What Types of Insurance Does a Bar Need?
Bars are often a place where people wind down and socialize. Whether the bar is a local tavern or a uniquely themed cocktail bar, a bar is a profitable business. However, because bars serve alcohol, liability is a concern. As a result, the bar’s business plan should include insurance with generous coverage limits. A lawsuit puts extreme financial pressure on a small business; however, insurance safeguards the bar from financial harm.
Related: Guide to starting a bar
What Are Some Risks for a Bar?
Bars have several liability exposures that cause financial harm. Some of those risks include:
- Fire damage
- Extended closures
- Customer injuries
- Employee injuries
This list of risks shows only some of the hazards a bar encounters, signifying the importance of insurance. Of course, accidents happen, but insurance prevents the accident from causing major financial damage.
Bars face a substantial risk of fire damage due to their ignition sources and heavy fire load. Common sources of fire include faulty wiring, equipment malfunction, smoking, and kitchen appliance fires.
In addition to the common fire sources, a bar also has a high fire load. Alcohol is highly flammable and can contribute to a fast-spreading fire. Other furniture, supplies, papers, and décor also contribute to a fast-spreading, costly fire.
In the event of a loss, such as a fire, the bar may be required to close for repairs. During the extended closure, the bar is unable to generate income. A bar depends on a regular and consistent flow of customers as its source of income, so without customers, the bar faces a considerable revenue loss—especially during peak seasons.
Relocating is possible, but it takes time, leaving the business without income and, in addition, relocating compromises the bar’s customers. The bar risks losing regular customers in a relocation.
Some common injury claims result from slips, trips, and falls. In addition, a bar has an increased risk of customer injury resulting from alcohol service. Over-serving alcohol or providing alcohol to minors can result in significant liability issues. Over-served customers can cause harm to themselves and injury or property damage to third parties.
Some bars feature live entertainment, like musicians, comedians, sporting matches on television, trivia, or karaoke nights. Events draw a crowd, and the additional equipment presents a liability risk for trips and falls. For example, the sound equipment’s cords may trip a customer if the cords are left unprotected in the walkways.
A separate rider may also be needed if you have certain entertainment such as mechanical bulls or pool tables.
Like customer injuries, employees are also at risk of personal injury from slips, trips, and falls. In addition, employees can also suffer back strains from lifting heavy trays and equipment. They may also suffer burns and scalds while cooking, and they are at risk of cuts and lacerations working with knives and glass.
Clear dedicated walkways and good cleaning procedures reduce the likelihood of an injury. However, while working, an employee may have reduced visibility. For example, factors that increase the risk of trips and injuries include dim lighting, crowds, and full trays.
Although debit and credit card transactions are common, bars will have substantial cash by closing time. As a result, establishments with large sums of money are targets for robberies. In addition to robberies, employee theft is also a concern. Good loss prevention includes security measures and accountable money handling, but theft can still happen, unfortunately.
What Types of Insurance Should a Bar Consider?
Bars need several layers of insurance for protection. Usually, this means that a bar needs an insurance package (i.e., a business owner’s policy), which combines various insurance policies into one package. Otherwise, bars can purchase individual, stand-alone policies and bundles that fit their needs.
Some beneficial insurance policies for bars include the following:
- Liquor liability insurance
- General liability insurance
- Commercial property insurance
- Business interruption insurance
- Workers’ compensation insurance
- Crime insurance
General Liability Insurance
General liability coverage is another standard coverage on a business owner’s policy. General liability protects the bar from bodily injury or property damage claims that happen on the bar’s premises or because of the bar’s operations.
A general liability insurance policy is essential because it protects the bar from lawsuits, for instance, injury claims resulting from slips or falls. In addition, general liability covers claims of bodily injury or third-party harm that results from over-service or serving minors.
Following a claim or lawsuit against the bar, the general liability policy covers the following costs:
- Medical expenses
- Property damage repairs
- Legal defense costs
Liquor Liability Insurance
In addition to general liability insurance, businesses that serve alcohol will also need to add liquor liability coverage to their policy. Businesses that serve alcoholic beverages can face potential lawsuits for the actions of their patrons while in the bar or in the parking lot.
Liquor liability insurance, also known as dram shop insurance, is a specific type of insurance for bars that covers property damage or physical injuries caused by patrons who have been overserved or injured due to a fight. It’s important that your policy includes assault-and-battery coverage, as your bar may be held liable, as it will be argued that patrons weren’t kept safe.
Commercial Property Insurance
Property insurance, which is normally included in a business owner’s policy, offers physical damage protection for business-owned structures and items. Property insurance policies limit the number of hazards it will insure. For instance, some normally covered hazards include wind, hail, fire, theft, vandalism, and water damage from leaking pipes.
Property insurance policies protect structures for repairs and rebuilding up to the agreed policy limit, minus the deductible. For example, let’s assume the policy covers the structure up to $100,000 per claim, with a $1,000 deductible. So, in a total loss, the policy pays $99,000, and the insured pays $1,000.
Similarly, the property insurance policy covers business-owned items (also called business property). Business property includes items not permanently affixed to the structure, like equipment, inventory, supplies, furniture, and materials.
As an illustration, appliances are covered as business property because they are not permanently affixed to the structure and can be moved around. In comparison, cabinets are permanent fixtures and are covered with the structure. Like structure coverage, the property insurance policy covers business property up to an agreed limit.
Business Interruption Insurance
When a business experiences a closure initiated by a loss, business interruption coverage insures expenses and lost revenue for a limited period. Business interruption coverage is added to a business owner’s policy or another type of insurance package and is not written as a stand-alone policy.
Business interruption ensures that a business can continue paying bills and receiving replacement income while repairs are made. Some coverages included in a business interruption policy are:
- Payment on regular bills and loans
- Employee wages
- Lost revenue
- Coverage for temporary relocation costs
Workers Compensation Insurance
Workers’ compensation insures employee injury claims and is an essential policy for bars with employees. This insurance policy covers medical bills, rehabilitation care, disability income, lost income, and funeral costs following an injury claim. Not only is the employee protected if they suffer an injury while working, but the policy also protects the business from lawsuits.
For example, an employee injured by a patron who’s been over-served may require medical attention and be unable to return to work right away. As a result, the employee may sue the bar for their medical bills and lost income; however, a workers’ compensation policy covers such expenses and protects the bar from a lawsuit.
Crime insurance is a policy that specifically covers cash and securities (property insurance does not insure cash). The crime insurance policy protects money stolen by third parties—such as a robbery—and employees.
A bar can accumulate considerable cash, especially during peak hours and seasons. For this reason, bars benefit from a crime insurance policy because the policy protects the bar’s revenue from incidents, including:
How Much Does Business Insurance Cost for a Bar?
Insurance costs vary from one bar to the next because each bar has differing levels of risk and assets needing coverage. For instance, a bar with an owned structure, numerous employees, and many patrons needs a higher level of coverage than a small owner-operated bar with rented space and few patrons.
Some aspects that insurance companies consider when insuring bars include:
- The size and condition of business-owned structures
- The number of employees on the payroll
- Fire suppression and safety measures
- The hours of operation and number of clients
- Any past or current lawsuits or insurance claims
The best way for you to determine the cost of insurance is to contact multiple insurance companies for a quote. The insurance company will gather information on your bar’s various assets and liabilities to write up a customized quote. Contacting several insurance companies allows you to compare quotes, coverages, and benefits and choose a policy that best fits your bar’s needs.