There is no set formula regarding how much business liability insurance you need for your restaurant. However, the more coverage you have, the more bulletproof your restaurant insurance program becomes. If you are running a successful business, you will probably want minimal disruption. If an incident occurs in which you may be seen as liability. Thus, the more coverage you have, the greater the likelihood that your business will not be affected by such an incident. Moreover, if you don’t carry enough liability coverage, the incident may result in hundreds of thousands-if not millions of dollars costing you out of pocket.
Understanding Your Liability Limits
In most cases, you will see two numbers on your liability policy. The first is your occurrence limit and the second is the annual aggregate. Occurrence refers to any single accident/incident and to subsequent related incidents. The annual aggregate limit is if there are multiple and unrelated accidents or incidents. For this reason, the occurrence limit is extremely important and is the number you should look at as your coverage amount.
Hitting Your Liability Limits
The problem with not having enough business liability insurance occurs when you are faced with a legal situation where the injured party or parties don’t want to settle for the coverage amount you have purchased. For example, if you have a $2 million liability policy and the combined parties will not settle for anything less than $4 million then you have a problem on your hands. You can pay the difference out of pocket or be forced to go to court.
The Umbrella or Excess Liability Policy As A Solution
There are a number of ways to purchase higher limits. Some companies will allow you to increase your liability limits on each of your policies. However, you may be capped at a certain limit, depending on the policy type, the size of the policy and the company. The best solution is to purchase an umbrella or excess liability policy. An umbrella policy will extend the limits on all or most of your policies and might respond to claims not covered by the underlying Liability insurance. An excess liability policy provides you with additional amounts of the same type of coverage as provided by the underlying Liability policies. Umbrellas and Excess Liability policies can be purchased in increments of a million dollars.
Deciding on How Much Restaurant Liability Is Enough
There are a few good ways to determine how much insurance coverage you need. The best starting point is to have a discussion with an insurance broker about your business, your risks and exposures. Liability limits should be taken seriously because your restaurant is your livelihood. Any liability incidents are not pleasant, especially when they put your business or your assets at stake. Having a robust restaurant insurance program will help neutralize these incidents and are crucial to the ongoing success of your restaurant, especially when an undesirable incident occurs.