Disaster insurance for bars and nightclubs may just seem like an unnecessary frill and indeed, for many bar and nightclub owners it is simply too expense. There is also a great deal of confusion between what is covered by disaster insurance for bars and nightclubs versus what the Commercial Insurance for a Bar or Nightclub or nightclub already carries.
So in this article I will explain what disaster insurance is and what it protects you against and help you get some clarity as to whether and in what quantity you might want to carry disaster insurance (such as hurricane insurance and flood insurance).
Property Insurance versus Disaster Insurance for Bars
So to begin, let us investigate what disaster insurance is and how it is different from your regular bar or nightclub insurance. Disaster insurance basically covers the kinds of property damage that your regular insurance does not cover. For example, your regular commercial insurance for bars and nightclubs will cover damage due to a fire that starts because of undetected electrical problems or damage due to say an automobile crashing through your front window.
It will not, however, usually cover a fire caused by an earthquake or damage from a tornado throwing a car through your front window pane. This is partly what earthquake insurance, hurricane insurance and flood insurance are designed to cover.
Generally, disaster insurance is bought as an add-on to your commercial nightclub insurance.
Business Interruption Insurance
Disaster insurance for bars and nightclubs is not just about restoring property, however. The cost of recovering after a disaster like a flood or earthquake goes beyond just rebuilding and buying equipment. Costs also arise from the interruption to your bar or nightclub. Insurance policies will not generally cover the expenses involved in getting back into business.
For example, if you are out of business for five months while your building is renovated after a flood, how will you retain your key bartender or chef? How do they pay the rent while waiting? And what if you are trying to get your bar or nightclub back up and running more quickly, say in time to take advantage of St. Patrick’s day. Will your insurance cover the expense of getting equipment and installing it in a rush?
Business interruption insurance for bars is the kind of insurance that helps you get back up and running and covers your expenses during the time that you are down. Generally speaking, however, being 100% covered will simply be too costly for most bars and nightclubs. That is why most bar and nightclub insurance has to make a determination as to the cost versus benefit of taking on this kind of policy.
Determining Whether Disaster Insurance is for your Bar
Determining whether to include disaster insurance as part of your bar or nightclub insurance will require quite a bit of critical thought. Many factors will play into this including the cost of carrying such insurance. For example, in many coastal areas insurance companies have simply stopped offering disaster insurance because their actuarial analysis has determined it is simply too risky. If you live in a coastal area, you may find that you need to get governmental flood insurance for your bar. Your nightclub insurance policy however, may still be too costly if you live in a high risk area like this.
The additional factor that you will have to determine is the amount of insurance that you need. You may simply conclude that if a disaster occurs you would be willing to simply cash out and start anew somewhere else, in which case you would not need business interruption insurance. However, if you have set down roots in a place and are determined to stay come hell or high water as the apt saying goes, then you will want to consider the cost of business interruption insurance. Generally speaking this kind of disaster insurance costs you about 1/50 of the amount of benefit you would receive. So if you are covered for $50,000/month, it would run you $1000/month to carry it.
There are two types of disaster insurance for bars or nightclubs. One kind of disaster insurance covers specific kinds of events. So, for example, hurricane insurance would cover damage from hurricanes but not from say floods. Flood insurance would cover damage from floods but not earthquakes. (Many of these kinds of insurance will also delimit the kind of event as well. For example, your flood insurance may not cover floods caused by hurricane events since that would be covered by hurricane insurance.)
Other kinds of insurance cover all events except those specified in the plan. These kinds of insurance is generally more reliable, though more expensive.
Of course, before you decide on the amount of insurance and the kind that you will carry, you should be sure to sit down with an insurance broker and with your smartest financial advisor and get clear about exactly what is covered and what is not and determine whether the plan is worth it for your business. If you have a lawyer or financial planner as a consultant to your bar be sure to have them give the policy a thorough read through and if you can bear it, try to do the same yourself.
It is always best to know than not to know when it comes to financial matters. (For more on the kinds of insurance you will need, be sure to check out or overview article: Types of Insurance for Bars and Nightclubs.)
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