Restaurants! Food! Drinks! We all look forward to these things, and we cannot go days without consuming them. The food industry is always growing, with new establishments opening frequently. The food and beverage industry (F&B) encompasses various companies, including restaurants, butcher shops, bakeries, and grocery stores.

Running a F&B business is exciting and dynamic but risky. Restaurants face threats like fire damage, accidents, and food-related illnesses.

These risks are why nearly all restaurants, alongside their F&B licences, also purchase a restaurant insurance package. Insurance helps owners protect their business and their employees. The article will explain why restaurant insurance is needed and the risks our favourite restaurants face while we are eating their tasty food.

What Is Restaurant Insurance?

As customers, we read reviews online, go to the restaurant, order what looks the tastiest, eat and leave; it’s simple. But on the other hand, restaurant owners have to worry about countless factors when opening a restaurant that serves and satisfies customers.

A restaurant is always at risk of shutting down. According to a study by Ohio State University on failed restaurants, 60% of restaurants do not make it past the first year, and 80% shut down or slowed down in five years. A business closing down could be due to many reasons, some being in the owner’s control and several being uncontrollable or accidental.

Restaurant insurance protects the business from uncontrollable risks. Risks include fires, weather damage, employee claims, and customer claims. The insurance will help any F&B business by reimbursing financial loss due to these risks. A costly guest or staff member lawsuit can force a restaurant to close its doors in days.

The restaurant insurance includes various business insurances in one package to protect the business from a large spectrum of risks while they keep producing the tasty food we love.

How Does Restaurant Insurance Protect Your F&B Business?

Property Damage

Restaurants mainly do most of their work on-site, from cooking to serving. The physical restaurant and its assets are a crucial part of the business. In places like Hong Kong, it can be costly. Accidents happen no matter how hard a restaurant owner tries to avoid property damage. A main part of cooking, as we all know, is fire. Fire is an element that can go out of control in seconds, causing extreme damage and burning parts or even putting the entire restaurant down. Damage could also be caused due to harsh weather, flooding or vandalism.

Property All Risk

An example is when a Nepali cuisine restaurant in Hong Kong caught fire and burned the entire site down. The freak fire resulted in casualties and a giant financial loss for the owner. Property damage is hard to recover from, especially when the online source of income is burned down or forced shut.

Property All Risk Insurance is part of the restaurant insurance package. This restaurant insurance factor will protect the owner’s properties and cover all property damage financial costs due to the risks. A restaurant must have the correct license and restaurant insurance before starting the business. Restaurant insurance can help the company rebuild and recover from any damages, moving on from the past to a better future.

Business Interruption

The severity of property damage can cause a business to have a temporary shutdown to rebuild. During this time, a company can lose a lot of income, causing financial problems for the owner. These costs would include income costs from customers, outgoing costs to employees (as employees still need to be paid during a sudden shutdown), rent and many more regular expenditures.

When all these costs add up, it can result in the owner not having enough financial capital to re-open the restaurant as planned. In many cases, this results in the owner having to sell the restaurant or the property itself.

Business interruption insurance is an adding factor to restaurant insurance. It is a perfect factor that flows with property all-risk insurance. Business operations must stop when rebuilding the property, and business interruption insurance will cover all financial costs lost due to the unpredictable interruption. However, business interruption will not cover any interruption due to pandemics. This section of restaurant insurance will cover regular income, employee salary and rent to the landlord.

Business interruption avoids the risk of shutting down and gives hope to those loyal customers who have been craving your delicious food.

Employee Compensation

Employees/staff at a restaurant can either make or break the business. From a chef to a waiter, employees are responsible for the entire dining experience, from seating to serving and cleaning up. A restaurant owner must have a solid and positive relationship with all the employees. Each employee should feel needed and appreciated. Especially in a restaurant, employees are at high risk from injuries such as cooking, serving or cleaning. An employee can easily cut, burn during cooking, slip while carrying many plates, and other unforeseeable injuries during working hours.


According to Labour laws, the employer must pay for any injuries caused at work and continue paying the employee during their recovery. Depending on the depth of the injuries, this can be costly to the restaurant owner, who will have to pay medical bills, salary and hire someone new to fill the temporary role.

Employee compensation (EC)/Employer’s Liability policy is one of the most common and crucial parts of restaurant insurance. The insurance will help the owner cover costs such as medical care and the injured employee’s salary. Furthermore, if an employee is permanently disabled due to a work injury, the employer must pay the injured compensation. EC insurance helps employers provide adequate care to their hard-working employees.

Public Liability

Customers are an essential part of a business; without the customer, there are no sales. As a result, they are a critical factor when developing a business. They are part of the significant term public, but the public (third party) can also be anyone affected by the business. Every owner does their best to keep customers and the members of the public happy with their restaurant and the products. Sadly, things do not go as planned for any business.

Public Liability

Minor and major mishaps with the public can always happen when running a restaurant. It can be any injury or property damage caused to the member of the public due to the business activities. Some third-party accidents are brushed away, and some turn into the third party suing the company. Lawsuits can financially cost a business and ruin the brand’s reputation.

This is where public liability insurance plays an essential role in restaurant insurance. Public liability will protect the business if a third party sues your business, alleging that the business activities caused them some bodily injury or property damage. The restaurant insurance will use public liability to cover all legal costs and pay for third parties recovery. It allows the business to run normally and avoid any major third-party financial loss.

Product Liability

The food and drinks created by a restaurant are known as their product. A strong product can help a business succeed and create a positive reputation. Owners have to provide the best food, but that’s not all. They also need to ensure their food is safe and edible – it won’t harm or cause the consumer any sickness. Including how it is served and packaged. Customers can sue a business if the product has caused them harm while consuming it.

product liability- defect

A famous example is a coffee burning a woman at a McDonald’s drive-thru, resulting in a $3,000,000 settlement. This was all because the hot coffee container did not have a “warning” label informing customers the coffee ‘is hot’. A law case like this can ruin a business, especially if they are not as big as McDonald’s, which can afford to pay the claim.

Product liability insurance is another crucial part of restaurant insurance that can save businesses millions of dollars and prevent them from closing down. The main purpose of product liability insurance is to cover legal costs and damages for the company due to product defect claims. The insurance will pay for legal, compensation and settlement costs. In the example above, product liability would pay the price decided by the judge. Thus, once again, restaurant insurance can be savvier for the owner.

The Benefits Of Purchasing Restaurant Insurance In The F&B Industry

Protected From Unexpected Claims

Restaurant insurance covers a large number of claims and risks. These risks can occur at any time and affect a business in a drastic negative way. Restaurant insurance gives the owners the peace of mind of knowing they are protected from these claims and unpredictable events. It will allow the business to focus on producing the best food and service rather than worrying about details that a company can’t avoid.

Reduces Financial Loss

 The fact that restaurant insurance pays for all the claims and losses, saves the owners a large sum of money. When a business loses such a large sum, it is hard to recover and rebuild the company back to normal. Restaurant insurance allows the owners to focus on a brighter future and invest money into growing the business and attracting new customers.

Employee Safety 

Restaurant insurance covers the medical care of any employee at work. It helps employees feel safer and cared about. If a work injury does occur, employees can focus on recovering rather than worrying about money and pay. It is crucial to have happy employees. The more comfortable staff are at work, the better they work, resulting in satisfied customers and a successful business.

Restaurant insurance is essential for protecting your F&B business from potential risks. Don’t leave your business vulnerable – invest in restaurant insurance today.


To learn more about restaurant insurance and get the best coverage for you and your F&B business, contact Red Asia Insurance.