Why You Need Liquor Liability Insurance To Serve Alcohol

Liquor liability insurance covers businesses that sell alcohol in case injuries or property damage occur because of an intoxicated customer. In most states, businesses can be held liable for the actions of an already-drunk guest they serve alcohol to, making liquor liability coverage an important way to protect your business from liability claims.

Read below to see some of the situations covered by liquor liability insurance and how you can get it for your business.

On This Page

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  What Is Liquor Liability Insurance?

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  What Does Liquor Liability Insurance Cover?

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  How Does Liquor Liability Insurance Work?

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  How Much Does Liquor Liability Insurance Cost?

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  Who Is Liquor Liability Insurance Best For?

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  How To Get Liquor Liability Insurance

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  FAQs

What Is Liquor Liability Insurance?

Liquor liability insurance, also known as dram shop insurance, is a type of commercial insurance that can protect a business if it serves alcohol to a drunken guest who causes physical harm to someone or inflicts damage on their property. It is important for any type of business that sells or distributes alcohol such as the following:

• Bars and taverns
• Restaurants
• Caterers
• Food trucks, carts and other vendors
• Wineries and breweries
• Grocery stores, convenience stores and retail stores
• Liquor stores
• Event venues

Liquor liability insurance differs from host liquor liability insurance, which insures companies that do not sell alcohol as part of their business against alcohol-related liability claims. For example, if an advertising agency serves alcohol at its annual holiday party, host liquor liability insurance would cover any damage caused by an employee who gets drunk at the party.

While host liquor liability coverage is typically included in a general liability insurance policy, companies that make money by selling alcohol will have to purchase separate liquor liability insurance to receive the same coverage.

What Does Liquor Liability Insurance Cover?

Liquor liability insurance covers claims that arise whenever your company is held liable for the actions of an intoxicated person you served alcohol to. The table below goes over the main components of liquor liability coverage and situations where they would each apply.

The amount of coverage available to you will vary depending on your insurance carrier. For example, the Food Liability Insurance Program offers liquor liability insurance with coverage limits from $100,000 to $1 million per incident and $300,000 to $2 million in total.^[1]

What Isn’t Covered by Liquor Liability Insurance?

Liquor liability insurance generally doesn’t cover claims related to anything other than the harm caused to other people or their property because you overserved alcohol to a patron. For example, your liquor liability insurance likely won’t pay for a defamation lawsuit if someone spreads false information about a bar fight that took place at your business.

In addition, liquor liability insurance generally doesn’t cover claims that arise after you serve alcohol to someone under the age of 21.

It also won’t pay for any repairs to your own property since these should be covered by your commercial property insurance instead.

How Does Liquor Liability Insurance Work?

The amount you have to pay for liquor liability insurance is largely influenced by how much income you bring in from alcohol sales. For example, a bar that generates 80% of its revenue by selling alcohol will likely have a higher premium than a restaurant that generates 20% of its revenue by selling alcohol.

Other factors that can influence your liquor liability insurance cost include your coverage limits, the prevalence of claims in your area, the number of claims you have filed in the past, your business’ hours of operation and whether your employees have undergone alcohol safety training. Be sure to compare commercial insurance quotes using an insurance marketplace like SmartFinancial to find the company that can provide the best rate for you.

How Much Does Liquor Liability Insurance Cost?

See below for an overview of the typical liquor liability insurance cost ranges that different types of businesses might encounter if they want to purchase $1 million worth of coverage.^[2]

Keep in mind that the amount you have to pay could extend above or below these price ranges depending on the scale of your business. For example, a small business with only one store can expect to pay less for coverage than a national restaurant chain.

Who Is Liquor Liability Insurance Best For?

Liquor liability insurance is important for any business that makes money by selling alcohol. Naturally, businesses that sell more alcohol have a higher liability risk, so this type of coverage is especially important for bars, liquor stores and other businesses with high alcohol sales.

The majority of states have dram shop laws, which means businesses can be held liable for damages if they serve alcohol to minors or adults who are already visibly intoxicated. As a result, liquor liability insurance is effectively a necessity for businesses that sell alcohol in these states.

Dram shop liability has been codified into law or upheld by courts in every state except for Delaware, Kansas, Louisiana, Maryland, South Dakota, Virginia and Wyoming. See below for an overview of when dram shop liability applies in each state.

How To Get Liquor Liability Insurance

You can purchase liquor liability business insurance from major insurance companies like The Hartford, Nationwide, Travelers and Liberty Mutual. Specialty insurance providers like the Food Liability Insurance Program, biBERK and Markel Insurance also offer liquor liability coverage.

Many insurance companies offer liquor liability coverage as an add-on to your general liability insurance policy. However, you may be able to purchase a standalone liquor liability insurance policy, especially if you select an insurer like Westchester that specializes in monoline commercial insurance products.