Written by While you’re serving up the best chai latte in town, have you ever thought what might happen to your cafe or restaurant if something went wrong? Unfortunately, cafes and restaurants buzzing with excited diners present a high risk setting where accidents can happen. That’s why it’s important to have comprehensive business insurance to protect you and your business against any eventuality.
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What types of insurance should I buy for my cafe or restaurant?
There are several types of business insurance you should consider if you run a busy cafe or restaurant. These include:
Product liability insurance
Product liability insurance is the most important type of insurance for any restaurant or cafe, as it will cover you against third-party claims that the food you supplied caused sickness, injury or even death. This type of insurance is vital for anyone who sells freshly prepared food or drinks, as it protects you from any claims associated with food poisoning.
Cover starts from $250,000, with the level of cover required depending on the type of cafe or restaurant you run, and the legal requirements of the council which issues your food vendors’ permit. Check with your council about the level of cover required for your specific location and the type of restaurant or small cafe you run.
What it covers:
- Claims that a product you supplied (such as the food and drinks you serve) caused sickness, injury or death
- Other third-party damages claims
- Legal fees to defend yourself against such claims
Public liability insurance
Public liability insurance is also essential for anyone who runs a cafe or restaurant, or any other type of hospitality business (including coffee shops and internet cafes.) It’ll cover you against claims a member of the public was injured whilst on your business premises, or that their property was damaged as a result of your business activity.
For example, if a customer trips or falls whilst in your cafe, or if one of your wait staff accidentally spills a hot coffee into a customer’s lap, your insurance will cover the cost of any resulting claims. Public liability insurance can offer between $5 million and $20 million worth of coverage, and is a compulsory form of insurance in order to get many commercial leases.
What it covers:
- Third-party personal injury claims
- Damage to a third party’s property
- Legal fees to defend yourself
General business insurance
General business insurance may also be necessary if you run a cafe or restaurant, or any other form of hospitality business such as a takeaway shop, a fish and chip shop or a pizza shop. In any such food businesses you may have a lot of portable business equipment to protect, such as ovens, deep fryers, fridges and freezers, food mixers and coffee-making machines.
All this type of electrical equipment can be covered by business equipment insurance, which you can purchase as part of a business insurance package. Other specialist types of business insurance which may be relevant to your cafe or restaurant include machinery breakdown, business interruption and tax audit insurance. If you own your restaurant or cafe building, you may also need commercial property insurance to cover your business premises.
Glass breakage is a common exclusion in most business insurance policies, but you can buy separate glass insurance as part of a general business insurance package. This will offer cover in case your glass windows, front counters or display cabinets are damaged.
Machinery breakdown – covers you in case your freezers or refrigerated storage rooms break down, causing loss of stock due to spoilage
Business interruption – covers you in case there is an insured event (such as a power failure, for example) which causes you to have to close your cafe or restaurant, and lose business and income as a result
Tax audit cover – which offers cover in case your business is subject to a tax audit, and you need to employ additional accountants or bookkeepers to comply with audit requirements
What it covers:
- Fire, storms, theft, vandalism
- Collisions or impacts which cause damage to your business assets
- Specialist cover for electronic and other equipment used in the food industry
Management liability insurance
This insurance covers you against the management liability risks involved with running your food hospitality business. It is usually taken out to protect business owners from the risks associated with making business decisions. For example, if you run a busy restaurant open seven days a week, you may employ upward of 20 or more staff. With this number of staff comes the risk of unfair dismissal claims, which is an area covered by management liability insurance. Other areas which are covered by management liability insurance include:
- OHSW claims
- Claims of sexual harassment or discrimination
- Breach of care of duty claims
- Breach of intellectual property rights
- Defamation
- The imposition of fines or penalties
- Regulatory or statutory breaches
- Corporate liability
What it covers:
- Legal costs to defend the claim
- Losses resulting from such a claim (for example, compensation paid to a third party after an unsuccessful defence)
- Fines and penalties imposed by a regulatory body (for example, a council food safety inspector)
- Media costs to defend a reputation or communicate with your clients
What isn’t covered under business insurance for a cafe or restaurant?
The most common general exclusions include:
- Injury to yourself or your employees
- Flood damage
- Glass breakage
- Unlawful activity or criminal negligence
- Reckless behaviour or intentional damage
- Anything to do with asbestos
- The effects of pollution caused by your business activity
How much will insurance cost for my cafe or restaurant?
There is no set cost for an insurance policy, as each applicant is different and faces unique risks. There are many factors that influence the cost of business insurance, including the following factors:
- The state you’re in
- Whether you live in a rural or urban area
- Whether you’re a sole trader, are in a partnership, or run a business
- Your business size and turnover
- If you have any employees
- Your insurance history
- Whether you’ve made an insurance claim in the past five years
The main factor which will affect the cost of your insurance is the industry you’re in. All businesses in Australia are classified according to the risk their industry poses, and are allocated a risk ratio. These ratios are used by insurers to calculate the comparative risk of any one business compared to another.
Another factor which will play a part in the cost of your insurance is your location. There may be two almost identical restaurants, one in the NT and the other in WA, but the insurance for the business in Darwin may cost more simply because of the additional risks posed by cyclones in that city.
You can find out how much insurance will cost for your food business by comparing quotes right here with Savvy. Whether your cafe or restaurant is located in a quiet rural town or a busy suburban shopping centre, you’ll be able to find a policy which is perfect for your business needs here.
Why do I need business insurance if I run a cafe or restaurant?
The reason you need business insurance (particularly why you need product liability insurance) when running any sort of food business is because you face multiple complex risks. Business insurance is there to protect you from a wide variety of risks, including:
- The risk of a customer contracting food poisoning
- Risks posed by allergies and unusual reactions to consuming certain food
- Trips, slips, falls and burns
- Natural weather events damaging your building
- Machinery and equipment failure
- Liability risks associated with employing multiple casual staff
Since you’ve worked so hard to set up your cafe or restaurant, it makes sense to protect it and your reputation from anything that can go wrong. Having business insurance offers security and peace of mind, knowing you’re protected against any unforeseen events. If something unfortunate does happen and you have adequate insurance to protect yourself, you’ll have a much better chance of recovering quickly and getting back on your feet.
Types of business insurance
Questions about business insurance for cafes and restaurants
This will depend on regulations set by your local council before they issue a food vendors’ permit. Many local councils require $10 million in public liability insurance for all types of food businesses.
In most cases, tenants will be responsible for the repair of shopfront glass if they're leasing the property commercially. However, if the breakage was caused by major structural issues, it may fall under the landlord's responsibilities. Be sure to check your lease agreement and contact your landlord if you're unsure.
You’ll be able to choose how often you pay your insurance premiums. You can either pay the full cost for the year, or pay your insurance in monthly instalments. Paying annually is usually between 5% to 10% cheaper than paying monthly, so an annual payment will be your cheapest option if you have the cashflow to be able to afford it.
The information you should have to hand when you contact your insurance company to make a claim will include:
- The name of the policyholder
- Your policy number and start date (which can be found on your Certificate of Currency)
- A detailed description of the incident (what happened to cause the damage or loss)
- Specific dates and times when the incident happened
- Contact details of any other parties involved (or witnesses to the event)
- Details of your police report number (if a crime took place)
- Details of the property lost or damaged (including its age and value)
- Your bank details for settling the claim
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Savvy does not compare all business insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.
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