Liquor Liability Insurance Cost

Written by: Staff

A liquor liability insurance policy, sometimes referred to as a dram shop insurance policy, will offer financial protection in the case the restaurant is found at fault for any alcohol-related incidents.  A good insurance policy will cover you in the event of an altercation, injury or and/or any other event involving someone who consumed alcohol at your establishment.

If you sell liquor and/or alcohol on site, then, in some cases, you could be held responsible for your patron’s actions or wrongdoings, even when they leave your grounds.  And even if you have a liquor liability insurance policy, it still will not prevent an individual from suing you; it’s designed to protect your assets as one lawsuit could put you out of business.

As alcohol-related incidents are often excluded from a general liability policy, restaurant owners have no choice but to purchase this type of policy.

Liquor Liability Insurance Cost
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How much does liquor liability insurance cost?

The average cost of liquor liability insurance, as with any insurance policy, will depend on the insurance company you choose, your geographical location, the limits, the kinds of coverage you want, the type of alcohol you’re selling, your business space and your deductible.  Other factors can affect the price as well, which will get into below, but for the most part, be prepared to spend anywhere from $800 to $2,500+ per year. states the median monthly costs for an average sized business is about $107, but a low-cost policy could be as little as $16 per month.

Additional cost factors to consider

The volume of beverages sold:  Like a car insurance policy, if you have no claims in the past and the liquor sales are less than 25 percent of the revenue, then these applicants tend to pay less than someone who had claims in the past.

Annual revenue:  With most of the insurance companies on the market, from what we researched, would closely look at the annual revenue, especially from alcoholic sals.  If the volume exceeds the food sales, then the premium will often cost about 20 to 30 percent more.

Hours:  A restaurant/bar that stays open much later than the average restaurant/bar will be considered a higher risk and, therefore, can pay a higher premium because of it.

Establishment:  All establishments are not created equally as a bar will be much different than a family diner.  Considering all of the factors in this list, a higher end restaurant with a limited alcohol menu may pay a lower premium than a bar that is open until 2 in the morning.

Entertainment:  It has been noted that an establishment with entertainment, such as a billiards table, for example, can be considered a greater risk due to the assault and battery incidents that can happen.

Training:  A restaurant owner who invests in staff training can often see a discount on their policy.

Claims history:  As with any insurance policy, the cleaner your record is, the cheaper your policy can be.

State laws:  All state laws will vary, with some state insurance companies requiring higher minimums than another.  Based on these minimums, this could affect your total premium in most cases.

Do I need a liquor liability policy?

The answer depends as it is based on your local state laws as to where the business is located.  In some cases, your state will not issue a liquor license unless your establishment is provided to the licensing board.  However, in some states, such as Texas and Louisiana, there are “softer” rules, meaning an establishment may not require it.

Aside from the licensing board, many lenders will require you have a liquor liability policy before a loan is approved, just like a mortgage requires homeowners insurance.

What is not covered?

As we touched upon above, a liquor liability policy will be separate from a general liability policy, and depending on the insurer you choose, many policies will not cover the following:

Any bodily injury or property damage not affiliated with alcohol

Assualt and/or battery due to the result of a sale, servicing and/or furnishing of an alcoholic beverage

Injury due to serving an underage minor

A lot of policies will not cover volunteers who work with your establishment

May act as a second layer of coverage, meaning you may have to resort to other policies before this insurer pays

Any other offense that may be considered a bodily injury or property damage

Damages not associated with alcohol to personal property

NOTE:  Again, as all insurers will vary, it is best to talk with your insurance company to know, for certain, what will not be covered in your policy.  In some cases, the scenarios listed above may be covered if you were to buy an endorsement, for example.

Dram Shop laws

In 43 states, something known as the “Dram Shop” law makes it easier for a business to be sued after a patron has caused harm to someone else due to an accident due to alcohol consumption.  Even when the patron leaves your bar and causes an accident, you can still be held liable and even sued for the damages, even though you had nothing to do with the accident.  Aside from road accidents, you could also get into trouble if a patron were to cause harm, injury and/or get into an altercation on your property while drinking.

Tips to know

A good policy will cover assault and battery, property damage and personal injury caused by a drunk individual, your employees if they happened to drink on the job and any litigation or court fees related to defending your policy.

As noted, most general liability policies will exclude liquor liability coverage for businesses that generate a profit from alcohol sales.  This type of policy is designed to fill in the gap for coverage.

If you’re not in the business of selling alcohol, then you may not need this type of insurance policy; instead, you may want to consider either a specialized one-time liquor liability policy, refer to your general liability policy or consider an event insurance policy, all depending on your circumstances.

The median policy limit in most states is $1 million, but the deductible will vary.

How to save on liquor liability insurance

Hire the right people:  When selling alcohol to the public, it’s always best to hire the professionals who have been in the business for a while, whether it’s a bartender or waiter/waitress.  Properly trained staff can spot early signs of intoxication and know when to cut someone off.

Minors:  It sounds silly, but you want to avoid serving minors, even if it means carding everyone who wants a drink.  The safer you are with I.D. checks, the safer your establishment can be — no exceptions.

Go off-site:  In the case of a work party, for instance, it’s best to have the party elsewhere, such as a restaurant, instead of the actual building in case of an accident.

Train your employees:  As mentioned above, properly trained employees, often offered by the insurance company, can reduce your overall costs; plus, it can create a safer enviornment.

Vouchers:  If you’re afraid of overconsumption, vouchers can often prevent this from happening by limiting customer’s intake throughout the day.

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