Liquor liability insurance provides liability protection for businesses that sell and serve alcohol and helps with claims that come from intoxication. Whether the claim is for damage or injury, the business can be legally liable for providing alcohol to the intoxicated customer. Liquor liability can be expensive, with the cost potentially ranging from $200 to $2,250 annually for a small bar.
Liquor Liability Insurance Costs
The following estimated prices are averages taken from obtaining multiple quotes online from different providers. Costs can vary depending on the specifics of your business.
Business Type | Coverage | Estimated Annual Premium | Deductible |
|---|---|---|---|
Bar | $2 million limit | $200 to $2,250 | $1,000 |
Restaurant | $1 million | $200 to $590 | $1,000 |
Caterer | $1 million | $150 to $850 | $1,000 |
Coffee Shop/Cafe | $1 million | $100 to $275 | $1,000 |
Nonprofit | $1 million | $75 to $670 | $1,000 |
Private Club | $1 million | $75 to $300 | $1,000 |
When determining the premium, an insurance company will consider many factors. Five important factors are:
- Total alcohol sales: When calculating your premium, insurers may factor in the total percentage of alcohol sales at your business. Businesses that rely on alcohol for the majority of their revenue will probably pay more than one where alcohol sales are only a small part of the business.
- Bundled policies: Buying liquor liability insurance as a standalone policy is generally more expensive than packaging it with other general liability or bundled in a business owner’s policy (BOP).
- Claims history: The insurer will want to know the last three to five years of your claims history and will consider any claims filed. Claims history can be a basis for higher rates or the carrier’s declining coverage.
- Type of establishment: Costs will vary depending on the type and the location of your business. For instance, an off-campus bar will probably see higher premiums than a restaurant.
- State laws: State liquor liability laws, called dram shop laws, can vary from state to state. This means the risk factor for the insurance company may be higher depending on the state.
How To Reduce Your Liquor Liability Insurance Costs
As a business owner, there are proactive steps you can take to help reduce the cost of liquor liability insurance. You should:
- Train your employees: Many training courses are offered for businesses that serve alcohol, such as alcohol awareness training.
- Hire professional bartenders: Most bartenders are trained to detect intoxication signs and prevent overconsumption of alcohol.
- Not serve minors: You can’t be too cautious—your employees should check identification for any patron who looks young.
- Use a voucher system: If your business is hosting a social event with alcohol, consider using a drink voucher to limit the consumption of alcohol.
- Offer nonalcoholic beverages and serve food: By providing food and nonalcoholic beverages, you can help your patrons offset any consumption of alcohol.
How Liquor Liability Insurance Coverage Works
Liquor liability is a third-party coverage designed to protect your business from claims that your negligence caused injury or property damage. The policy provides coverage for your business when someone damages third-party property or becomes injured due to intoxication.
Here are some examples of when liquor liability insurance would come in handy:
- Jessica has had too much to drink at Bob’s Bottom Shelf Bourbon. She leaves the business and dislikes what the parked car on the street is saying to her, so she kicks the passenger door, denting it. The damage to the vehicle is an example of third-party damage, which Bob’s Bottom Shelf Bourbon could be found legally liable for.
- Jack is playing darts at his favorite campus bar, Study Break. Unfortunately, he’s had too much to drink and suddenly sees three dart boards instead of one. Jack takes a guess and mistakenly throws a dart into the shoulder of a customer. This is an example of a bodily injury claim for which Study Break could be legally liable.
Policies That Complement Liquor Liability Insurance
As you can see, liquor liability insurance is often best when paired with other policies your business may need:
- General liability: A commercial general liability insurance policy provides coverage against claims arising out of third-party damage and bodily injury that result from the business’s everyday activities. If your company produces alcohol that makes someone ill, that risk will fall within the completed operations of the general liability policy.
- Workers’ compensation: Restaurant and bar employees face several job-related hazards, such as wet floors, broken glass, intoxicated customers, and a fast-paced environment. Liquor liability insurance seldom covers employee injuries, making workers’ compensation insurance necessary for some businesses.
- BOP: A BOP is a combination of general liability and first-party property for the actual business (property and operations). It is often more cost-effective to bundle these coverages into the BOP than to buy them separately.
- Host liquor liability: This is useful to have if your business does not manufacture or sell liquor but allows it to be consumed on your premises. Standard general liability policies usually include this coverage; however, your limits may be insufficient for a special event, so check your policy and consider increasing your coverage.
- Event insurance: Liquor liability and host liquor liability do not protect the business against all claims. You may still be sued under tort law by a third party if an alcohol-related injury or damage is due to your negligence. For this reason, social hosts may consider buying event insurance.
Who Needs Liquor Liability Insurance?
Any business that serves or sells alcohol should consider liquor liability insurance. That means the coverage is necessary for more than just bars and restaurants:
- Bars
- Restaurants
- Caterers
- Food trucks
- Breweries and wineries
- Delis
- Cafes
- Liquor stores
- Grocery stores selling beer, wine, or liquor
- Certain event and performance spaces
- Landlords with tenants engaged in the above activities
This list is not exhaustive. The key here is to ask yourself: does my business produce, manufacture, distribute, serve, or sell alcohol? If so, then you should consider adding liquor liability to your stable of policies.
Dram Shop Laws by State
Dram shop laws are regulations created by state governments to set liability for businesses selling alcohol. These determine the scope of who is liable for a loss as a result of alcohol consumption. Since dram shop laws aren’t regulated federally, it’s up to each state to decide how liability is determined—and not every state has a law on the books.
Some states require insurance, while others—even if they have a dram shop law in place—do not. This means the law states that your business may be held legally liable, but it is up to you to decide if you want to purchase insurance.
In 2023, a convenience store in South Carolina settled a wrongful death suit for $15 million. The suit stemmed from the sale of alcohol to a minor who later crashed a boat while operating it under the influence, tragically resulting in the death of another party.
We’ve compiled a list of what states currently have dram shop laws. The specifics of each state law are subject to change by the legislature, so we omitted those details and encourage you to be up-to-date on the laws in your state.
Dram Shop Law?
Yes
Is Insurance Required?
Yes, all businesses that sell alcohol must have liquor liability insurance.
The minimum coverage required is $100,000 per occurrence.
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
Yes
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
On-premise licensees are required to carry a minimum bodily injury or death coverage of $50,000 per individual ($100,000 cumulative) and loss of support coverage of at least $25,000 per individual ($50,000 cumulative).
Policies cannot place an aggregate or cap on total settlements for the life of the policy.
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
Yes
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes (Limited)
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
Maintain liquor liability insurance of not less than $300,000; or maintain a bond with a corporate surety authorized to transact business in this state in the amount of not less than $300,000.
Dram Shop Law?
Yes
Is Insurance Required?
No. The code states that alcohol licensees cannot be held liable for third party injuries suffered off-premises and caused by someone who was served at the establishment.
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
Bars are required to carry at least one million dollars worth of liability insurance to pay dram shop claims.
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
No
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
No
Dram Shop Law?
Yes
Is Insurance Required?
Yes
Frequently Asked Questions (FAQs)
Liquor liability insurance is a policy for business owners who serve, sell, or manufacture alcohol. Laws vary from state to state, but if a customer is injured, or causes injury or property damage as a result of their intoxication, the establishment that served them may be held liable.
For a small bar, liquor liability can range from $200 to $2,250 annually while, for a small restaurant, it can run from $200 to $590 annually. Factors, such as the percentage of total revenue from alcohol, location, and type of business all play into the range of potential premiums.
Host liquor liability, usually offered with general liability insurance, offers protection against alcohol-related claims when a business is hosting an event. It differs from liquor liability because it is targeted toward events held by businesses that do not usually serve or manufacture alcohol.
Special event insurance is a liability policy for organizations that host special events, including ones that involve alcohol. The policy often will come with additional layers of protection for things like canceling the event because of weather. When you purchase special event insurance, the policy period is the time period of the event.
Bottom Line
Having a liquor liability insurance policy can provide the peace of mind that comes from knowing that, in the event of an unforeseen circumstance, there is help available. Whether you are serving liquor at a one-time event as a nonprofit organization or are in the business of selling and serving alcohol, you will want to consider purchasing a liquor liability insurance policy.
If you’re in the market, then check out The Hartford, our top recommendation in our guide to the best liquor liability insurance companies. As one of the oldest carriers in America, it has a depth of experience in understanding the risks small business owners face and offers the right level of coverage for your business. You can get a quote online or call and speak with an agent.
