Want to Sell Alcohol? Learn About Liquor Liability Insurance

Why Do You Need Liquor Liability Coverage?

If your business already carries liability coverage for its activities, you may first wonder why you need this additional coverage. The answer is that many general liability commercial policies specifically exclude incidents that happen as a result of selling alcohol as part of your income-producing business. And if your liability policy does cover alcohol-related events, its coverage is likely severely limited. 

In addition, many states (including Illinois) require this coverage as a condition of obtaining liquor licenses or doing business involving alcohol.

What Does Liquor Liability Cover?

What makes liquor liability insurance different from general liability? Because it is geared toward alcohol-related risks, it covers a more tailored range of potential losses. For example, liquor liability protects you from lawsuits related to a customer who consumed alcohol at your establishment and then drove while intoxicated. Not only is the drunk customer a liability, but their passengers and other third parties could also sue the alcohol seller.

Another risk that is somewhat specific to alcohol consumption is physical assault and battery. Property liability insurance often includes provisions to pay for incidents when a person is injured by another person on your property. However, liquor liability covers the increased risk of this happening at higher levels when alcohol is involved as well as responsibility for drunk patrons’ behavior after they leave your property.

What Factors Affect Cost of Liquor Liability?

As with all insurance policies, a variety of factors — both under your control and outside your control — affect how much you pay.

First, you must buy at least the minimum amount of coverage any state laws require. How much this adds to your price tag depends on your state’s rules. In addition, a bar that primarily sells alcoholic beverages will generally need higher limits than a caterer that only needs to include alcohol in a small percentage of its client orders.

Insurance carriers may also consider other factors like your location and even the types of alcohol you plan to sell. The nature of your business will also affect pricing. A liquor store selling closed products to customers who come and go may have lower chances of covered incidents like drunken behavior or fights. However, a bar or restaurant that serves alcohol onsite may see higher chances.

How Can You Reduce Liquor Liability Costs?

While you probably will not base your alcohol sales strategy solely on reducing insurance costs, you can take some measures to keep these under control. Employee training to reduce the potential of covered incidents, for example, prevents the company from having too many claims. And shop for policies with experienced insurance agents to customize your coverage to meet your business needs as specifically as possible.

Where Should You Start?