When you're shopping for general liability insurance for your restaurant, one of the first decisions you'll face is choosing your policy limits. You'll see options like $1 million per occurrence / $2 million aggregate, $2 million / $4 million, or even higher.
Most restaurant owners pick the minimum required by their landlord or lender, but that's not always the smartest strategy. Understanding what these limits actually mean, how claims work, and what you're exposed to can help you choose the right balance between protection and cost.
At Anchor Insurance, we help restaurant owners evaluate their liability limits based on their specific operations, lease requirements, footfall, and risk tolerance. Here's what you need to know.
What Do General Liability Limits Actually Mean?
General liability policies have two main limits you need to understand:
1. Per Occurrence Limit
This is the maximum your insurance carrier will pay for a single claim or incident, regardless of how many people are injured or how many damages result.
Example:
You have a $1 million per occurrence limit. A customer slips and falls at your restaurant, suffers serious injuries, and sues you for $1.5 million. Your carrier will pay up to $1 million (your limit), and you'd be responsible for the remaining $500,000 out of pocket.
2. General Aggregate Limit
This is the maximum your carrier will pay for all covered claims during your policy period (typically one year). Once you hit this limit, your policy stops paying, even if individual claims are below your per occurrence limit.
Example:
You have a $2 million aggregate limit. During the year, you have four separate slip-and-fall claims that settle for $600,000, $500,000, $400,000, and $300,000. That's $1.8 million total, which is still under your aggregate. But if you had one more claim for $300,000, you'd exceed your aggregate limit, and you'd be on the hook for $100,000 out of pocket.
Why Both Limits Matter
The per occurrence limit protects you from a single catastrophic claim. The aggregate limit protects you from multiple smaller claims adding up over the course of a year.
For restaurants with high foot traffic, multiple locations, or operations that involve higher-risk activities (like live music, outdoor seating, or alcohol service), your aggregate limit can be just as important as your per occurrence limit.
Standard Restaurant GL Limits: $1M / $2M
The most common general liability limit structure for restaurants is:
- $1 million per occurrence
- $2 million general aggregate
- $1 million products/completed operations aggregate
- $1 million personal and advertising injury
This is often called "1/2 million limits" in shorthand.
When $1M / $2M Is Enough
This limit structure is appropriate for many small to mid-sized restaurants, especially if:
- You have one location with moderate foot traffic
- Your lease or lender requires exactly this amount
- You don't serve alcohol, or you carry separate liquor liability coverage
- Your operations are relatively low-risk
- You're a quick-service concept with limited dine-in seating and high turnover
When $1M / $2M May Not Be Enough
In some scenarios, standard limits leave you underinsured. Consider higher limits if:
- You have high foot traffic (hundreds of customers per day across multiple shifts)
- You operate in multiple locations
- You have outdoor seating, patios, or sidewalk service
- You host events, live music, or private parties
- You serve alcohol and have a bar-heavy revenue mix
- Your landlord or commercial lender requires higher limits (increasingly common)
- You operate in a high-litigation jurisdiction (like California, New York, or Florida)
Higher Limits: $2M / $4M or $3M / $6M
Some restaurants opt for higher general liability limits to better protect their business and meet contractual requirements.
Common Higher Limit Structures
- $2 million per occurrence / $4 million aggregate - Often used by full-service restaurants with multiple locations or higher-risk operations
- $3 million per occurrence / $6 million aggregate - Seen in upscale dining, event venues, and restaurants with extensive alcohol service
When to Consider Higher Limits
- Your landlord or franchisor requires it (many franchise agreements now require $2M or higher)
- You operate in a litigation-heavy market
- You have significant assets to protect
- You've had prior claims and want more cushion to avoid out-of-pocket exposure
- You want to layer an umbrella policy on top and need higher underlying limits
Cost Difference: $1M / $2M vs. Higher Limits
Increasing your general liability limits is usually more affordable than you'd expect. The cost difference between $1M/$2M and $2M/$4M limits is often only 10-25% of your total premium, depending on the carrier and your risk profile.
Example:
If your $1M/$2M policy costs $2,500/year, upgrading to $2M/$4M might cost $2,800-$3,000/year. For an extra $300-500 annually, you double your protection.
At Anchor, we'll quote both limit structures so you can see the exact cost difference and make an informed choice.
Umbrella / Excess Liability: Adding Another Layer
If you want even more protection without drastically increasing your primary general liability premium, consider adding an umbrella or excess liability policy.
What Is an Umbrella Policy?
An umbrella policy sits on top of your primary general liability policy and provides additional limits once your underlying policy is exhausted.
Example:
You have a $1M/$2M general liability policy and a $2 million umbrella. A customer wins a $2.5 million judgment against you. Your primary GL pays the first $1 million, and your umbrella covers the remaining $1.5 million.
When to Add an Umbrella Policy
- You have significant personal or business assets to protect
- You operate multiple restaurant locations
- You want catastrophic claim protection without overpaying for primary limits
- Your commercial lease or franchise agreement requires it
Cost of Umbrella Coverage
Umbrella policies are surprisingly affordable. A $1 million umbrella policy for a restaurant typically costs $500-$1,500 per year, depending on your underlying coverage and risk factors.
How to Choose the Right Limits for Your Restaurant
Choosing the right general liability limits comes down to balancing three factors:
- 1.Contractual requirements - What does your lease, franchise agreement, or lender require?
- 2.Your risk exposure - How much foot traffic do you have? Do you serve alcohol? Do you have outdoor seating or host events?
- 3.Your asset protection needs - How much are you worth personally and as a business? What could you afford to pay out of pocket if you exceeded your limits?
At Anchor Insurance, we walk you through this analysis and show you quotes at multiple limit levels so you can see the cost difference and make the best decision for your restaurant.
Frequently Asked Questions
What is the difference between per occurrence and aggregate limits?
The per occurrence limit is the maximum your insurance will pay for a single claim. The aggregate limit is the maximum your insurance will pay for all claims during your policy period (usually one year). Both limits matter, especially if you have multiple claims in a year.
How much does it cost to increase my general liability limits from $1M/$2M to $2M/$4M?
The cost increase is usually 10-25% of your total premium, depending on your carrier, location, and risk profile. For many restaurants, this translates to an extra $300-$800 per year. At Anchor, we quote both options so you can see the exact difference.
Do I need an umbrella policy if I already have $2M/$4M general liability limits?
It depends on your risk tolerance and asset protection needs. If you have significant personal or business assets, operate multiple locations, or want protection against catastrophic claims, an umbrella policy can provide cost-effective additional coverage. We'll help you evaluate whether it makes sense for your situation.