This week I want to discuss 5 common mistakes that restaurant owners slip up on when dealing with their restaurant insurance program. I hope you haven’t fallen prey to all of them but do take a minute and think about your own approach handling your restaurant insurance and which of these mistakes you may have made. It will be too late to fix your mistakes after you have a loss, so I would advise that today be the day that you read this blog and take immediate action.
Mistake #1 – The Price Only Mindset. This is the most common mistake that a restaurant owner will make. And it can be a real trap. Restaurant owners are busy and running their business day to day can be a series of stomping out small fires from personnel to supply chain to equipment issues. Finding time to evaluate and understand the intricacies of your insurance contract just gets put by the wayside. This can lead to the restaurant owner becoming blind to all of the moving parts and pieces in the policy rating process and just focusing on the easiest lowest common denominator: the bottom line price of the policy. But this strategy ignores so many important variables. There can be huge coverage and protection differences from one policy to the next. There can also be great differences between one agent and the next in terms of how well you will be protected (and incidentally how much you pay). Also, consider the differences from one insurance company to the next, and last of all, remember that the insurance policy rating process has many step by step calculations that might actually cause you to pay a higher rate but have a policy that makes it appear that you are paying a lower final premium. Often this particular problem only shows up a year later at audit, but by then it is too late, you are now going to have to pay the higher amount for your policy. To avoid this mistake, just remember that the cost of your insurance program is the total of three things. The premiums you pay for the policy itself, plus the premiums you will pay at policy audit, plus the uncovered losses that you have to pay during the life of the policy.
Mistake #2 – Using The Wrong Agent. This mistake is a biggie and could even cost you your business if it results in a large enough, uncovered loss. Insurance is an unusual business in that unlike most professional services, hiring a specialist to help you with your insurance will most often cost you less money than using a non-specialist. If you dig a little deeper, the real truth is even scarier. Unlike your family physician, who would never operate on a brain tumor, an insurance agent can take a stab at insuring just about anything that walks in the door. And many will. If you bought your restaurant insurance from a friend, or your brother in law, or the agent that just happens to insure your house or your cars, you may be walking into the trap of inexperience and not even know it. And few insurance agents will tell you that they don’t really understand how to properly insure your restaurant. Most will just muddle through and try to learn on your nickel. This puts you at risk for a huge, uncovered loss. Also, insurance agents with niche specialties in restaurant insurance, not only better understand the coverage ins and outs, but they also are more likely to have access to better priced restaurant insurance programs simply because they have a high volume of restaurant business and they are more trusted by their underwriters. This is one of the strange truths of insurance; in most cases using a more highly experienced professional will actually cost you less money. It’s a win win for you.
Mistake #3 Skipping Insurance Reviews. Insurance should never be a set it and leave it kind of approach to risk management for your business. Most restaurants are constantly changing and so is the world around them. Take the time, at least every couple of years if not every year, to review your policies in depth with your agent. Consider how your restaurant has changed since your last review. Did you buy new equipment, change your hours of operation, or perhaps you began offering new services or products like home delivery? Even the smallest change in your business, could have a big impact on your insurance protection.
Mistake #4 Cost Cutting. The recession that we’ve been fighting through since 2008 has left many restaurant owners looking for ways to cut costs. Be careful when you choose your insurance policy as a place to cut. Some cuts may be justified and make sense, but don’t delete coverage if you can’t afford to actually pay for the uninsured losses that you might be creating. There is a huge difference between self insuring and being uninsured.
Mistake #5 Square Hole, Meet Round Peg. All restaurants are not the same and so you probably don’t want a restaurant insurance program that is designed as a one size fits all program. This mistake is most likely to happen when you don’t use an agent who insures many other restaurants as mentioned in mistake #2. If you are a high end, fine dining restaurant, then your insurance needs will be quite different from a lunch and breakfast grill. You can read more about this particular mistake by reading my blog on one size fits all restaurant insurance programs.
At Clinard Insurance Group , in Winston Salem NC, we are a full service, independent insurance agency. Restaurants are one of our niche groups and we insure over 100 restaurants all across North Carolina and South Carolina. If you own a restaurant or catering company located in NC or SC, please feel free to contact us to discuss your restaurant insurance needs. You can reach us by phone, toll free, at 877-687-7557 or you can visit us on the web at www.TheRestaurantInsuranceStore.com.
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