What New Bar Owners Need to Know About Insurance
Opening a new bar is an exciting venture, but it also comes with its own set of challenges. One of the most critical aspects that new bar owners often overlook is insurance. In this post, we’ll discuss some of the key things you need to know about insurance when opening a new bar.
The Importance of Relevant Experience
In today’s market, getting approved for insurance has become increasingly difficult. Relevant experience in the industry plays a significant role in this process. Insurance companies are more likely to provide coverage to those who have a proven track record in owning or managing bars or similar establishments. This experience shows insurers that you understand the risks involved and are prepared to mitigate them.
Unfortunately, many new bar owners are getting declined. It’s easy to know yourself and think that you are qualified for the job, but insurance carriers want to see specifically 3 or more years of experience either owning or managing a nightclub or bar. This is a high turnover industry so they look at this from a risk perspective and are quicker to decline coverage than accept. They do not care if you are a Wharton financial businessperson, they care that you have done the specific job before. If you have not, it is advised hiring a general manager that has. This will greatly increase your chances of qualifying.
Budgeting for Insurance
Many new bar owners budget for insurance, but it often ends up being higher than they expect. It’s important to understand that down-payments will need to be made at 25-30% down of the premium cost. This can be a significant amount, so it’s crucial to factor this into your initial budget.
Insurance is a significant part of your operating costs, and it’s not an area where you can afford to cut corners. It’s essential to understand the full scope of what your insurance will cover and what it won’t. This understanding will help you avoid any unpleasant surprises down the line.
Anticipated Gross Annual Revenue
When applying for insurance, it’s really important to have the most accurate numbers possible for your anticipated gross annual revenue. If the estimate is too low, carriers may not want to entertain it, but if it’s too high, then you might end up overpaying. Many carriers audit too, so if you tell your agent a low number and you double it, you can expect to get hit hard on an audit on policy expiration because nightlife policies are rated on revenue. It is best to be as accurate as possible.
Remember, honesty is the best policy when it comes to insurance. Providing accurate information will not only help you get the right coverage but also build a good relationship with your insurance provider.
Business Classifications and Premiums
Different classifications of business can significantly impact your insurance premiums. Adding entertainment, having security, and allowing under 21+ patrons can make premiums go way up and the access to the market even slimmer. It’s essential to consider these factors when planning your bar’s operations.
It’s also worth noting that each insurance company may classify businesses differently. Therefore, it’s crucial to work with an insurance agent who understands the nightlife industry and can help you navigate these classifications.
Reviewing Lease Agreements
Before signing any lease agreement, it’s advisable to review it with a specialized agent. Often, landlords ask for unnecessary coverages and excess limits, which can burden bar owners. An agent can help you understand these requirements and negotiate better terms if needed.
Lease agreements can be complex and full of legal jargon. Having a professional review the agreement can save you from agreeing to terms that could potentially harm your business in the long run.
Social Media Clean-Up
Lastly, it’s important to maintain a clean online presence. Insurance carriers often monitor social media and look for any reason to cancel a policy. Regularly reviewing and updating your social media platforms can help prevent any potential issues.
In today’s digital age, your online presence can say a lot about your business. It’s important to ensure that your social media profiles reflect the values and professionalism of your bar.
Remember, opening a new bar is a significant investment, and protecting that investment with the right insurance coverage is crucial. By understanding these key points, you’ll be better prepared to navigate the insurance landscape and set your bar up for success. Good luck!