Restaurants that sell, serve, or assist in the purchase or use of liquor have a rate exposure that affects how restaurant insurance rates are determined. Your restaurant liquor liability insurance rate is calculated by taking your gross liquor sales multiplying it by the insurance company’s modified base rate (Liquor Liability Exposure (liquor sales) X Modified Base Rate = Premium).
Insurance companies have varying guidelines for the percentage of total revenue that they’ll allow for liquor sales. Most insurance companies will hesitate when offering liquor liability coverage to a restaurant when liquor receipts are greater than 30% of gross sales. Insurance underwriters will make exceptions to this if your restaurant is more of a fine dining establishment opposed to a bar or tavern. Providing answers on a restaurant insurance application helps underwriters understand the characteristics of your business to determine acceptability, and if accepted whether or not credits or debits would be added to the liquor liability insurance rate.
Exposures that affect your restaurant liquor liability insurance rate include:
Entertainment: What kind of entertainment does your restaurant offer?
- Do you have a dance floor?
- Do you have a karaoke machine or jukebox on premises?
- Do you offer live entertainment?
The Age of Customers: Whose eating and drinking at your establishment?
- Are your patrons in college?
- Are your patrons post college?
- Are your patrons families?
General Location: Location, location, location can play a factor in your liquor rates!
- Are you located in a remote rural area?
- Are you located in an urban setting?
Prior Violations: Is your business known by local authorities?
- Has your business been fined for violations of licensing, ID checking, or server certification requirements?
Hours: How late are you open?
- Does your restaurant stay open late when there would be more drinking than eating?
- Do you stop selling liquor before the restaurant closes?
As you can see based on the above there are many factors that come into play and contribute to your overall restaurant liquor liability insurance rate. Each insurance company has their own threshold which defines who they will provide coverage to.