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Hotel Insurance Guide

A simple guide to insurance for hotels and guesthouses. We explain the features, exclusions and optional covers that are usually found in this type of business insurance. From public liability, guests’ contents insurance and how to make sure your pools, gyms and any extras are covered.

What is hotel insurance?

A hotel business has three fundamentals. The first is your property/premises, the second your staff and guests, and the 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.

What is the difference between a hotel and guesthouse?

A commercial hotel can typically be defined as an establishment that provides guests with a place to stay. Rooms normally have an en-suite bathroom and there is a designated eating area serving daily breakfasts and dinner most evenings. Hotels typically provide 24-hour service, with a receptionist or night porter on-hand to help at any time.

Guest houses tend to be more of a ‘full time’ venture than B&Bs, but don’t have 24-hour receptions like hotels. They are usually VAT-registered (unlike most B&Bs), often serve dinner and have alcohol licences. As a rule of thumb, guest houses typically have fewer than 15 rooms available.

For all the rules and legislation around tourist accommodation health and safety, download the government’s Pink Book.

Do I need hotel insurance?

The simple fact is, no two hotels are the same. The number of rooms, the turnover, members of staff, the food served, the type of building, any events the hotel hosts, and any other services they 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.

What does hotel insurance cover?

Public liability – This will compensate you for damage, loss or injury to third parties at the property. If, for instance, a guest slips on a wet floor in your reception area, you could be held liable for compensation.

Public Liability limits are usually offered at £2 million as standard. If you have an on-street seating area or you hold functions that are open to non-guests, some local councils require you to have a higher level of public liability insurance, which can be up to £10 million.

Employers' liability – If you plan to employ staff, you are legally obliged to take out employers' liability insurance. This will mean that you are covered should any staff member be injured while working for you.

Buildings insurance – Your property will usually be your most expensive asset. Taking out buildings insurance will help you cover the costs of repairing damage to the structure, right through to a complete rebuild. 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.

Business interruption - Business interruption insurance pays your outgoings such as rent, wages and all necessary over-heads if something happens 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.

Should the property become uninhabitable, the length of time ‘business interruption’ can be claimed for is the called the indemnity period. 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.

Hotel contents insurance explained

When talking about hotel contents insurance there are two aspects to consider: hotel contents insurance and guest contents insurance. With hotels, there is often little or no stock. Things are ordered in as and when they are needed.

For a hotel, the equivalent is furniture and its room contents. Essential items like kettles, televisions and furniture can quickly add up when multiplied by the number of rooms. It is vital to calculate these costs accurately. Inaccurate estimates will stop you being able to claim for these things to be replaced should you need them to be.

It is also important to have 'guest's personal effects cover’, or ‘guest's contents insurance’. Hotels can be targets for major crimes and to ensure you and your guests are secure, it is strongly advised to invest in the aforementioned policy.

Some policies offer set amounts you could claim per guest, and some have over-all claim limits which are usually suitable for small to medium sized businesses. Your adviser can talk you through the options during a quote or discuss with you if you think you may need a higher level of cover.

Optional 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 adviser 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 included automatically 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 the most common activities/services a hotel might offer. More exotic treatments may cause problems or extortionate premium rises with some providers. 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 adviser 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, etc.) 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 always 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. 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 it is best to check with one of our advisers.

Things to consider when choosing your hotel insurance policy

  • You are a business: Have you been running your hotel for some time without any incidents? Some insurers will see your experience as testament to your ability to run a risk free enterprise and will offer you lower premiums. If you have such experience speak to one of our advisers who will be able to discuss this possibility.

  • Multiple properties: If you have more than one hotel Towergate can offer large discounts on admin fees as well as sourcing from insurers that will lower their premiums for multiple properties. We can even add new properties pro-rata meaning that everything conveniently renews at the same time rather than you juggling multiple policies.

  • Cancelations: It is sometimes the case with commercial insurance policies that they do not offer a ‘cooling off period’ where you would otherwise be able to cancel your policy for free within a certain amount of time. Check this during the quotation period to make sure you are fully aware of what your options are.

Hotel and guesthouse insurance from Towergate

Every hotel or guesthouse is different, so the policy that’s right for you needs to be equally unique. At Towergate, we’ll take the time to get to know your business and work closely with you to draw up and cost a hotel insurance policy that will give you the peace of mind that you’re covered in any event. Call us for a quote when you’re ready on 0344 346 0409, or read more about our specialist hotel and guesthouse insurance.

This is a marketing article by Towergate Insurance.

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