Budgeting Insurance Costs for your new Nightclub or Bar

Congratulations on your new and exciting venture on opening a Nightclub or Bar. It is an opportunity many dream about, but very few accomplish in their lifetime. Like opening any new business, there is typically a budget involved and let’s be real, it almost always ends up being more than we originally planned for.

Now as exciting as it is to start budgeting the design from the wall colors to the bar stools it is important to not forget a large part of your annual budget, Insurance! I am here to explain all the considerations that go into insuring a Nightclub and/or Bar.

Now to its core Insurance is based on risk. Your nightclub and/or Bar is considered a risk. And typically, higher risks directly correlate to higher premiums. What does that mean? Well, if you are a pure family restaurant serving no alcohol, you are probably presenting less of a risk than a large nightclub with a 20x20 dance floor. Another risk factor that many Insurance carriers consider is your ratio for Food to Liquor sales. Higher alcohol consumption creates a riskier environment.

Square footage is also heavily considered. A larger capacity allows more patrons in one designated area which increases the risk.

So, when you are budgeting for insurance it important to define the type of concept your venue is going to be and be honest with yourself about the type of risk it presents.

Now these are large factors to consider and here are a few more that can impact how your venue is rated. Is there a dance floor, is there bottle service, are there elevated surfaces, are people under age 18 allowed in at certain times, is there security, are your bartenders trained and certified through a responsible vendor program such as TIPS, is your venue sprinklered, do you have a central fire alarm, do you have a central burglar alarm system, so you have surveillance cameras, how late does your venue stay open until?

Now the rating of your risk comes down to several factors and there is never a venue that is always the same. It is to the underwriter’s discretion to rate this risk the way they see fit for the venue. Among these factors, premiums will also be rated along with Annual Gross Revenue. The pricing of premiums fluctuates greatly from venue to venue, so you should be prepared to pay as little as 1% up to 5% of your Annual Gross Revenue. This is a general range, but it can be more or less.  

Recently, we have seen a large increase in premium rates post-covid. Venues with large claims are now seeing quotes come through the door upward of 8% of Gross Annual Revenue.

Insurance premiums will continue to be a thorn in your side as a Nightclub or Bar owner, however, it is worth the purchase because losing your business will feel like a dagger to the heart.

Congratulations on your new venture and feel free to reach out to our team at KEL Insurance to discuss finding an adequate insurance policy that fits your venue.