What is Hotel Insurance?
A hotel business has three fundamentals. The first is your property/premises, the second your staff and guests and third is your income. Keeping these three things safe should be at the heart of a hotel insurance policy. Protection for your property comes under the buildings and contents insurance and should someone get hurt you have public and employers’ liability insurance. To protect the income you take from your business there is also business interruption insurance. From then on everything else becomes much more dependent on the different requirements and services you may offer.
Do I need Hotel Insurance?
The simple fact is that no two hotels are the same, just as no insurers or business insurance policies are. The amount of rooms, the turn over, members of staff, the serving of food, type of building, the events the hotel might hold and other services they may offer all affect the level of risk and therefore the level of cover. Hotel insurance is specifically designed to accommodate for these risks. If you have a holiday home or second home you let out as short term rental you will most likely need a policy specific to your own requirements (See recommended links below).
Hotel Insurance Features Explained
Public Liability – Liability insurance for a hotel is to compensate loss, damage or injury to 3rd parties and their property. The hotelier is ultimately liable because it’s their responsibility to oversee that their property is adequately maintained. For example, a guest slips on a wet floor in your entrance hall. You could be held liable in a compensation case if they are injured.
Public Liability limits usually are offered at £2m as standard. Do you have an on street seating area? Or hold functions open to non-guests? Some local councils require you to have a higher level of public liability insurance. This can be up to £5m or £10m.
Employer’s Liability – This is a legal requirement for any employer and is usually offered at £5m as standard. Employers’ liability insurance guarantees you have access to adequate funds should you need to compensate a member of your staff for an injury or damage from a situation you, as their employer, are liable for.
Buildings Insurance – The Rebuild Cost - A hotel is reliant on the premises and is most likely the most expensive asset. Buildings insurance exists to cover the costs for repairing damage right through to rebuilding - should it need. You should insure yourself for the full re-build cost of your property. Make sure you factor in any outbuildings, boundary walls, pools, fitted kitchens and bathrooms etc. as well as the building itself.
There are various free re-build calculators online that can assist you in working out your re-build cost.
‘Condition of average clause’ - This means that if you give a sum insured for building/contents which is not enough, they can reduce the claim by the percentage that you’re underinsured. For example - insure for 100K, but should be 200k, and claim for 50k. You could end up being able to claim only for 25k.
Business interruption - Business interruption insurance pays your outgoings such as pay your rent, wages and all necessary over-heads if something happened to stop your business trading. If buildings and contents insurance cover your assets, business interruption is the life support that sees you through until they are up and working again. Indemnity Period – Should the property become uninhabitable the indemnity period is the length of time ‘business interruption’ can be claimed for. How long should my indemnity period be? 24 months is often the standard on a hotel policy. When working out your indemnity period, don’t underestimate the time it takes for demolition and debris clearance, architects and planning and then rebuilding.
Contents Insurance - A great way to understand the difference between your ‘contents’ and your ‘building’ would be to (hypothetically of course) tip your hotel the wrong way up. Anything that would fall is considered contents. This would mean furniture and decorations are contents but the walls, ceiling and kitchen cabinets come under buildings insurance. For a hotel this obviously makes the contents extremely important. Guest contents – Your guests are the life (and soul) of your business. Guests’ contents insurance for your hotel means that their belongings are protected in the event of a theft, fire or other insurable event. It’s also a legal requirement in line with the Hotel Proprietors Act 1956. The amount of cover you need here obviously depends on the capacity of your hotel; an advisor can go through this with you so you are comfortable you have the correct level of cover.
Personal contents – If you or any of your staff live at the hotel you can take out personal contents cover. This essentially combines your business insurance with a cover similar to domestic contents for those who reside there.
Legal cover – This option allows you to claim for financial support when taking legal action against another party. Legal cover is not a legal requirement and so is not always found as standard. Make sure you let your advisor know early on during a quote that you may be interested in this cover, that way they will be able to narrow their search for suitable policies.
Loss Of license – Not all hotels serve alcohol so this optional cover will not always be found already included in an insurance policy. Loss of license insurance will cover you for the loss of income and lowering of the overall value of your business that might subsequently happen should you lose your license to sell alcohol on your premises.
Gyms, swimming pools, spas and treatments – These are mostly common activities/services a hotel might offer. But, for more exotic treatments this may cause problems or extortionate premium rises. A specialist insurer such as Towergate understands the insurance market and knows where to go for the right policy for your specific business needs. Simply speak to an advisor and discuss through with them what you offer and let them do the hard work.
Hotel Insurance Exclusions Explained
Accidental damage –Accidental damage insurance covers you for damage to buildings and contents not insured under any other peril. For example damage from a fire will be covered under your standard buildings and contents insurance but there may be nothing in there to cover the same items should you accidentally put a nail through a pipe when hanging a picture. Accidental damage covers you for these types of incidents.
This cover is not always covered as standard so make sure you let your broker know this is something you are looking for. With or without this cover you should always make yourself aware of the limitations and exclusion on your specific policy. Insurers put exclusions into their policies to protect themselves from undue claims such as damage through the inevitable wear and tear of any item, and as such accidental damage will also come with various exclusions. Discussing these and other exclusions will help you understand your side of the insurance agreement such as levels of maintenance (plumbing, tree surgery) and what in turn you can expect your insurer to cover.
Theft by violent/forced entry – This feature is to cover your business should there be a break in. With any hotel though doors can’t remain securely locked otherwise how would your staff enter the premises! The reason the feature is called theft via forced entry is because they can’t cover theft when the culprit entered through an unlocked door (either a public entry or an unlocked staff door). Make sure you understand and meet the security requirements of your insurance policy to remain covered.
Keeping the property in good condition – A common stipulation of a hotel insurance policy is that the property and equipment is properly maintained. This is to protect your staff and your guests from risk. While an insurance policy won’t cover you for the general wear and tear of your contents, you are expected to maintain it yourself.
Commercial kitchens / serving food – If you do a high level of cooking and have a frying range, this could add a few stipulations to your policy, or maybe make you ineligible entirely! This is due to the much increased fire risk a frying range is deemed to add. It's key that this is highlighted and covered adequately so if you have any uncertainty its best to check with one of our advisors.
If you’re business is similar to any other, every cost counts. Nobody wants to pay more than they need for their insurance but we all certainly want to have the best policy possible. The key is to speak with the people who understand insurance the best, and preferably understand your business too. Sometimes, an ‘off the shelf’ policy is perfectly suitable, you can buy it online and be sent your documents ready to read at your leisure but more often, you may have a restaurant, bar, gym, swimming pool, freelance staff, speciality treatments or any other diversifying activity and you need advice to make sure your business is protected. Without expert advice this is where you could potentially leave yourself open to risk. When every penny counts, why would you pay for something you’re not sure is doing its job?