Coverage Limits
Coverage Limits are the maximum amount your insurance company will pay for a covered loss or claim. Liability policies typically have two limits: a per-occurrence limit (the maximum for any single claim) and an aggregate limit (the maximum for all claims during the policy period). Once you reach your limit, you are personally responsible for any additional costs.
What You Need to Know
Coverage limits represent the boundary between insurance protection and personal financial exposure. Different coverage types carry different standard limits.
Common coverage limit structures:
- General liability — $1M/$2M most common, $2M/$4M for higher-risk operations
- Liquor liability — $1M/$2M minimum, higher recommended for bars and high-volume alcohol service
- Property coverage — based on building and contents replacement cost
- Commercial umbrella — $1M-$5M additional coverage above primary policies
The aggregate limit trap: the aggregate applies to all claims during the policy period, not per claim. Multiple moderate claims in one year can exhaust the aggregate just as easily as a single catastrophic claim — and you can't increase your limit mid-policy after claims start eating into it.
Why It Matters for Restaurant Owners
Choosing the right limits is one of the most important insurance decisions you'll make. Limits that are too low leave you financially exposed; limits that are too high waste premium dollars on coverage you don't need.
Factors that should drive your limit selection:
- Restaurant size, revenue, and alcohol sales volume
- Location and clientele — urban, tourist, and upscale locations face higher claim severity
- Landlord and contract requirements, which often mandate a minimum $2M aggregate
- Personal asset protection for your home, savings, and retirement accounts
Commercial umbrella coverage sits above your primary policies and is relatively inexpensive for the additional protection it provides against a single catastrophic claim.
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