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Insurance Policy Check-Up

By David Delorenzo

When was the last time you read, and made sure you understood your insurance policy? Maybe you’re opening a new restaurant and/or bar and you need to have coverage; or perhaps you’ve been open or years, and you are just not sure if you have the best coverage for the best price. Don’t wait for a claim to find out if your insurance agent wrote you the right policy; Find out now.

Here is some basic information about the types of coverage your restaurant or bar may need:

1. Business Income Coverage
This coverage can sometimes be overlooked and often not estimated correctly. Basically, this is commercial property coverage (ISO forms CP 00 30 and CP 00 32, which excludes extra expenses) that reimburses lost earnings when normal business operations are temporarily suspended because of property loss caused by insured perils. Coverage usually includes salaries, taxes, rents, net profits, and necessary operating expenses during the period required to restore operations with due diligence. This policy replaces previous business interruption forms.

It is always wise to ask your insurance agent for a worksheet and have your bookkeeper and/or accountant fill it out. This is only necessary if you do not have a 12-month limit policy on this coverage.

2. Assault and Battery
It is imperative that night clubs, bars and taverns make sure that this coverage is a separate line item in their insurance policies. Many policies may exclude this type of coverage, so ask and make sure it’s part of your policy.  Fights inside the club or bouncers handling situations incorrectly are the most common examples of where assault and battery coverage will come into play. If the policy has an assault and battery exclusion, it could leave you responsible for any damages incurred.

3. Spoilage
Suppose the power fails at your fine dining restaurant and does not come on for hours (or maybe even days). What happens to the food inventory you lost? Do you have enough coverage for your loss? Remember that if your inventory goes bad, then you lose money. Therefore, it is always wise to make sure you have the maximum coverage for this type of exposure.

4. Equipment Breakdown
This coverage is so inexpensive and yet vital to the bottom-line. There are thousands of examples of claims that have been paid out under this coverage. This can include items ranging from pumps and compressors breaking down, to minor explosions and power surges. If your machinery doesn’t work, then you can’t produce your product; if you can’t produce your product, then your business may come to a halt and the bottom-line may be affected. Don’t wait for that day to come. Find out today if you’re covered.

5. Defense Cost Inside or Outside the Limits
Many policy holders do not realize that they have cost of defense inside the limits. If you do not read your entire policy, then you would be unaware, so it is important to ask your agent. In the event of a claim, if your policy limit is exhausted and the attorneys have not been paid, then you might very well be held responsible for the additional costs.

Policy Exclusions
Over the years, we have seen many policies with exclusions that could have potentially bankrupted a business. Night clubs with gun and assault and battery exclusions seem to be the most common.
Sometimes restaurants may have other hidden exclusions and it is not until a claim arises that other owner realizes that the coverage they needed was excluded from their policy. Always ask questions. Make sure you talk to the industry experts — whether they are friends who own similar businesses, a mentor or fellow bar/restaurant owner with a wealth of experience, or an insurance company specializing in your industry.

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