Here's what nobody tells you about starting a restaurant: you can have the perfect location, an incredible menu, and a killer marketing plan, but if you don't have the right insurance in place from day one, you might not even get to open your doors. Landlords want proof of coverage before handing over the keys. Your local government won't issue permits without it. And if something goes wrong before you're properly insured? You're personally on the hook.
The restaurant industry is expected to hit $1.5 trillion in sales in 2025, with over 200,000 new jobs added. But those numbers also mean more competition, more risk, and more reasons to protect yourself properly. This guide walks you through exactly what insurance you need before opening, what to add as you grow, and the costly mistakes that trip up most first-time restaurant owners.
Day One Coverage: What You Need Before You Open
Before you flip the "Open" sign, you need two essential policies in place: general liability insurance and workers' compensation. These aren't optional nice-to-haves—they're required by law, your landlord, or both.
General liability insurance protects you when customers get hurt or their property gets damaged. A customer slips on a wet floor and breaks their wrist? Your general liability policy covers their medical bills and legal fees. The repair crew you hired scratches a neighboring business's window? That's covered too. Most landlords require at least $1 million in general liability coverage before you can sign a lease, and you'll pay around $146 per month for it.
Workers' compensation insurance is legally required in almost every state if you have employees. It covers medical treatment and lost wages when an employee gets hurt on the job—and in a restaurant kitchen with hot surfaces, sharp knives, and wet floors, injuries happen. Workers' comp runs about $63 per month on average, though your actual cost depends on your number of employees and your state's rates.
Here's a smarter move for most new restaurants: get a Business Owner's Policy, or BOP. A BOP bundles general liability, commercial property insurance, and business interruption coverage into one package for about $214 monthly. That's less than buying each policy separately, and it covers your kitchen equipment, furniture, inventory, and lost income if you have to close temporarily due to a fire or other covered event. For a new restaurant with hundreds of thousands of dollars invested in equipment and buildout, property coverage isn't something you want to skip.
Coverage to Add as You Grow
Your insurance needs will evolve as your restaurant expands. Here's when to add specific coverages and why they matter.
Liquor liability insurance becomes essential the moment you start serving alcohol. If you serve a visibly intoxicated person who then drives and causes an accident, your restaurant can be held liable for medical costs, property damage, and legal fees. Many general liability policies specifically exclude alcohol-related claims, so you'll need separate liquor liability coverage. Don't wait until after you get your liquor license—add this coverage before your first drink gets poured.
Commercial auto insurance covers any vehicles you use for restaurant business—delivery cars, catering vans, or even your personal vehicle if you use it to pick up supplies. If you're offering delivery or running catering operations, you need this coverage before your first trip. Your personal auto policy won't cover business use, and if your delivery driver causes an accident, you could face massive liability without proper coverage.
Employment practices liability insurance (EPLI) protects you from claims of discrimination, harassment, wrongful termination, and other employment-related issues. Once you're managing a larger staff, the risk of employment disputes increases. EPLI covers your legal defense costs and settlements, which can easily reach six figures even if you've done nothing wrong.
Food contamination coverage addresses a nightmare scenario: what if your refrigeration fails overnight and you have to dispose of thousands of dollars in spoiled food? Or worse, what if contaminated ingredients lead to customer illness and you need to issue a recall? This specialized coverage pays for product disposal, recall expenses, and customer notification costs. With over half of foodborne illness outbreaks traced back to restaurants, this protection becomes increasingly important as you scale.
Common Mistakes That Cost Restaurant Owners Thousands
The biggest mistake new restaurant owners make is underinsuring their property. You might buy a space for $300,000, but replacing all your specialized kitchen equipment, custom buildout, furniture, and inventory at current market prices could cost $500,000 or more. Make sure your property insurance reflects replacement cost, not purchase price or depreciated value.
Another critical error: not understanding what your workers' compensation policy actually covers. Part-time employees, family members working in the business, and people you consider independent contractors might all need to be covered under workers' comp depending on your state's laws. Misclassifying workers can leave you exposed to massive liability if someone gets hurt.
When something does go wrong, how you handle the claim matters enormously. Report incidents to your insurer within 24-48 hours, even if you're still gathering information. Document everything immediately—take photos, collect witness statements, save receipts. And here's the hardest part: never admit fault at the scene, even if you think you might be partially responsible. Let your insurance company investigate and determine liability. Admitting fault can weaken or even void your claim.
Finally, don't set your coverage limits once and forget about them. Your insurance needs change as your business grows. Conduct annual policy reviews to ensure your coverage limits still match your actual exposure. Adding more seating, hiring more staff, expanding your menu, or increasing revenue all affect your risk profile and insurance needs.
What Restaurant Insurance Actually Costs
Budget between $250 and $500 per month for comprehensive restaurant insurance coverage. That's $3,000 to $6,000 annually, though your actual costs depend on your location, size, menu, and coverage choices.
Several factors push your premiums up or down. Larger restaurants with more square footage, more seats, and more employees pay more because they have more exposure to claims. Your location matters too—insurance costs more in areas with higher crime rates or more frequent natural disasters. Restaurants that serve alcohol or operate late-night hours face higher premiums due to increased liability risk.
You can reduce costs by improving your risk profile. Install security cameras, upgrade to commercial-grade fire suppression systems, implement thorough employee training programs, and maintain excellent health inspection scores. Many insurers offer discounts for restaurants that demonstrate strong safety practices.
How to Get Started
Start shopping for insurance at least 60 days before your planned opening date. This gives you time to compare quotes, understand policy details, and meet any insurance requirements in your lease or licensing agreements.
Work with an insurance agent or broker who specializes in restaurant coverage. They understand the unique risks you face and can help you avoid coverage gaps that general business insurance agents might miss. Be prepared to provide detailed information about your concept, square footage, expected revenue, number of employees, menu type, alcohol service plans, and hours of operation.
Get at least three quotes and compare not just the price, but the coverage limits, deductibles, and exclusions. The cheapest policy isn't always the best deal if it leaves you underinsured or excludes critical coverages.
Starting a restaurant is risky enough without gambling on insurance. The right coverage protects your investment, keeps you compliant with legal requirements, and lets you focus on what you do best: creating amazing food and experiences for your customers. Get your insurance in place before day one, adjust it as you grow, and review it annually. Your future self will thank you.
