From property losses to claims that you are liable for a serious injury, your hotel/motel business faces multiple risks. The good news is there are ways to transfer a substantial amount of the most crippling financial danger to your insurer. Here are some important Hotel/Motel insurance coverage options that you should consider.

Property Insurance For Hotels/Motels

Your hotel/motel needs commercial property insurance that will provide financial restitution if there is damage to your building(s) or their contents.

It’s prudent to set your policy limit based on a worst-case scenario – in other words, determine how much money you would need to completely rebuild and refurnish. Another thing to consider is whether you want your payments to be based on replacement value or actual cash value (ACV). The former is the more expensive option, but it pays what is needed to replace the building or item to a similar standard. If you select ACV, all you would receive when a claim is settled is the depreciated value of the lost items. That makes it difficult to rebuild to the same quality as before.

You may also want to purchase what’s known as building ordinance coverage. This protects you if you must repair or rebuild a formerly grandfathered structure to today’s building codes.

When selecting your policy, be sure to consider the value of any unique property at your facility, such as antique furniture, one-of-a-kind collectibles, hand-painted signage, Oriental rugs, or china and crystal. To ensure these items are covered, you’ll need to add fine arts or collectibles coverage. Even before talking with your insurance professional, it’s wise to photograph and catalog these items, and collect any receipts or certified valuations you possess. You may have substantially more invested in these items than you ever imagined. This inventory will help you secure the right coverage and be a valuable resource if you need to file a claim in the future. Of course, store the records somewhere off-premises or online with cloud backup.

Don’t forget to take a complete inventory of back-of-the-house operations as well, noting all supplies, equipment and appliances. For these, you might also benefit from equipment breakdown insurance. This type of policy covers major mechanical systems for repair and replacement, and typically includes business income coverage if your hotel/motel has to close due to malfunctioning air conditioning, refrigeration or other systems.

If you have business vehicles, a commercial auto policy is also in order. If they are livery vehicles, you need to talk to your insurance agent or broker about special liability treatment for those operations.

Income Protection

If you have to file a property claim, it’s likely you’ll be losing rental income. Depending on the amount of damage, you may be unable to house guests for weeks. While your property insurance will pay for repairs or rebuilding, you need a business income policy,  also called business interruption coverage, to cover lost income during the time you cannot accommodate guests.

On the other hand, you might be able to remain open throughout the repair period – though doing so could require some additional expenditures, such as:

• Emergency cleaning
• Costs of containing any affected areas
• Outside catering, if the kitchen is not usable
• Overtime pay to employees who must contact guests, rearrange rooms, and so forth
• Advertising and PR expenses (these could be considered extra expenses, business interruption or neither, depending on the specific policy language)

Extra expense insurance, tied to your business income policy, can help with these kinds of costs. Always check the language so you can clarify exactly what’s covered, and for how long. Also, keep detailed records of your expenses. 

Exclusions

Standard property insurance does not cover every scenario. Your insurance professional can review the exclusions on your policy, and together you can decide whether you should add specialized coverage for catastrophic risks, such as floods or earthquakes. In some areas you may need special windstorm or wildfire policies.

Industry-Specific Policies

Some insurance companies that specialize in hotel/motel insurance offer industry-specific protection. Such package policies or insurance programs are designed to enhance general coverage and address the particular needs of hotels/motels. They cover many common hospitality industry risks, including damage to your key card systems, customer inconvenience payments, emergency evacuation expenses and water backups. They may also bundle coverage for crimes common in the lodging industry, such as employee theft, forgery, theft of money or securities, and transfer fraud.

Liability Protection

You definitely need general liability insurance, which covers third-party claims of bodily injury, property damage, and personal and advertising injury.  These include false arrest, detention or imprisonment; malicious prosecution; wrongful eviction, entry or invasion of private occupancy spaces; and libel, slander and defamation of character. While these descriptions sound like a dramatic television program, the risk of lawsuits is real. You need protection to help with the legal costs associated with your defense, as well as financial awards or required medical expenses that arise from a claim.

Like business property insurance, general liability insurance does have some exclusions, meaning it doesn’t cover every third-party risk. Depending on your operations, there are other coverages you might find valuable.

• Product liability insurance protects you if a guest or other patron claims they were injured or their property was damaged by products that you sell at your business, including food.
• Liquor liability coverage is imperative if you sell or serve liquor on your premises. You could face a lawsuit if someone accuses you of overserving alcohol and it results in injury or death.
• Innkeepers liability insurance protects you if a guest claims their property was damaged, lost or stolen while in your safekeeping. Each state defines and limits what types of claims can be made, but your insurance professional can help you understand your level of liability.

Additional Considerations

Lodging operations vary widely. Connect with us to review all of the details of your operations, including common scenarios:

• Hosting special events or conferences
• An on-site pool and/or spa, exercise facility or play space
• Employee use of personal vehicles for business-related errands
• Computer reservation systems and online financial payment programs

Employment practices liability and wage-and-hour insurance are other coverages that will protect your business if you are accused of mistreating your workers. And don’t forget about workers’ compensation insurance, which is mandated by most states.

Much of your property and general liability risk can be mitigated by excellent loss-control programs. But for major disasters and serious injury claims, a solid insurance portfolio could save the day.