Planning for insurance costs


How much insurance is needed for a small coffee shop? There will be some baked goods. How much personal liability is needed?

– Coffee Shop Owner, Scranton, PA


We really need to break down personal liability versus business liability in this case. First, you should meet with an attorney who can form a business such as an LLP or S Corporation to insulate your personal assets. In that way, you shouldn’t need any additional personal liability beyond an existing umbrella and what’s included in your insurance package. I would strongly advise against operating even the smallest coffee shop as a sole proprietorship or partnership that would put your personal assets at risk. One guest choking on your muffin or spilling hot coffee on himself could be enough to ruin you.

Once you have your business formed, the next challenge is to find an insurance agent you trust, who can give you a fair suggestion of reasonable coverage for your operation. Insurance companies, like restaurants, often introduce new products—advertising liability to protect you from competitors’ suits, separate valet insurance, spoilage insurance in the event of a power outage, loss of business insurance, and so on. But it can be simpler. Nick Kiliaris with DurAmerica Brokerage in Astoria, NY says, “We have a client, a small cafe in Astoria that sells no liquor, only coffee and baked goods, and they see insurance costs in the two to three thousand dollar range. Included in that is coverage for liability, building, money and securities. Every company is different with what they offer to a restaurant but typically the package always includes general liability, workers’ comp and disability.”

Of course one establishment as an example is not a firm guide. LuAnne Beginski from Commercial Restaurant Insurance advises, “I would arrange a meeting with a local agent, to sit down and determine a more accurate quote for costs as rates change monthly. Recently rates have increased due to higher reconstruction costs. Prices for insurance for a cafe could be anywhere from $6,000-$10,000. Rates are influenced by: square footage, single versus multi-occupancy (is there residential living above?), the number of stories, building material, and age. Also, look for fire sprinklers or an Ansul Fire System for fire suppression. Having these systems in place will lower your insurance cost.”

Like much of our business, having a handle on these costs in advance is key. For a startup, get as close to a firm quote as you can to include in your planning.