What is restaurant insurance?
Restaurant insurance in Canada comprises various policies that provide financial protection for food service businesses against risks such as property damage, equipment failure, liability claims and operational disruptions. It typically refers to a comprehensive policy for a traditional sit-down or take-out eatery.
Whether you are starting a business in the restaurant or food business or reviewing your current coverage, having the right restaurant insurance is critical.
Restaurant vs. food business insurance: what’s the difference?
In Canada, restaurant insurance and food business insurance are typically not separate policies. They are both terms for a customized commercial insurance package for your business.
A comprehensive restaurant insurance policy is a tailored package that protects a restaurant’s finances and assets from risks such as kitchen fires, customer injuries and food-related illnesses.
Food business insurance is a broader term that includes a wider range of operations beyond a traditional restaurant. This can include:
While the core coverages are often the same, the specifics of each package are tailored to address the unique risks of your business.
For example, a restaurant policy will heavily focus on liquor liability if it serves alcohol and equipment breakdowns in its large commercial kitchen. In contrast, a food vendor package will emphasize commercial auto insurance and coverage for portable equipment.
What does restaurant and food business insurance cover?
A comprehensive restaurant or food business insurance policy for dine-in and dine-out restaurant owners, food businesses and caterers is an important part of risk management. Many policies include multiple components to ensure your business is protected.
Here are some policies that can help cover your restaurant or food business:
Commercial general liability (CGL) insurance
A core policy that covers a wide range of third-party claims, including bodily injury, such as a customer slipping and falling, and property damage. This coverage can be critical for restaurants, as it can also protect against claims of food-related illnesses.
Commercial property insurance
This protects the physical assets of the business, including the building, fixtures, kitchen equipment, like ovens and freezers, furniture and inventory. It covers losses due to events like fire, theft and vandalism.
Workers’ compensation insurance
Workers’ compensation insurance for food businesses in Canada is mandatory in most provinces and territories. It provides coverage for medical expenses and lost wages for employees injured or made ill on the job. Premiums are typically determined by provincial guidelines and factors such as your business’s revenue, location, number of employees and the specific risks associated with the food service or production type.
Liquor liability insurance
If your business serves alcohol, liquor liability insurance is an essential form of protection. It shields your company from claims of property damage or bodily injury caused by an intoxicated customer. This is a critical component for any establishment with a liquor licence.
In Canada, provincial and territorial laws and common law can hold businesses, hosts and employers accountable for damages that arise from alcohol service. Having this coverage helps protect you from significant financial losses from a lawsuit.
In addition to insurance, responsible service training, such as Ontario’s Smart Serve, Alberta’s Pro Serve and British Columbia’s Serving It Right, and maintaining safe premises are crucial for mitigating these risks.
A liquor liability policy typically covers:
- legal fees, including attorney fees due to a lawsuit
- cost of damages if the court finds you to be the liable party
- settlements if you and/or the other party have decided to settle out of court
Equipment breakdown insurance
This policy covers the cost of repairing or replacing vital kitchen equipment that breaks down due to mechanical or electrical issues, like your refrigerator, ovens or boilers. This is a crucial coverage, as a standard property policy does not cover these types of breakdowns. For example, if your refrigeration system fails, it can cover the cost of replacing spoiled food.
Food contamination/spoilage insurance
Food contamination or spoilage insurance covers the cost of spoiled food inventory due to power outages or equipment failure.
Commercial auto insurance
This coverage is essential if the restaurant or food business owns vehicles for catering or delivery services. Commercial car insurance can protect you and your employees if they are involved in a car accident while operating one of your business vehicles.
For example, if delivery drivers accidentally knock over an outdoor light or cause third-party property damage to a customer’s home or injuries, this coverage will pay for legal expenses, repairs, replacements and any medical fees associated with the accident.
Cyber liability insurance
As restaurant and food business owners rely more on technology, the risk for data theft or cybercrime increases. Cybersecurity and protecting sensitive third-party information, such as customer or employee data, from being compromised, is essential for businesses that handle online orders or customer payment information.
Business interruption insurance
The chance of experiencing an interruption to your business due to storms, power outages, fire or theft is real. Business interruption insurance can cover the costs of utilities and taxes, employee wages, lost business income and rent payments. It helps cover your business until it is up and running if you must close your restaurant for an extended period due to an insured property damage loss.
What is food liability insurance?
Food safety laws vary by province and territory, making food liability insurance essential to a food business’s overall insurance strategy. It protects you from financial losses if a customer becomes ill or gets injured by the food you sell, covering legal fees and settlements. This includes cases of food poisoning, allergic reactions or physical harm from a foreign object. For added protection, many policies include product recall insurance to cover the costs of a large-scale recall.
What is food vendor insurance?
Food vendor insurance is a tailored business insurance package designed to protect mobile food businesses from the unique risks they face. This type of insurance is essential for companies like food trucks, food carts and vendors.
Municipalities typically set food vendor insurance requirements. For example, Toronto requires a motorized refreshment vehicle owner’s licence and a mobile food vending permit.
Event organizers may have their own insurance if you operate at farmers’ markets, festivals and other events. However, many require vendors to carry their own coverage and show a Certificate of Insurance (COI) before they can operate.
Because food trucks are mobile, insurance for this type of business is different from a traditional restaurant policy. Drivers may be required to have certain commercial driver’s licences, and commercial auto coverage and general liability insurance are standard for a food truck. General liability insurance will protect you from property damage or bodily injury claims. Other coverages, such as equipment breakdown insurance, are vital to protect your business.
Factors affecting the cost of food vendor insurance
The cost of food vendor insurance in Canada can vary widely, and several factors can influence the final premium. This includes:
- Type of business: A hot dog stand will have a different risk profile than a full-scale food truck.
- Annual revenue: The higher your revenue, the more assets you have to protect.
- Coverage limits: The amount of coverage you choose will directly affect your premium.
- Claims history: Past claims can increase your rates.
- Where you operate: The type of events you attend, such as small farmers’ markets or large music festivals, and the provinces or cities you operate in can impact your premium.
Who needs food business insurance?
Any business in Canada that handles, prepares, manufactures or sells food needs food business insurance. The term is broad and applies to various operations, from small, home-based businesses to large-scale manufacturers. This type of insurance protects against the unique risks of the food industry, which are not fully covered by a standard commercial policy.
Here is a list of some businesses that can benefit from food business insurance:
- Restaurants, cafes and bistros: This includes everything from fine dining to quick-service restaurants and cafes. Their primary risks are third-party injuries on the premises and food-related illnesses.
- Food trucks and food vendors: These mobile businesses have a different set of risks, including commercial auto liability, theft of equipment and spoilage due to power outages.
- Catering companies: Caterers operate in various locations, increasing their exposure to liability risks at client venues. Their policies need to cover equipment and food in transit.
- Bakeries and patisseries: They face risks related to allergic reactions, equipment breakdowns and potential product contamination.
- Home-based food businesses: Small businesses run from a home kitchen are not exempt from liability. Many farmers’ markets and event coordinators require vendors to have insurance before they can sell their products.
- Specialty food makers: This includes producers of items like jams, sauces, spices or health food products.
Operating a restaurant or food business in Canada can involve various potential risks, such as property damage and liability claims from customers. A comprehensive and tailored insurance plan is essential to effectively manage these risks and protect your business’s financial health. With the right commercial underwriter and thorough insurance, you can operate confidently, knowing you’re prepared for unexpected challenges.
