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.
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.
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:
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.
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.
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.
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.
Lodging operations vary widely. Connect with us to review all of the details of your operations, including common scenarios:
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.
At General Insurance Services, we are a team of insurance professionals with an array of experience, backgrounds, and interests. We’re advisors with a mission to secure the future of the communities we serve. Share our knowledge through this blog allows us to get one step closer to achieving our mission.