Why Your Restaurant Should Have BOP Insurance

publication date: Sep 29, 2020
author/source: Sean X Cummings

Photo by Louis Hansel @shotsoflouis on Unsplash

Any small business owner could tell you that there's no such thing as a risk-free business.

In fact, most accept risk as a necessary reality. However, certain industries provide a higher level of challenge. This means that they require a greater level of care to manage and mitigate said risk.

Hospitality certainly ranks as one of those challenging and risky industries. And it's easy to see why. Think about everything it takes for your restaurant to function properly on a day to day basis and the risks that are associated with each piece of the puzzle. Your kitchen is a busy and often crowded place with open fires and sharp tools of the trade that could lead to employee injuries. Your dining section is prone to spills and clean-up efforts, both of which could lead to slip-and-fall accidents. Your storage facilities could lose power for a number of reasons, causing your refrigeration units to shut off and your food to spoil.

This is why even the smallest restaurants should look to protect their business by investing in the right insurance program. Having the right insurance products in place will allow restaurant and bar owners to manage these unpredicted risks and avoid financial losses caused by them that could potentially cripple or kill their business.

However, no restaurant owner wants to overpay for insurance. This is why it's essential to seriously consider the insurance solutions on offer, and craft an efficient, cost-effective solution that will cover as much of the risk as possible, for the best price.

Restaurants in the US have access to a very cost-effective insurance solution called Business Owner's Policy, commonly referred to as a BOP. BOP offers protection from the most common risks a restaurant faces, at a price that’s considerably lower than purchasing them piecemeal. Additionally, it ensures there are no gaps in coverage since it presents a single, seamless policy.

Let's take a look at how BOP can protect you and your restaurant in order to understand why no restaurant owner should be without one.

Why BOP Insurance Is Crucial For Restaurants

BOP is a package of essential commercial insurance policies that every restaurant will need. BOPs enable restaurateurs to make significant savings in both time and money by providing a single, cost-effective package that offers a broad range of protection from the risk they face every day.

Typically a BOP package bundles three crucial coverages: general liability, commercial property liability, and business interruption insurance.

General Liability Insurance

A general liability policy will protect your restaurant against third-party claims such as property damage or bodily injury that occurs on your property. Crucially, it will protect you should a customer slip, fall, and injure themselves while in your restaurant. Additionally, it will protect you from claims related to foodborne illnesses.

Commercial Property Insurance

This policy will cover the damage caused by the perils of fire, theft, and natural disasters to your property. In this case, property refers to the building your restaurant is based in, as well as the equipment and personal property used in the business.

Leased buildings will typically be protected by their owner's property insurance, but you'll still need to protect your equipment, furniture, and inventory crucial to operating the restaurant.

Business Interruption Insurance

The final, and potentially most important coverage included in a BOP is business interruption insurance. This insurance policy will cover operating costs and income loss if you are forced to close your restaurant due to direct physical loss, such as might be caused by a fire or a natural disaster. It's important to note that the amount you'll receive is typically based on your restaurant's past financial records. The purpose of this insurance policy isn't to cover the loss itself, but rather to replace the lost income stemming from the damage. Essentially, it will allow you to get back on your feet in a worst-case scenario.

Additional Coverages

Many restaurants may find that these three coverages are not enough to protect them from the risks they face daily. BOP can be fortified with endorsements and add-ons to suit the needs of your business better.

For instance, an Inland Marine endorsement will protect the property owned by, or used in the business should it be damaged while in transit. Additionally, it will cover damages to third-parties if there's an accident while the property is being transported.

You can also add an endorsement for employee theft that will cover financial losses that arise out of criminal activities committed by the restaurant's employees. Another important is addition is coverage for spoilage. It would pay to replace the perishable inventory that goes bad if it was caused by an equipment breaking or an issue with utilities.

If you're expecting equipment issues, you can also insure it with a breakdown endorsement. This endorsement will pay for repairs or replacement of damaged equipment used in the operations of your restaurant.

The Takeaway

Any restaurant that's looking to survive and thrive should consider setting up the right insurance program based on their specific needs and unique risk profile. Using insurance to manage and transfer risk efficiently will ensure that it's set up to succeed in a very tough industry. BOP insurance is a crucial first step in this - as it allows restaurants to get coverage for the most common and dangerous claims at a very affordable price.

Sean X CummingsMarketing mastermind and agent of change, Sean X has been looking into the future where brands, technology, and media intersect—and manipulating the present to get there—for more than two decades. He led global marketing for Ask, oversaw digital strategy for consumer leader Amazon Advertising, established an acquisition engine for the financial arm of American Express, and helped Nike and numerous other brands succeed. Sean is currently CMO at Embroker, a digital insurance company reinventing how businesses ensure they can take the risks they need to grow.