Restaurant Insurance – Equipment Breakdown Coverage Revisited

In the past I have blogged about equipment breakdown coverage for restaurants and I have discussed one of the more obvious reasons for needing it – breakdown of heating or air conditioning systems. However, with rapid technological changes in the restaurant industry, there are new areas of concern that give new weight to the value of carefully considering adding this protection to your restaurant insurance policy.

Specifically, I want you to think of the new technologies that you may have added to your restaurant in the past 5 years that you now rely on for smooth day to day operations. Which of these could you do without for an extended period of time? How much would it cost you to replace lost income due to the breakdown of this equipment? For instance, many restaurants now use sophisticated, computer based cash registers that integrate with point of sale software systems. What losses would you face if this system broke down? Could you stay open?

Another area of consideration for your equipment breakdown coverage is your commercial grade sound system if you have one, or your inventory scanner system or even your time clock and payroll system that might be run from your computerized register. If these systems go down, your restaurant could be crippled and the lost revenue while you struggle to get your systems running again could be substantial.

All of these new electronic systems are at risk for power surges and electrical arcing. Unbudgeted losses from breakdown of these systems can be significant enough that for some restaurants equipment breakdown coverage should no longer be considered an optional coverage but rather a critical one. Take a moment to check your restaurant insurance policy and see if you have equipment breakdown coverage. After the systems break, it will be too late to go back then and add the coverage.

Restaurants are a unique kind of business and they present unique insurance challenges. If you own a restaurant then you should take the time to seek out an insurance agent who specializes in restaurant insurance. Don’t trust your protection to a generalist. You will likely save money and be better protected if you find an agent who understands restaurants and insures dozens or even hundreds of them.

Clinard Insurance Group, located in Winston Salem, NC is an independent insurance agency that specializes in restaurant insurance. We write insurance for more than one hundred restaurants in North Carolina and South Carolina. Our understanding of how each restaurant is different from the others has led us to create 5 distinct restaurant insurance programs. We have a fine dining restaurant insurance program, a casual dining restaurant insurance program, a fast food restaurant insurance program, a bar and grill and tavern insurance program and a specialized insurance program for catering companies. If we can help you with your restaurant insurance needs, or if you simply need a professional second opinion on any restaurant insurance issues, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.

You can find the original source material for this article at www.RestaurantInsuranceGuy.com.

Restaurant Insurance Basics – Part 3 of 10 – Business Income Insurance

Part 3 in our 10 part series discusses Business Income insurance and how to use it to correctly protect your loss of income after insured disasters.

Business Income, sometimes referred to as business interruption insurance is often overlooked when the restaurant owner sets up his or her restaurant insurance program. This is because with most businessowners policies, this coverage is now included automatically. This is of course a great convenience for those who might overlook this protection in the first place. But this automatic protection does not remove the need for you to take the time to understand this coverage and make sure that it will respond in the way you expect after a large loss.

Before this coverage was simplified and added into the businessowners policy coverage, it was sold separately under the name business interruption coverage. If you still have a package policy as opposed to the businessowners form, then you will probably need to add this coverage by endorsement. Either way, there are several different elements to this protection and you should understand each clearly.

Before I tackle the different elements of business income protection, it is important to note that business income coverage is a consequential loss form. That means, the losses that you incur which are to be covered by this part of your insurance policy have to be the consequence of an insured peril in the first place. For instance, if a fire burns your building down, then the fire loss is covered by the businessowners policy and so therefore, the business income coverage will apply. If, on the other hand, you have a flood loss to your restaurant, then that type of loss is not covered by the businessowners policy so you will not have protection for your lost income.

To understand these elements of this protection, I will focus on the most common form of policy, the businessowners policy. Bear in mind that these are generalities and you should discuss your specific form with your agent if you have difficulty understanding it. First of all, business income is usually defined as net profit or loss before income taxes that would have been earned or incurred if no physical loss or damage had occurred. So, we are talking about lost profits here. But what else should be considered? Well, the form usually also includes normal continuing operating expenses. These are expenses that will continue on even when you are shut down and out of business. They might include rent, electricity, water etcetera and most importantly payroll. If you can’t pay your employees while you are shut down, you might lose them. Often though, the coverage for payroll can be limited in both time and scope. Many common forms only include payroll for 60 days past the date of the physical loss that triggered the business income coverage. In addition, most forms exclude payroll for owners, executives, department managers and employees under contract. Also, you should check your policy form carefully to see if any of the following are included or excluded in the definition of payroll: employee benefits, fica payments you pay, union dues you pay, and workers compensation premiums you pay.

One additional element of this protection deals with extra expense. Extra expenses are those that you must bear in order to get your restaurant back in business more quickly. You may have to expedite shipments or rent another location to get in business while your old one is repaired. You should put together a firm and clear disaster plan for what you would do if your restaurant is destroyed by fire and then be sure that your business income protection will respond in a way that works well for your plan.

I think that the business income section of your policy is a place that points out just how important it is for you to deal with an agent and company that specializes in insuring restaurants. There is too much to lose here and you can’t fix it very easily after the big loss has occurred. Take the time to make sure you have hired the professionals that you need to make sure you don’t lose your livelihood in an accident that is compounded by poor disaster and risk management planning.

At Clinard Insurance Group in Winston Salem, NC, we want all insurance consumers become better informed buyers. Insuring and helping restaurants all across North Carolina and South Carolina is our specialty. We even have ways to help you gain and keep more customers. For one example of that type of program, visit our partners page. We also know that not all restaurants are the same. That’s why we have created 5 different restaurant insurance programs so that you can choose a program more tailored to your needs. We have a fine dining insurance program, a casual dining restaurant insurance program, a fast food insurance program, a bar and grill and tavern insurance program and a special insurance program for caterers. If you need help or advice for your NC restaurant or your SC restaurant, please call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com. Don’t trust your livelihood to an agent that doesn’t specialize in restaurants. There is just no need to take that risk.

The source information for this article was pulled from other articles which can be found at www.RestaurantInsuranceGuy.com

Restaurant Insurance Basics – Part 2 of 10 – Liability Insurance

This is the second in a 10 part series on the how to’s of insuring your restaurant. In this article we discuss liability insurance, what it is and what issues you should consider when purchasing your liability insurance.

Generally speaking your liability insurance will be a part of your package policy that also includes property insurance. For help on property insurance issues for your restaurant, check out part 1 of this series by clicking here.

Your liability insurance for your restaurant is generally divided into two kinds of protection. They are premises liability and products liability. Premises liability insurance provides protection for your restaurant for damages caused by accidents for which you can be held liable that happen on your premises. The easiest example of a premises liability claim would be a customer who slips on a wet floor and is injured as a result. Products liability insurance provides protection for your restaurant for injuries or property damages caused by the products that you make and sell; the food in your restaurant. A common example of a products liability claim would be a broken tooth when a customer bites down on some foreign matter in their entrée.

The liability section of your restaurant insurance policy should provide you with both premises and products liability. When you look at the limits of coverage provided by these different liability coverages you will usually see a per occurrence limit and a general aggregate limit. The per occurrence limit is the most that the insurance company will pay on your behalf for any one occurrence of that type. The general aggregate limit is the most that your insurance policy will pay in any one policy year. So, each claim that you have in a policy year will reduce the amount left on your general aggregate limit. Pay very close attention to these limits and make sure that you are comfortable with the limits on your policy. Generally I would advise you to purchase the highest liability limits that you can afford. The reason is that liability exposures, unlike property exposures, are unlimited. For example, if you own your restaurant building and it burns down, you know how much you will lose and what it will take to rebuild it. But with liability claims, you really can’t predict in advance how high the damages will go. For that reason the most prudent approach is to purchase the highest coverage limits that are available.

Liability insurance is rated based on a factor that helps anticipate your exposure to risk. Some seem like better predictors than others to me. Most common these days is to tie the liability rate to the property insurance costs, using a sliding scale or a flat amount for the different levels of liability coverage. This approach is most common in the businessowners policy form and is more about simplification than anything else. Other policy forms will have a rate per $1000 of gross sales to calculate your liability insurance premium. These types of formats will often require an audit at the end of the policy term to determine your actual gross sales for that time period. If you overestimated your gross sales, then you would be due a refund, if you underestimated them, then you would owe more money. If you have this type of policy form, be sure to read my blog on avoiding the audit trap.

Take the time to really think about your liability insurance limits and make sure that your policy is set up correctly so that it will respond the way you want it to in the event of an accident. If you are not using an agent who specializes in insuring restaurants, you should seriously consider doing so. Ask your agent if he or she insures at least 25 restaurants and if the answer is no, you may want to consider using an expert to protect your largest investment and your livelihood.

At Clinard Insurance Group in Winston Salem, NC, we want all insurance consumers become better informed buyers. Insuring and helping restaurants all across North Carolina and South Carolina is our specialty. We even have ways to help you gain and keep more customers. For one example of that type of program, visit our partners page. We also know that not all restaurants are the same. That’s why we have created 5 different restaurant insurance programs so that you can choose a program more tailored to your needs. We have a fine dining insurance program, a casual dining restaurant insurance program, a fast food insurance program, a bar and grill and tavern insurance program and a special insurance program for caterers. If you need help or advice for your NC restaurant or your SC restaurant, please call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com. Don’t trust your livelihood to an agent that doesn’t specialize in restaurants. There is just no need to take that risk.

The source information for this article was pulled from other articles which can be found at www.RestaurantInsuranceGuy.com

Restaurant Insurance Programs – Watch Out For That Coinsurance Clause

Restaurant owners are busy individuals with little time to delve into the details of their restaurant insurance policy. So it’s little surprise that few of them understand the coinsurance clause on their policy. And often, those that are aware of it may not correctly understand how it is applied in the event of a loss. All of this can lead to the restaurant owner spending more out of pocket funds after a large loss than he or she expected. Talk about a cash flow killer.

First of all it is helpful to understand that not every restaurant insurance program will even have a coinsurance clause built in to the policy language. If your restaurant insurance is written on the business owners policy form, then you will more than likely not have any coinsurance clause to deal with. But if you are in an older building, or if you have high liquor receipts or have had past losses or are insured with a company that doesn’t specialize in restaurants, then your property insurance for your building and your contents might be written on the commercial package policy. If that is the case, then you will likely have a coinsurance clause embedded in your policy language.

So what is this coinsurance clause exactly? Well, it is a clause in the policy that helps force the policy holder to purchase enough insurance to cover a total loss of the property. Since most losses are partial losses, some crafty restaurant owners would attempt to purchase only enough insurance to cover the partial loss and not a total loss. If everyone were able to do this, then insurance rates would be much higher than they are now.

Here’s how a coinsurance clause works. Let’s assume that you have replacement cost coverage on your building and contents and you are in a building worth $1,000,000 and have contents valued at a replacement cost value of $300,000. If your policy has an 80% coinsurance clause, then to avoid the coinsurance penalty at the time of a loss, you need to carry a building limit if at least 80% of the replacement value of the building or in this case $800,000. Likewise, you must purchase a contents coverage limit of at least 80% of $300,000 or $240,000. As long as you do so, then you face no coinsurance penalty in the event of a loss.

Now let’s see just how the coinsurance penalty would work if you were not in compliance with your policy’s coinsurance clause. Taking the above example, let’s assume that you only purchased $600,000 of building coverage and $100,000 of contents coverage. And now let’s assume you have a small fire loss and the damage to your building is $10,000 and your contents loss is $5000. Here’s where some restaurant owners who are aware of the coinsurance clause don’t have a clear understanding of how the coinsurance penalty works. Many think that if you don’t carry the 80% required by the clause, then the insurance company will only pay 80% of the loss. But the reality is more brutal than that. You see, the insurance company will only pay the percentage of your loss that is in ratio to the percentage of coverage that you carried. Let’s crunch the numbers. In this example you purchased $600,000 of building coverage when you should have purchased $800,000. If we take a ratio of these two numbers then we divide 800,000 by 600,000. The result is 6/8ths or 75%. So you purchased 75% of the amount of insurance you should have purchased so you will only be paid 75% of the claim. If we ignore the deductible in this example then you would only be paid $7500 for the $10,000 damage to your building. Just think if the loss had been $100,000. Now you are out $25,000 on the claim. That’s going to kill your savings and your cash flow. In the case of your contents coverage, your ratio of what you purchased to what you should have purchased is 100,000 divided by 240,000 or 41.6%. Multiply that by the loss of $5000 to the contents and you see that the company is only going to pay for $2083 of that $5000 loss.

It’s clear from these notes that restaurant owners need to be very aware of any coinsurance requirements that are on their restaurant insurance policies as ignorance could lead to a financial disaster after a large loss. At Clinard Insurance Group in Winston Salem, NC, insuring restaurants all across NC and SC is our specialty. We have designed specialty Restaurant Insurance Programs for many different types of restaurants so that you don’t find yourself as a square peg jammed into a round hole. We have created specialized programs for Fine Dining Insurance, Casual Dining Insurance, Fast Food Insurance, and Bar & Grill Insurance as well as Catering insurance so we can help you with your restaurant insurance no matter what type of restaurant you own. If you would like help with your restaurant insurance issues, or if you would like a quote on your current restaurant insurance, please call us toll free at 877-687-7557, or visit us on the web at www.TheRestaurantInsuranceStore.com.

The source information for this blog can be found at The Restaurant Answer Guy blog site.