Owning and running a bar or tavern can be an extremely lucrative endeavor. Varying state liquor laws and regulations make it difficult for bars and nightclubs to form large chains. For this reason, the bar and tavern industry is one of the few that makes it easy for small and newly established businesses to compete. These businesses require a large initial investment, so you will want to be sure to protect yours with bar insurance that reduces your financial risk.
U.S. Bar and Tavern Industry Statistics
- There are approximately 45,000 bars, taverns and nightclubs in the country
- Of these, the largest 50 companies make up only 5% of the total revenue generated
- In 2013, bar and tavern food and drink sales totaled around $19.5 billion
- This is a 10% increase over 2010, when food and drink sales totaled about $17.7 billion
Coverage to Protect Bar and Tavern Employees
Whether you own a small tavern, a wine bar, a high-end martini bar or large popular nightclub, you will need to have insurance coverage that protects you and your employees. Some insurance policies are mandatory, while others may be required by lenders if you have a business loan. Optional coverage is available and highly recommended because establishments that serve alcohol face an increased risk of damage and liability claims.
Insurance policies you will need to consider include the following:
- Unemployment insurance: This coverage is required by law. It is included as part of your state taxes. Once you establish and register your bar, tavern or nightclub with your state’s workforce agency and begin paying taxes, your business will be covered.
- Disability insurance: This coverage is required by law if your business is located in California, Hawaii, New Jersey, New York, Rhode Island or Puerto Rico. Otherwise, this insurance coverage is optional.
- Medical insurance: Most bars employ fewer than 50 people and are therefore not required to provide health insurance benefits for their employees. If you employ more than 50 full-time people, however, the Affordable Healthcare Act requires you to subsidize their health insurance.
- Workers compensation insurance: It is not uncommon to find wet and slippery floors in bars. Your employees face potential injuries from slip-and-fall accidents and other work-related mishaps. When employees are injured on the job, you are responsible for their resulting medical treatment. Workers compensation insurance provides you with coverage for the costs.
Bar Insurance to Cover Your Liability Risks
Bar liability insurance can protect you from the potential lawsuits that may be filed against your establishment. There are many different types of liability coverage you can purchase. In each case, your bar liability insurance coverage will provide compensation for any related court costs and legal fees.
- General liability insurance: This provides coverage for bodily injuries and property damages if a customer is injured in your bar or perimeter areas such as the parking lot. You may need to purchase a separate rider if your bar offers hazardous entertainment features such as mechanical bulls. Oftentimes, bar insurance policies exclude general liability coverage if the customer involved was injured due to intoxication after being served in your establishment. For that, you will need liquor liability insurance.
- Liquor liability insurance: This is a specific bar liability insurance that covers property damage or physical injuries caused by patrons who have become intoxicated at your bar. Oftentimes, liquor liability insurance policies exclude coverage for injuries due to fights and assault. For that coverage, you will need assault and battery liability insurance.
- Assault and battery liability insurance: If a fight breaks out in your establishment, you may be held liable if it can be shown that you failed to provide a safe environment for your customers. Hiring security guards and bouncers can prevent many instances of assault and battery claims against you.
- Product liability insurance: Many bars also serve food. If the food or alcohol you are providing to your customers is tainted in any way and causes your patrons to be sickened, you may be held liable for resulting medical expenses and punitive fees. This insurance will provide coverage for such claims.
- Garage-keepers liability insurance: This is necessary only if your bar or nightclub provides a valet service. It provides coverage for damages to your patrons’ cars while they are in your care.
Bar Insurance to Protect Your Property and Assets
In addition to bar liability insurance, you will need to protect your physical property and assets. The following coverage options will likely be available with your bar insurance policy:
- Building coverage: This is necessary if you own the building in which your establishment is housed. It will provide coverage for damages to the structure of the building due to causes such as fire, severe weather, falling objects, vandalism and theft.
- Contents coverage: This provides coverage for the property kept inside your bar, from tables to decorative touches to your supply of alcohol. It may be necessary to purchase separate riders or endorsement for specialty items such as outdoor signs, glass display cases and windows, entertainment equipment such as pool tables, sound systems and expensive computer equipment.
- Equipment breakdown coverage: If a power surge or mechanical failure causes equipment failure in your bar, this can affect your sales and even your ability to stay open. If you own a dance club and the sound system is not in working order, for example, you will likely need to close down until repairs can be made. Likewise, if your bar serves food and there is a failure in your kitchen, this can affect sales and at require you to close temporarily. This coverage will compensate you for repair fees as well as lost income.
- Food spoilage coverage: If your bar includes a kitchen, an extended power outage cause you to throw away a lot of food. This insurance coverage will provide compensation for this sort of loss.
- Lost income coverage: If your bar is forced to close temporarily because of a covered event, such as a fire, this insurance will provide continuation of income so that you are able to continue to pay your required expenses and employee salaries. This coverage is usually limited to one year.
- Flood insurance: It is important to know that in most cases, flood damage is excluded from your property and assets coverage. If you are in an area that is at even a moderate risk for flooding, a business flood insurance policy may be an important investment. An agent in the Trusted Choice network can provide more information about flood insurance and help you secure a policy.
Is Bar Insurance Expensive?
Every bar has unique risks based on the size of the business, number of employees and the types of products served. Thus, every bar insurance policy is different. The cost of a bar insurance policy varies greatly from one establishment to the next. On average, these policies run about $3,000 to $5,000 a year, but if your bar is a small one, you can expect to pay less than that.
Some factors that influence your insurance rates include:
- The type of bar you own
- The location of your bar
- The number of years you have been in business
- Your annual sales and revenue
- Whether or not your establishment is a venue for live entertainment
The only way to know for certain how much insurance will cost for your establishment is by comparing rate quotes from a variety of insurance providers.
Where Can I Find Affordable Bar Insurance?
Comparison shopping for bar insurance may take some time. Researching your options is an important exercise as you're planning to invest in this kind of protection for your establishment. You may want to speak with your accountant or financial advisor, to make sure you understand the worth of your establishment. This will help you get the insurance protection that's high enough to reimburse you if something like a fire destroys your building.
In addition, a lawyer may be a useful person to consult with in order to get a full picture for the liabilities you face when you bring patrons in and serve alcohol. There may be some legal requirements you didn't consider, and that could affect your insurance needs as well.
Finally, an insurance agent is going to be a crucial part of this picture. Finding an agent who understands your needs is important. Look for an insurance company who has high ratings with agencies like A.M. Best and other rating agencies. Checking online consumer reviews also may help you evaluate the quality of the insurance company you're working with. You'll get peace of mind when you understand all the risks you face and the coverage options you have.