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If your small business sells, serves or distributes alcohol, you may need liquor liability insurance. A liquor liability insurance policy covers claims of property damage or bodily injury that a drunk person causes after being served alcohol by a business.

Liquor liability insurance is also called dram shop insurance.

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

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

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

There are several key factors impacting the cost of liquor liability insurance:

  • Coverage limit.
  • State.
  • Claims history. If you have filed liquor liability insurance claims in the past, these claims will impact your premium.
  • Industry. Some industries are riskier than others. For example, restaurants that serve alcohol are considered higher risk and will pay more in premiums than, say, a retail store that hosts occasional wine tastings.
  • Liquor sales. The total amount of liquor sales that your business makes annually impacts the insurance.

How To Buy Liquor Liability Insurance

You can generally add liquor liability insurance as an endorsement on a general liability policy. Liquor liability insurance also can be purchased as a standalone policy or be added to a business owners policy (BOP).

Host liquor liability coverage is usually already included in a general liability insurance policy. Host liquor liability insurance is good for companies that don’t sell alcohol but do allow people to drink on business property.

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.

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