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Understanding Nightclub Insurance

written by: •edited by: Laurie Patsalides•updated: 10/19/2011

One of the major considerations of opening a nightclub is being properly insured. In order to do this nightclub owners must carry a variety of liability insurance. Policies are written based on a number of factors including food service, client base and entertainment.

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    Why Would You Need It?

    Insurance contract As required by state law, there are various types of liability insurance that must be maintained by nightclub owners. There are a number of incidents that occur in nightclubs that can result in a lawsuit being filed. While this is true of any large business establishment, the fact that large numbers of people are gathering in a location and consuming alcohol can result in additional liability. Some of the general types of coverage that may be secured include:

    General liability coverage - what happens if someone in a nightclub sits in a chair and the chair collapses or they simply fall out of the chair? As the owner of a nightclub, there is a potential for a lawsuit for injuries that were sustained. Since the owner of the facility (e.g., the business, not necessarily the property) may be found negligent in ensuring their furniture was stable, they may be held liable for injuries;

    Property liability coverage - the facility must also be covered to help protect the owner and the occupant. This insurance will help protect the property owner in the event that someone falls on the property due to poor maintenance (e.g., not clearing snow thoroughly). While many times the owner of the club may not have to be concerned since the land owner may carry this coverage, the club owner may need an additional rider on their renter's policy; Due to the fact that you are dealing with a large number of people on a regular basis, situations are bound to arise from time to time that may require insurance coverage. Say someone falls off a chair in your establishment and gets seriously injured. You are responsible for that injury because you are supposed to assure that the furniture you provide in your nightclub is sturdy and safe. A nightclub insurance policy may pay those claims.

    Contents insurance - this type of insurance helps protect the owner of the nightclub from the situations that are less common but can be devastating. Content insurance helps protect furnishings, inventory, etc. in the event of robbery, fire or other damage that may occur. It is crucial to find out exactly what each insurer offers in terms of coverage since not all policies cover everything and some exclusions may exist that you need to be aware of before there is a problem.

    Business disruption - while it may seem obvious, if a bar or nightclub is not open for business, there are no receipts hence a loss of income. Business disruption policies may help curb the losses that occur when a bar or nightclub is closed for business due to repairs as a result of floods, fire, etc. Bar and nightclub owners should review these important riders and find out exactly what coverage is offered. For example, it may not cover disruption caused by being closed down by a municipality due to licensing violations.

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    Premium Costs for Premium Coverage

    nightclub The premium cost for your nightclub insurance policy will vary according to several factors, including the location, the club's security personnel and procedures, and your practices and policies involving alcohol consumption at your club. If you are located in a bad area where there are frequently fights both in the club and outside, you may have to pay a much higher rate to cover yourself in case someone gets hurts and it's due to your own negligence. In some cases, specialized clubs such as those who cater to college students, members of the gay community or other specialized clientele may also need additional liability insurance coverage.

    The insurance company may require you to have a certain number of security guards in the club depending on the number of people who are in your nightclub on any given day. Finally, there are many risks that can come up if the club owner is not responsible about the way alcohol is distributed to patrons that will boost insurance rates. For example, if alcohol is given to a minor who ends up getting hurt due to his or her inebriation, there can be substantial penalties charged to the club owner and possibly a lawsuit. To avoid this, your insurance company might require that you get a special machine to verify that IDs are real before granting entry into the club.

    While nightclubs and bars are often considered turnkey business ventures, those who own this type of establishment often find themselves dealing with liability issues that they were not aware of. It is crucial to your long term success as the owner of a bar or nightclub to ensure that you have proper liability insurance. Not only is it a law, it helps protect you in the case of any incidents that could result in legal action. These polices will not be inexpensive, but failure to have them could be far more costly.