Alcohol Liability Insurance for Small Businesses – Forbes Advisor


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If your small business sells, serves, or distributes alcohol, you may need alcohol liability insurance. An alcohol liability insurance policy covers claims for property damage or bodily injury caused by an intoxicated person after having been served alcohol by a business.

Alcohol liability insurance is also called dram store insurance.

If your small business is sued, a liability insurance policy can help by covering:

  • Legal fees, settlements and judgments
  • Medical bills
  • Repair costs to repair damaged goods

Who needs alcohol liability insurance?

In most states, alcohol liability insurance is required for businesses that sell or serve alcoholic beverages. And depending on your state, you may need an alcohol liability policy to get a liquor license for your business.

The following are examples of businesses that may need alcohol liability coverage:

  • Bars and taverns
  • Breweries and wineries
  • Caterers
  • Groceries
  • Liquor stores
  • Restaurants

Liquor store laws make small businesses responsible for selling alcohol to people who then cause injury or property damage. Most states have some sort of liquor store law, with rules varying from state to state, but these states do not:

  • Delaware
  • Kansas
  • Maryland
  • Nevada
  • South Dakota
  • Virginia

Cost of alcohol liability insurance

Several key factors influence the cost of alcohol liability insurance:

  • Limit of coverage.
  • State.
  • History of complaints. If you have filed any alcohol liability insurance claims in the past, those claims will affect your premium.
  • Industry. Some industries are riskier than others. For example, restaurants that serve alcohol are considered higher risk and will pay more premiums than, say, a retail store that holds occasional wine tastings.
  • Alcohol sales. The total amount of alcohol sales your business makes each year affects insurance.

How to take out alcohol liability insurance

You can usually add alcohol liability insurance as an endorsement to a general liability policy. Alcohol liability insurance can also be purchased as a stand-alone policy or be added to a business owners insurance (BOP) policy.

Host alcohol liability coverage is usually already included in a general liability insurance policy. Alcohol Host Liability Insurance is good for businesses that do not sell alcohol but allow people to drink on company premises.

Let’s say a business serves alcohol at its annual holiday party. An employee gets drunk at the party and causes a car accident on the way home. The other driver, injured in the accident, files a complaint against the company. The company’s liability insurance policy would cover the costs of the lawsuit.

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