If your small business sells, serves or distributes alcohol, you may need liquor liability insurance. A liquor liability insurance policy covers property damage or bodily injury that a drunk person causes after being served alcohol by a business.
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What Is Liquor Liability Insurance?
Liquor liability insurance protects businesses that sell or serve alcohol. A policy covers property damage and bodily injuries caused by an intoxicated person after you serve them or sell them liquor.
This type of business insurance, which is required in most states, covers legal costs, medical bills, repair bills, settlements and judgments if your business is liable for a liquor-related problem.
Liquor liability insurance is also called dram shop insurance.
What Does Liquor Liability Insurance Cover?
Liquor liability insurance covers claims pertaining to drunk driving, assaults and property damage.
Here are a few examples of when liquor liability insurance can help you:
- A person gets into an accident causing injuries after your restaurant overserved them.
- A minor buys alcohol at your store, gets drunk and crashes a vehicle through a storefront.
- An overserved patron assaults someone outside your bar.
- An employee drinks on the job and causes injury or property damage to someone else.
If your small business get sued, a liquor liability insurance policy can help by covering:
- Legal costs, settlements and judgments
- Medical bills
- Repair costs to fix damaged property
What Does Liquor Liability Insurance Not Cover?
Liquor liability insurance won’t cover damage to your business property, even if it’s caused by an intoxicated patron. If you want coverage for your own business property, such as your building, inventory and equipment, you need commercial property insurance.
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Who Needs Liquor Liability Insurance?
In most states, liquor liability insurance coverage is required for businesses that sell or serve alcoholic beverages. And depending on your state, you may need a liquor liability policy to obtain a liquor license for your business.
Examples of businesses that may need coverage for liquor liability include:
- Bars and taverns
- Breweries and wineries
- Caterers
- Grocery stores
- Liquor stores
- Restaurants
States without dram shop laws
Dram shop laws make small businesses liable for selling alcohol to individuals who then cause injury or property damage. Most states have some kind of dram shop law, with rules varying by state, but these states don’t:
- Delaware
- Kansas
- Maryland
- Nevada
- South Dakota
- Virginia
Liquor Liability Insurance Cost
Liquor liability insurance costs about $55 a month, according to Insureon. Bars will typically pay more for the insurance compared to grocery stores and other businesses where a smaller percentage of total sales is for liquor.
Liquor liability insurance costs will depend on several key factors, including:
- Coverage limit. The higher your coverage amount, the more you pay for liquor liability insurance.
- Liquor sales. The percentage of your annual sales that are from alcohol.
- State. Similar to any other type of insurance, location influences cost.
- Industry. Some industries are riskier than others. For example, restaurants that serve alcohol are considered higher risk and will pay more in premiums than a retail store that hosts occasional wine tastings.
- Claims history. Previous liquor liability insurance claims impact your premium.
Median annual cost of liquor liability insurance by business type
How to Get the Best Liquor Liability Insurance
Many business insurance companies offer liquor liability insurance, so it’s wise to get quotes from multiple insurers so you can find the best rate. A good place to start is your small business insurer for other types of coverage.
You can generally add liquor liability insurance as an endorsement on a general liability insurance policy. Liquor liability insurance also can be purchased as a standalone policy or be added to a business owners policy (BOP).
Check with insurance companies that offer small business insurance and request a quote for liquor liability. You can work with your agent or check company websites to get an online quote.
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Liquor Liability Insurance FAQ
What’s the difference between host liquor liability and liquor liability coverage?
The difference between host liquor liability and liquor liability insurance is that liquor liability coverage is for businesses that sell or serve liquor, while host liquor liability is for companies that allow people to drink on their property but don’t sell alcohol.
Liquor liability insurance can be an endorsement on a general liability insurance policy, while host liquor liability is part of a business’ general liability policy.
Host liquor liability insurance is good for companies that don’t sell alcohol but do allow people to drink on business property.
Here’s an example of how host liquor liability coverage works. Let’s say a company serves alcohol at its annual holiday party. An employee gets intoxicated at the party and causes a car accident on the way home. The other driver, hurt in the accident, files a lawsuit against the company. The company’s general liability insurance policy would cover the costs of the lawsuit.
Does general liability insurance include liquor liability?
Liquor liability coverage isn’t automatically part of a standard general liability insurance policy. Instead, you have to add it as an endorsement.
Do liquor stores need liquor liability insurance?
A liquor store is one type of business that a state may be required to have liquor liability insurance to get a liquor license.
For instance, Massachusetts requires insurance in order to get a liquor license. The minimum you must have is $250,000 of liquor liability insurance for bodily injury or death and $500,000 for any accident that results in injuries to or death of more than one person.
