Liquor Liability Insurance: Costs & Coverage
Nathan Weller is an Insurance Expert focusing on insurance for small business. He has 15 years experience in insurance operations, FNOL, and claims handling.
Liquor liability insurance provides liability protection for businesses that sell and serve alcohol and handles claims arising out of the actions of an intoxicated patron. Whether the claim is for damage or injury, the business can be legally liable for providing alcohol to the intoxicated customer. The cost of liquor liability can range from $200 to $2,250 annually for a small bar.
The Hartford is a small businesses insurer with more than 1 million small businesses insured—and it’s our top recommendation in our guide to the best liquor liability insurance companies. It offers an intuitive online quoting system, a 24/7 claims service, and the ability to manage your account online or speak with a representative. In 10 minutes or less, it can generate a quote.
Who Needs Liquor Liability Insurance
Any business that serves or sells alcohol should consider liquor liability insurance.
- Bars
- Restaurants
- Caterers
- Food trucks
- Breweries, wineries and distilleries
- Delis
- Cafes
- Liquor stores
- Grocery stores selling beer, wine, or liquor
- Certain event and performance spaces
- Landlords with tenants engaged in the above activities
If your business doesn’t manufacture or sell liquor but allows it to be consumed on your premises, then ensure you have host liquor liability coverage. 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.
Host liquor liability doesn’t protect 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.
Liquor Liability Insurance Costs by Business Type
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 pricing this type of policy, an insurance company will consider many factors. These include the size of your business, the policy limit, and the legal requirements of your state. Five important factors are:
- Total alcohol sales: When calculating your premium, insurers may factor in the total percentage of alcohol sales at your business.
- Bundled policies: Buying liquor liability insurance as a standalone policy generally is more expensive than packaging it with other insurance policies.
- Claims history: The insurer will want to know the last three to five years of your claims history and will consider any claims filed.
- 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: Because dram shop laws can vary from state to state, the risk factor for the insurance company may be higher depending on the venue.
Dram shop laws are regulations created by state governments to set liability for businesses selling alcohol. These determine the scope of who’s 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. For example, a victim of a DUI in the state of Utah can seek compensation from every involved party, including the business that served the driver. You’ll want to check your state to see if it has a law—and, if so, what the specific details are.
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 Does Liquor Liability Insurance Coverage Work
Liquor liability is a third-party coverage designed to protect your business from claims that your negligence caused an 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 doesn’t like 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 another 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.
- Business owners policy (BOP): A BOP is a combination of general liability and first-party property for the actual business (property and operations). Often, it’s more cost-effective to bundle these coverages into the BOP than to buy them separately.
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, whereas for a small restaurant, it can run from $200 to $590 annually. Factors, such as the percent 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’s targeted toward events held by businesses that don’t 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’s help available. Whether you’re serving liquor at a one-time event as a nonprofit organization or are in the business of selling and serving alcohol, you’ll want to consider purchasing a liquor liability insurance policy.
