equipment is expensive, so the policy ensures you can replace or fix everything as soon as possible.

Additionally, product liability insurance covers property damage or injuries caused by the food, beverages, and other products you sell, make, or distribute. It’s this policy that covers the medical and legal fees if a customer falls ill due to your food and decides to sue.

Lastly, cyber liability insurance is necessary if you use a digital booking system or store your diners’ data. It covers the costs associated with virtual security compromises like cyber hacks.

 

In a nutshell, dine-in restaurant owners like you should take out the following policies:

  • Commercial general liability insurance (CGL)
  • Commercial property insurance
  • Business interruption insurance
  • Liquor liability insurance
  • Product liability insurance
  • Cyber liability insurance
  • Equipment breakdown insurance

 

For Take-Out or Delivery-Only Restaurants

Many food-based establishments are take-out only, but others are only partially take-out restaurants. Regardless of the camp you fall into, you need specific coverage to protect your business.

Firstly, you need a commercial property insurance policy. It doesn’t matter whether you own or rent your restaurant space, the policy applies. It protects the physical building and its contents from covered events such as fires, vandalism, and thefts.

Then, you should purchase a commercial general liability insurance policy to cover your delivery drivers and employees from claims of third-party bodily harm or property damage. The coverage limit you select applies to all staff members, not each separate individual. It might be wise to ask your delivery drivers to purchase their own CGL coverage.

Thirdly, product liability insurance is vital for long-term survival in the restaurant world. It covers the legal and medical fees associated with property damage or bodily injuries caused by your food or drink. The coverage applies to food you make and deliver too.

On top of that, you need to buy a commercial auto insurance policy to protect your delivery vehicles. Personal policies won’t cover any accidents that occur while driving for business. Ensure you hire drivers with a clean record; otherwise, you risk extortionate insurance premiums.

Finally, you should take out cyber liability insurance to protect your customers and business from data breaches and network hackers. After all, you have a legal responsibility to protect your customer’s details.

 

In a nutshell, take-out or delivery-only restaurants like you should consider the following policies:

  • Commercial general liability insurance coverage (CGL)
  • Commercial property insurance coverage
  • Commercial auto insurance coverage
  • Business interruption insurance coverage
  • Product liability insurance coverage
  • Equipment breakdown insurance coverage
  • Cyber liability insurance coverage

 

Why Choose LiabilityCover?

We ensure you can keep doing what you love (serving delicious food) by connecting you seamlessly to Canada’s leading insurers with experience providing policies to restaurant owners.

Once you fill in our online request form, we do the rest! We give you the knowledge, time, and space you deserve to make beneficial insurance decisions.

Our dedicated team can’t wait to fulfill your restaurant insurance needs.

 

Frequently Asked Questions

 

Is Liquor Liability Insurance Important for Your Restaurant?

If you serve alcohol, you can be held liable if a customer causes an accident due to the alcohol you served them. Plus, you have a responsibility not to serve alcohol beyond the level of intoxication, which is incredibly hard to manage.

Therefore, you should definitely consider adding liquor liability to your comprehensive restaurant insurance policy. If you’re unsure whether you need one, we’ll analyze your requirements after you complete the quick inquiry form.

 

Are Employee and Regular Theft Covered Under Crime Insurance?

Employee theft is covered under your crime insurance policy, which typically includes stolen cash and credit card forgery. However, regular theft is covered under your commercial property insurance policy.

We highly recommend having both in your comprehensive restaurant insurance policy package.

 

How Can You Lower Your Restaurant Insurance Premium?

There are plenty of ways to lower your restaurant insurance premiums. But our top ten tips and tricks are listed below:

  1. Prioritize safety — Proving your restaurant is a safe place to work will reduce your insurance premiums. Ensure employees understand how to lift and carry items to prevent injury. Provide the proper PPE (personal protective equipment) like oven mitts to avoid burns and other kitchen disasters. We suggest compiling a clear safety program that you can give to your insurers to prove your proactive nature.
  2. Implement thorough sanitization protocols — Preventing food-related illnesses is essential to reducing your risk of third-party bodily injury claims. Ensuring your employees carry out the following steps enhances your sanitization routine and potentially lowers your insurance cost:
    1. Sanitize all surfaces before and after preparing food
    2. Train your employees on correct hygiene rituals and food storage
    3. Store food at the correct temperature
    4. Ensure all staff wash their hands before and after handling food
  3. Increase your deductible — The deductible is the amount you must pay before the insurance policy kicks in. Just make sure you have the money to pay a larger deductible if a claim occurs.
  4. Hire with care — In the restaurant business, your employees are your number one asset and potentially your highest costs. But you can significantly lower your insurance premium by making smart hiring decisions. Here are a few general rules of thumb:
    1. Ensure every employee is given the correct worker’s compensation code
    2. Always let your insurer know when you hire a new person or when somebody leaves your restaurant
    3. Make sure anybody driving a company vehicle has a clean record
  5. Train your staff — Adequately training your staff decreases the risk of accidents. It’s a good idea to ensure everybody is up to date on fire evacuation plans too. Experience properly handling and storing food also helps.
  6. Tighten security — Lowering your risk of thefts, injuries, fires by tightening security will, without a doubt, decrease your premium. Try installing:
    1. Fire alarms
    2. Fire sprinklers
    3. Access control locks
    4. Security alarms
    5. Video surveillance cameras and video monitoring
  7. Ensure ventilation — Increasing the ventilation in your restaurant decreases the likelihood of fires or heat-induced mechanical costs. Plus, employees are less likely to suffer from temperature-related illnesses.
  8. Keep up with maintenance — You can reduce the cost of your equipment breakdown insurance by performing preventative maintenance on key items. This may mean checking your fridge’s door gaskets and changing hood filters.
  9. Focus on preventing fires — We’re sure you know how to prevent fires in your kitchen. But if you’d like a refresher, take a look at the below:
    1. Clean equipment regularly to prevent grease build-up in flat grills, oven hoods, ventilation systems, and others.
    2. Pay for a professional equipment clean once a year.
    3. Train your employees on oven and deep fryer fire prevention.
    4. Ensure all portable fire extinguishers are easily accessible.
    5. Train your employees on how to use a fire extinguisher safely.
    6. Regularly check for faulty or frayed wiring that may cause sparks.
    7. Implement an evacuation plan for employees and customers.
    8. Keep up with daily housekeeping chores.
  10. Get a food handler license — You should consider asking all employees to get a food handler’s license. It’s relatively easy to obtain, especially for experienced restaurant workers well-versed in food safety, cleaning procedures, and avoiding cross-contamination.

 

Do You Need Equipment Breakdown Insurance Coverage As a Restaurant Owner?

Absolutely — it is an imperative policy for restaurant owners like you.

The coverage protects your business from mechanical and electrical breakdowns of your major equipment, such as boilers, refrigerators, air conditions, ovens, and coolers. It gives you the money you need to repair or replace the broken equipment.

It’s a common misconception that equipment breakdown is included in your property insurance. The reality that is you need a standalone policy to protect vital pieces from mechanical faults.

 

Why not get a free quote?

 

Takes less than 30 seconds. Compare multiple insurance companies at once.