Businesses that manufacture, sell, or serve alcoholic beverages generally need liquor liability insurance. Liquor liability coverage will protect the businesses against the cost of claims arising from alcohol-related damages or injury. The cost of liquor liability insurance ranges from $15 – $150+ per month, depending upon the types of coverage needed and other factors.
Since liquor-related claims are excluded under standard commercial general liability policies, liquor liability insurance coverage is often purchased as an add-on policy. To get a liquor liability insurance quote for your small business, contact CoverWallet. Their experts will answer any questions you have about coverage, costs, and more.
Who Needs Liquor Liability Insurance
If you’re in the business of manufacturing, selling, or serving alcoholic beverages, you will need liquor liability insurance. That’s because liability arising from the sale or serving of liquor is excluded from the coverage provided by nearly all commercial general liability policies.
With that in mind, the following businesses will want liquor liability insurance:
- Breweries & wineries
- Liquor stores
- Grocery stores that sell beer, wine, and/or liquor
- Certain event & performance spaces
- Landlords who have tenants engaged in the above activities
While liquor liability coverage is recommended for any small business where selling or serving liquor is a part of regular and ordinary business, there are also times where a policy is required. Sometimes it’s required by a landlord as part of a lease or by a trade partner as part of a contract. Sometimes a policy is required by state or local laws, including as a potential requirement for obtaining a liquor license.
When Liquor Liability Insurance is Needed
|If Your Business:||Required or Recommended?|
|Manufactures, sells or serves alcohol||Required|
|Is in a state that mandates coverage||Required|
|Holds fundraisers and special events where alcohol is served||Required|
|Offers catering services that serve alcoholic beverages||Required|
|Serves alcohol at a business-related event or party||Recommended|
|Owns property that can be rented out for parties||Recommended|
|Owns property that is rented to businesses engages in any of the above||Recommended|
Many people incorrectly assume that their commercial general liability policy will protect them from damages arising from liquor-related incidents. But nearly all general liability insurance has a coverage exclusion if the incident involves alcohol, with few exceptions.
One such exception involves host liquor liability, a type of coverage that is typically included in general liability policies. For example, when a business that hosts a party or event where alcohol is served may be considered “social hosts,” and would be covered under Host Liquor Liability. However, as a rule of thumb, if a regular part of your business is the sale or serving of alcohol, your business won’t be considered social hosts.
Liquor Liability Insurance Coverage
Liquor liability insurance can protect against a range of risks for businesses that serve and sell alcohol. While your business may not need every coverage type, you’ll need to know what to look for when shopping for a liquor liability policy that is most appropriate for you.
Examples of Risks & Claims Liquor Liability Can Cover
|Property Damage||Property that is damaged by a drunk individual.|
|Slips, Falls & Injuries||A patron slips and falls because they had too much to drink.|
|Assault & Battery||A patron sues because they were assaulted and injured by another patron that is drunk. Claims can also arise as a result of a patron being escorted off premises.|
|DUI Injury or Death||Injury or death of a third party because of a drunk driver that became intoxicated at your establishment.|
|Sexual Assault & Harassment||A patron is sexually harassed by another patron who had too much alcohol at your place of business.|
|Mental Damages||Witnessing traumatic events can give cause to take action against responsible parties.|
|Off-Premises Incidents||Any potential injuries / damages that arise away from your place of business.|
|Legal Fees||Protection against costs arising from defending a lawsuit brought on by a liquor-related claim.|
|Employees||A good policy will cover employees as patrons, in case an employee is drinking on the job..|
A robust liquor liability policy will protect your small business from the many accidents and incidents that can be linked to the over-consumption of alcohol. Businesses, from startups to well-established enterprises, will rest easier knowing that a single accident will not put them out of the business so long as they’re properly insured. However, liquor liability insurance does not offer limitless protections to policyholders.
What Liquor Liability Does Not Cover
While liquor liability insurance offers relatively comprehensive coverage for protection against alcohol-related injuries and damages, it doesn’t cover everything that could happen at your establishment.
Here are three things that liquor liability does not cover:
- Injury or damages resulting from patrons who are underage and drinking
- Alcohol-related claims other than property damage or bodily injury, such as slander or libel
- Damages to your own property (typically third-party damage is covered)
Since those and other alcohol-related claims can occur in your everyday business, and are not covered by your liquor liability insurance, it’s important to confirm you are covered in these instances with other insurance types. Speaking with experts, like those at CoverWallet, to build a comprehensive policy will ensure you’re fully covered.
Insurance that Compliments Liquor Liability
If you are in the business of manufacturing, selling or serving alcoholic beverages, you will need to buy liquor liability insurance. But there are other types of insurance policies that you may need that provide additional and related protection. Most businesses will also need general liability, and possibly a business owners policy, umbrella insurance, or workers compensation.
- General Liability: Whether you own a bar, a tavern, or a full-service restaurant that serves alcoholic, commercial general liability is needed to cover third party lawsuits arising from everyday business activities, including bodily injury, property damage, and foodborne illness. However, liquor liability is excluded coverage for businesses that manufacture, sell, or serve alcohol.
- Umbrella Insurance: Also known as excess liability coverage, umbrella insurance will provide additional liability coverage above the limits of your other insurance policies. For example, legal fees can be a major expense that exceeds the limits of liquor liability coverage and an umbrella policy can cover the excess liability.
- Workers Compensation: Employees that work behind and around a bar may face several hazards, such as wet floors, glass, intoxicated customers, and a fast-paced environment. Liquor liability insurance does not always cover employees, which makes good workers comp insurance even more necessary for some businesses.
- Business Owners Policy: Some businesses may choose to bundle general liability and property insurance into one BOP for cost efficiency. Since liquor liability coverage is an add-on policy that will add to your monthly expenses, the BOP bundling can help reduce your overall insurance costs.
Cost of Liquor Liability Insurance
Throughout the US, liquor liability insurance costs can range from $966 to $3,360+ per year. The cost will depend upon several factors, including the size of your business, the amount of protection you want, and the state or locality laws or requirements for coverage. For example, cost of liquor liability insurance is much higher for a business in Houston than in Washington, D.C. because of stricter laws in Texas.
Although the cost of liquor liability insurance for your business depends upon several factors, here are some estimated average costs, limits, and deductibles of the types of insurance a small business owner of a bar or tavern will typically need:
Liquor Liability Insurance Cost
Estimates from Insureon
Liquor liability insurance is just one type of coverage that businesses will need if they manufacture, sell or serve alcoholic beverages. For example, every business will have a general liability insurance policy and may also need additional coverages, such as umbrella insurance and workers compensation. They may also bundle coverage together into one business owners policy (BOP).
- General Liability: Premiums range from $1,170 to $3,780 per year and the median policy limit is $2 million.
- Umbrella Insurance: Premiums range from $2,547 to $7,520 per year and the median policy limit is $1 million.
- Workers Compensation: Premiums range from $749 to $5,916 per year and the median policy is $1 million.
- Business Owners Policy: Premiums range from $2,547 to $7,520 per year and the median policy limit is $2 million.
Because liquor liability coverage can vary so widely from business to business, obtaining quotes directly from an insurance company, or getting multiple quotes through an insurance broker, is the best way to estimate your cost. You can begin your search for the best liquor liability coverage for you by speaking with an expert from CoverWallet.
Top 5 Impacts on the Cost of Liquor Liability Insurance
While costs for liquor liability insurance can vary, there are a few main drivers that a business can use to estimate their costs. Some factors, such as state laws, are not within your control but most of the costs are dependent upon factors specific to your business
According to Gregg Petry, an insurance professional with The Robert P. Brady Agency, Inc. in New York:
“In my experience working with restaurants, three of the biggest drivers of cost for liquor liability insurance are sales, packaging, and loss control. For example, higher sales generally translate into higher premiums. Also, businesses will rarely buy a monoline policy for liquor liability; they will bundle policies into one package, which will reduce the total cost of insurance. An example of loss control is to reduce the potential for claims by training the employees through a program like TIPS.”
Here are the top five things that impact the cost of liquor liability insurance:
1. Your Total Alcohol Sales
Insurance companies often determine liquor liability pricing by percentage of your total sales. This provides an indication of how many customers you serve, which contributes to risk factors.
2. Bundled Insurance Policies
Buying liquor liability insurance as a standalone policy is generally more expensive than packaging it in with your other policies. For example, a business owners policy (BOP) can reduce overall costs by combining protection from all major property and liability risks into one package.
3. The Number & Frequency of Claims
More claims on your liquor liability insurance will translate into higher premium costs. Therefore, you’ll want to keep costs low by minimizing claims with smart, proactive, loss control measures, such as training for employees through a program like Training for Intervention Procedures (TIPS).
4. State Laws
Insurance costs will be directly impacted by regulatory law, which is primarily enforced by state insurance departments, as authorized by the each state’s statutory law. Specifically, each state’s dram shop laws will determine liquor liability, which will impact related costs of insurance.
The Insurance Services Office (ISO) has a helpful 1-10 scale on how much liability a business faces based on the state they’re operating in. A zero would indicate a business has very little liability arising from an alcohol-related accident. A 10 would indicate the state laws are quite strict and expose a business to significant liabilities. You can see the ISO state list here.
5. Type of Establishment & Alcohol Served
Coverage and costs will vary by business type and the types of alcohol served. For example, liquor liability insurance for the typical restaurant can be lower than a bar because alcohol is only an incidental consumption item at a restaurant, whereas alcohol consumption is the primary purpose of patronizing a bar or tavern.
With so many factors determining costs of liquor liability insurance, there is a wide range of premiums for various business types and locations. Therefore, once you clearly define aspects of your business that drive cost, you can get a more accurate estimate of coverage amounts and limits with a company like CoverWallet.
How to Reduce Liquor Liability Costs
A big part of keeping liquor liability insurance costs down is by not having any claims. Buying a liquor liability insurance policy doesn’t mean that responsible, cautious behavior is less necessary. In fact, premium reductions may be obtained in exchange for good loss history.
One of the primary ways to keep liquor liability insurance costs down is to train your employees. According to James Henry Dunne, J.D., Professor of Hospitality Management, NYIT School of Management:
“Having your service staff trained and certified in the responsible service of alcohol (TIPS, ServSafe, etc.) is not only helpful to cultivate professionalism amongst your staff, but it also provides a reduction in liability premiums for the business (varies depending on your insurance provider and state where you operate). Many insurance providers require a periodic responsible service certification course for staff just to maintain coverage.”
Here are proactive measures to keep in mind, whether you are a business that sells or serves alcohol or you are a social host:
- Train your employees: Reputable insurers in the bar and restaurant insurance industry offer free training to liquor liability insurance policyholders. This training can result in a premium discount.
- Hire professional bartenders: This best practice applies to businesses that sell and serve alcohol and to businesses not related to alcohol but who are social hosts. Most bartenders are trained to detect signs of intoxication and to prevent overconsumption of alcohol.
- Do not serve minors: You can’t ever be too cautious. Bartenders should check identification for any patron that looks younger than 30 years old. Social hosts should not invite minors to an event where alcoholic beverages are served.
- Host your party at an offsite location: If you are a social host, hold your event at an offsite location. If there is a liquor-related incident, it’s best that they occur away from the business location.
- Do not pay for alcoholic drinks: For prudent social host practices, don’t buy or give away alcohol to your guests. Have them bring their own beverages or provide a drink voucher system that limits the consumption of alcohol.
- Offer non-alcoholic beverages and serve food: It’s proven that food and alternative, non-alcoholic beverages can counter the effects of alcohol.
- BYOB: For social hosts, serve non-alcoholic beverages but ask your guests who want to drink wine, beer or spirits to bring their own beverage.
Tips for Buying Liquor Liability Insurance
Sufficient coverage for liquor liability will vary by the business type. But there are a few primary guidelines that are smart to follow for every business looking to buy liquor liability insurance. The two primary things that every business owner should know before choosing a liquor liability policy is to shop around for the best value and to start the search early, especially for startups.
Shop Around for the Best Value
Although you may be armed with all the information you need to make a smart choice for your liquor liability policy, you’ll need to get quotes from at least three different providers before making your decision. A good insurance broker can do this research for you and review the policy choices before helping you make your final choice.
Startups Should Do Their Shopping Early
In addition to the time needed to shop for the best liquor liability insurance coverage, you may be faced with potentially disastrous delays from related and unforeseen issues, especially in the startup phase of business. During the startup phase, apply for the liquor license as soon as possible. This may prevent unwanted delays.
Also, the liquor license may require certain types of insurance, including the liquor liability coverage, and it may define specific minimum coverage amounts and liability limits for each coverage type. In summary, do your shopping early for insurance and keep in mind that it may take two to three months for the liquor license to be approved.
One place to go to answer you liquor liability insurance questions is CoverWallet. After describing your business and its needs to one of their insurance experts, they’ll be able to help you find a great policy. The consultation is free and there’s no obligation.
Host Liquor Liability
If you are not in the business of manufacturing, selling, or serving alcoholic beverages, you may not need liquor liability insurance because you may be covered under your general liability policy. For example, if your company hosts an event where alcohol is served and an employee or third party is injured because of intoxication related to your event, Bodily Injury and Property Damage in your general liability policy should cover this injury.
This coverage is called host liquor liability coverage. For example, if your business hosts an office party and a guest has too much to drink; they subsequently drive home and injure a third party; the third party then sues you for damages. Since you are not in the business of making, selling or serving alcohol, your general liability policy will cover you as a social host.
However, host liquor liability does not protect against all claims. Even if you are not in the business of making, selling and serving alcohol, and you are covered under a general liability policy, you may still be sued under tort law by a third party if an alcohol-related injury or damage is due to your negligence. Social hosts may consider buying event insurance.
Host Liquor Liability Exceptions
Host liquor liability coverage under your general liability policy may not cover you if you are negligent. Here are some host liquor liability exceptions:
- You provided the alcohol that caused or contributed to a guest’s intoxication.
- You served or made alcohol available to a minor.
- You violate a statute, ordinance, or regulation related to the selling, distribution or use of alcoholic beverages.
- A claim is made for something other than bodily injury or property damage (i.e. an intoxicated person makes slanderous remarks about a third party that sues you).
Businesses that are not primarily alcohol-related but do host occasional events where alcoholic beverages are served can prevent claims by practicing responsible behaviors.
Dram Shop Laws
Dram shop laws make businesses liable for injury, damages or death resulting from serving an obviously intoxicated individual. For example, dram shop laws enable victims of accidents caused by a drunk driver to sue the establishment that served the alcohol to the driver. These laws may also specify policy limitations for total coverage and per occurrence.
Each state that has adopted dram shop laws have this primary framework but can have differing interpretations, penalties, and requirements of businesses. See our map below for dram shop laws in each state:
One reason the cost of liquor liability insurance varies widely by state is because of dram shop laws, which have been adopted in most states but aren’t uniform. Some states do not specify dram shop laws in their statutes but still create similar liabilities, where businesses can be held liable for selling alcohol to an obviously intoxicated person or to a minor.
Ultimately, small businesses should be doing everything they can to promote the safe consumption of alcohol at their establishment while still meeting their bottom line. The CDC estimates that the overconsumption of alcohol leads to over $250 Billion in losses to US economy annually. Those losses help explain why state and local governments are creating and enforcing such strict liquor liability laws.
This variance from state to state means business owners should review their state’s dram shop law and other related laws before deciding how much liquor liability coverage they need. With something this important, it’s best to rely on the advice of an expert. Speaking with a professional at CoverWallet will ensure you know you’ve got the right coverage for your state’s laws.
As with all small business insurance, getting the right liquor liability insurance policy is integral to the startup, growth and ongoing success of your business. Whether you are serving liquor at a one-time event at an offsite location, or you are in the business of selling and serving alcohol, you will need a liquor license and will thus be required to have liquor liability insurance.
For more guidance in finding the right liquor liability insurance for your business, a good place to get started is CoverWallet. Their experts will be able to discuss your state and local laws and how they impact the coverage you’ll need. Getting a quote is free and there’s no obligation.