Terry's Restaurant Insurance Blog


Restaurant Insurance – Part 7 – Workers Compensation Insurance

Workers compensation insurance is an integral part to any NC restaurant insurance program.  But, due to the relatively low cost of this protection for restaurant owners, it is often overlooked.  This 7th part in our 10 part series takes a closer look at workers compensation and highlights several key elements of this policy that a restaurant owner needs to understand in order to best protect his business, his workers and his cash flow.

First of all, this discussion will be directed to and focused on North Carolina workers compensation insurance for restaurants.  Some of what you may learn here will apply in other states but for the sake of this discussion, we are focusing on NC rules and regulations.

The first question that a restaurant owner might ask would be if he or she even needs to buy work comp insurance for their restaurant.  The answer is an unqualified yes.   But here are the rules.  In NC, you are only required to purchase work comp insurance on your business if you have 3 or more employees.  Also, you can choose to include or exclude corporate officers and owners.  But here’s the catch.  Not being required to purchase the policy is not the same thing as avoiding the exposure.  If you don’t purchase the policy, you will still be required to pay all claims.  Without the policy you are just deciding to pay all the claims yourself out of your own pocket.  This is almost universally a bad idea.

The insurance policy itself is a statutory based policy.  This means that the policy follows the NC work comp statutes which spell out what is covered and to what extent.  The workers compensation rules and rates in NC are controlled by the NC Rate Bureau.  The claims process is handled by the NC Industrial Commission. 

Your actual workers compensation costs will be based on your payroll.  Each classification of worker will have its own rate.  To get your policy started you will estimate what your payroll will be for the year for each different classification that applies to your restaurant.  At the end of the policy year, the insurance company will perform an audit of your payroll and an adjustment to the final premium will be made.  If you had overestimated your payroll then you would be due a refund and if you had underestimated it, you will owe an additional premium.  Under estimating is risky and can leave you with a bad cash flow situation that I call the audit trap.  To understand the audit trap better, read my blog here.

Another aspect of your workers compensation policy to consider is that over time, most workers compensation policies are experience rated.  This is done when the NC Rate Bureau assigns you an experience modification factor.  This factor modifies your rate either up or down, depending on your past loss experience.  This is a strong incentive for you to manage your risks and minimize your claims.  To learn more about how this works, visit my blog on this by clicking here.

One more point that I would make to restaurant owners who are setting up their workers compensation insurance is that they take the time to consider using a mono line workers compensation company for this policy.  Recently we have seen a rise in these companies which write only workers compensation insurance.   Often their expertise and specialization allows them to provide better back to work programs as well as more effective loss control programs.  They are also more likely to offer a pay as you go program for your billing.

While workers compensation insurance will rarely be the biggest ticket item in a restaurant owner’s insurance program, there are several areas in this policy where the restaurant owner can reduce risk and save money by using the right company and the right agent.  At Clinard Insurance Group, in Winston Salem, NC we specialize in helping restaurants all across North Carolina and South Carolina.  And since not every restaurant is the same and we don’t think you should have to pay for prepackaged coverages you don’t need or miss out on the coverages you do need, so we have created 5 different restaurant insurance programs for our NC and SC clients.  We have a fine dining insurance program, a casual dining insurance program, a fast food insurance program, a bar and grill and tavern insurance program and a special insurance program for caterers.  If we can help you with your insurance needs, please feel free to visit us on the web at or call us, toll free, at 877-687-7557.


Restaurant Insurance – Part 6 – Business Auto Insurance

This is the 6th part in a 10 part series on how to insure your restaurant.  This article deals with auto insurance for your business and discusses a few of the pitfalls that restaurant owners need to wary of when setting up their restaurant insurance program.

Business Auto insurance is an easy one to overlook when you are setting up your restaurant and planning your insurance needs.  Often the restaurant owner will tell me that he doesn’t have any cars in the company name, so why worry about business auto insurance.  This seems reasonable on the surface.  But the problem is that you don’t have to own any vehicles to get yourself into a world of hurt with an auto loss for your business.

Here’s the problem.  At some point in time, and probably more often than you may at first imagine, someone, be it you or an employee of yours, is going to be out there running errands on behalf of the business.  Let’s say your employee is taking a deposit to the bank and runs a red light and severely injures a mother and two children.  Now, assume the costs of the injuries from this accident run in excess of $500,000.  Well, you didn’t cause the accident so why should you worry?  The problem will stem from the fact that it is unlikely that your employee who caused the accident will have high enough insurance limits on his or her personal auto policy to cover these losses.  And since the errand was run on behalf of your restaurant, your corporation or partnership or LLC or whatever entity owns your restaurant can be held liable for the excess losses that are not covered by your employee’s personal auto insurance policy.  And in this case, if your employee has only $100,000 of auto insurance bodily injury protection and no real assets to speak of, then your business is now the deep pocket in this event and that puts you on the hot seat.

So what do you do about this?  The solution is wonderfully simple and also inexpensive.  What you need is a business auto insurance coverage called nonowned auto coverage.  If you do have a business auto policy because you have vehicles titled in the company name, then you can add this coverage to that policy.  The cost is usually under $100 per year.  While you are at it, you may as well add hired auto coverage as well since the cost of this coverage is also very low.  In fact you may already have this coverage.  To find out, take out your business auto policy and check the symbol showing beside the liability section.  If you see a symbol 1, or a symbol 9, then you already have nonowned coverage.     If you don’t have a business auto policy already, then most restaurant business owners policies will allow you to add both hired and nonowned auto insurance to that policy.  If neither of these is possible, then you can simply purchase a standalone hired and nonowned auto policy, usually for under $250 per year.

There is also a second problem that occurs very often with restaurant owners.  Often I see that the restaurant owner chooses to re-title all of the family cars in the name of the restaurant.  While this is often a good tax strategy, it leaves the restaurant owner vulnerable to a coverage gap that I call the DOC trap.  Basically this is a situation where all of the insurance protection is written in the name of the corporation or LLC and the individual family members don’t have a personal auto insurance policy with their names listed on the policy as named insureds.  If you find yourself in this situation, and then you have an at fault accident, then the protected entity is the owner of the car, in this case the corporation.  After the insurance company pays the claim on behalf of the corporation, they then own the claim as it were.  This means that the insurance company has the right to subrogate this claim against you, the individual.  With no personal auto policy in your name anywhere, you have nowhere to turn for your protection and now you are forced to pay this clam out of your pocket.  The solution to this problem is to add DOC or (Drives Other Car) coverage to your commercial auto policy in the name of the restaurant.  This endorsement will name each person who needs the coverage extended to them.  The cost generally runs under $200 per person per year but without it you are out there riding without a spare so to speak.   To learn more details about the DOC trap, visit my blog here.

There are so many different things that a restaurant owner has to worry about, just to keep the doors open.  The last thing you need is a policy with holes in it that you only find out about after a loss.  Take the proactive step of finding an agent who specializes in writing NC restaurant insurance.  It’s just not worth the risk to do otherwise.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping restaurants all across North Carolina and South Carolina with their restaurant insurance needs.  We understand your business and we speak your language.  That’s because I have owned 4 different restaurants myself in the past.  We understand that not all restaurants are the same on they don’t all need the same coverages.  To help prevent you from buying a package of coverages that includes things you don’t need, or one that leaves out important coverages you do need, we have developed 5 different restaurant insurance programs.  We have a fine dining insurance program, a special insurance program for casual dining restaurants, one for fast food restaurants, a unique bar and grill and tavern insurance program and a caterers insurance program.  If we can help you with your restaurant questions, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at


Restaurant Insurance – Part 5 Mechanical Breakdown

This is the fifth part in our 10 part series on North Carolina restaurant insurance.  This section will deal with mechanical breakdown, what this means for you the restaurant owner and how and why you should consider this protection form when setting up your NC restaurant insurance program.

First of all, an explanation.  What is mechanical breakdown coverage and when would you need it.  Let’s use an example.  Assume it’s the middle of July and temperatures have been hovering in the mid 90’s for weeks.  One morning you come in to your restaurant and find it is 85 degrees inside.  You call your landlord and he calls a technician to look at the air conditioning systems located on the roof of your restaurant.  As it turns out, both units have failed and it will be a week before parts can be found and the units replaced.  And yeah, no one is going to eat at your establishment until this problem is solved. Who can eat in 85 degree heat?  What you have here is a classic case of a mechanical breakdown that is going to cost you money in terms of cash flow, lost sales, and possibly spoiled supplies.

Your standard restaurant insurance policy is not going to cover these losses.   The only way to get this type of loss covered is to purchase mechanical breakdown coverage.  This is added as an endorsement to your standard restaurant package or restaurant businessowners insurance policy.  This is the kind of extra coverage that is often overlooked by agents who don’t specialize in insuring restaurants.  If you are buying your insurance from an agent who isn’t a specialist in restaurants, then you might be taking risks you don’t even know about.

Now it is important to understand that in our example, the repair costs to the air conditioner will not be covered under the mechanical breakdown protection. (for a discussion on how you might get burned for the costs of maintaining your landlord’s air conditioners on the roof, please click here.) This endorsement is for the consequential losses that are caused by the failure of a piece of equipment.  Also, don’t restrict your thinking just to air conditioners.  This can also apply to coolers, freezers and other types of equipment, the loss of which would take your business down completely or partially for some time frame. 

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping restaurants all across North Carolina and South Carolina with their restaurant insurance needs.  We understand that your business is unique and your insurance needs are complex and varied and for that you need a restaurant insurance specialist like us.  We also know that not all restaurants are created equally and that they have different needs.  That is why we have developed 5 uniquely different restaurant insurance programs to help you get just what you need and not have to buy coverages that don’t apply to your situation.  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 special insurance program for caterers.  If you would like help with your restaurant insurance, please call us, toll free at 877-687-7557 or visit us on the web at


Restaurant Insurance Part 4 of 10 – Spoilage Coverage

This 4th part in a 10 part series deals with spoilage coverage and what you need to know when purchasing it.  As you will see, there are a couple pitfalls here that you will want to avoid.

Spoilage protection is coverage that almost every restaurant owner should consider purchasing.  Of course, like all insurance coverages, you should consider the need and weigh that against the costs, but in most cases spoilage protection is fairly inexpensive and could be a real help if you lose your cooler, especially if it goes out at a time when it is full of prepped work for a large function.  But as I mentioned, there are a few pitfalls to avoid when purchasing this coverage.

Spoilage protection is coverage that is typically added to your businessowners policy.  And while that is a great convenience, it leads to our first pitfall – coverage limits.  Take a few minutes to calculate your worst case scenario with a loss of the use of your cooler and make sure you know how much money you stand to lose if this happens at the absolute worst time.  Now, make sure that you have at least that much spoilage coverage on your policy.  You see, with add on coverages like this, often times the insurance company that designed the program simply has a flat amount of protection, say $5000 or $10,000 worth that comes with the spoilage coverage.  But it is very important that you take the time to evaluate what you need here and then make sure that you can add that amount of spoilage coverage to your policy.

So what is the other pitfall?  Well, this one is a bit more insidious and will take more research on your part.  You should take a moment to read over the policy wording on your spoilage coverage to understand what requirements are being put on you in order for the protection to trigger in the event of a claim.  Many of these spoilage endorsement forms require that you have a refrigeration maintenance agreement in place and that your refrigeration units are inspected at defined regular intervals.  Failure to do so could make this coverage void so you see how important it is to know what you are dealing with in this area.

All of this points out just how important it is for you, as a restaurant owner, to purchase your insurance from an agent that specializes in restaurant insurance.  There are just too many small print items that can come back to bite you.

At Clinard Insurance Group, in Winston Salem, NC, restaurants are our specialty.   We insure many different types of restaurants all across North Carolina and South Carolina.  We know that there are many different kinds of restaurants, each very different from the other and each with widely different needs in terms of risk management, marketing and protection.  This is why we have created 5 uniquely different restaurant insurance programs.  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 programand a special insurance program for caterers.  If we can help you with your insurance needs or simply answer a question for you, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at


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   Don’t trust your livelihood to an agent that doesn’t specialize in restaurants.  There is just no need to take that risk.