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Hotel & Motel Insurance

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For your guests, your hotel, motel, inn, or bed and breakfast is a home away from home. For you, it’s your livelihood. Having the proper hospitality insurance coverage to protect your business means taking care of what’s yours, as well as your guests and their belongings.

Running a hospitality business has its own unique risks.

One of the big differences between insuring a hospitality business and other businesses is the need for innkeepers’ legal liability insurance. You have an obligation under the law to keep your guests’ belongings secure, safe, and in some cases, you can be held responsible for loss or damage. What’s more, because the legal requirements can vary from state to state, your insurance needs can be complex.

Other unique risks for the hospitality industry.

If your hospitality business also includes a restaurant or bar, a liquor liability policy is a must-have. Offering valet services, either for the restaurant or guests lodging with you, creates another risk factor that requires attention. Airport and local shuttles are also popular amenities, but they also carry their own specialized coverage needs.

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Hospitality
Building / Property Insurance
Risk Factor

Is your building subject to severe weather events, fire, or burst pipes? Most are. These situations and others can cause significant damage to the structure leading to costly repairs.

Solution

Building coverage protects the permanent structure from most weather perils, burst pipes, a fire, and other losses.

Innkeepers Legal Liability
Risk Factor

You are required by law to keep your guests’ valuable personal items secure and safe, and you can be held responsible for loss or damage unless caused by an act of nature or the actions of the guest.

Solution

An innkeepers legal liability policy can protect against losses to your guests’ personal items when they are being stored in your hotel. Requirements vary by state, including maximum liability per guest, the types of items that are covered, where the item was stored, and the value of the item.

General Liability
Risk Factor

Water on the floor, slippery entry in the winter, broken glass/hazardous debris, etc. These are all accidents waiting to happen that make your business susceptible. Claims may arise due to bodily injury, property damage, personal injury, and more.

Solution

General liability insurance is an absolute necessity for any business. It provides broad coverage when you are deemed responsible and liable, and will also pay to defend any covered lawsuit or action regardless of its merit.

Liquor Liability
Risk Factor

Any establishment that sells, serves, or assists in the purchase or use of liquor is open to a liability claim as a consequence of someone getting inebriated to the extent that injuries or property damage result.

Solution

If you are in the business of selling or serving alcohol, it is critical that you protect your business from potential financial losses by being covered by a liquor liability insurance policy. Having the right policy in place could help cover your legal costs, court fees, and any civil or criminal damages stemming from an incident involving liquor.

Valet Parking
Risk Factor

Providing a valet service is convenient for your guests, but damaging a vehicle, property, or causing injury is a very real risk associated with it.

Solution

Obtain a general liability policy to protect your business from lawsuits by a third party. Be certain that a garagekeepers legal liability policy is in effect with adequate limits to cover any physical damage to your guest's vehicle or other vehicles on site. If you are using an independent valet service, obtain a certificate of insurance to verify they have the proper coverage with adequate limits. Also make sure that your business is named as an additional insured under their policy.

Cyber Insurance
Risk Factor

Hotels rely on technology to run almost every facet of their business and store sensitive information such as credit cards, passwords, and guests’ personal data. You are at risk if this information is lost, stolen, or compromised. You may be legally obligated to alert those impacted by the breach and possibly pay fines, restitution, and defense costs.

Solution

Experiencing a data breach is often not a question of if, but when. Securing a cyber liability policy can offer coverage for expenses associated with compliance regarding data breach notification laws, securing legal counsel to advise on incident response, credit monitoring service, and paying for regulatory defense, as well as penalties arising from privacy law violations.

Workers’ Compensation
Risk Factor

Most states require an employer to provide coverage for any injuries their employees experience while on the job, as well as any job-related illnesses.

Solution

Maintain workers’ compensation insurance to provide benefits to eligible employees, otherwise, you can be penalized for every day that coverage is not maintained, as well as for any benefits an employee would have been eligible for in the event of a job-related injury or sickness.

EPLI
Risk Factor

On average, it’s estimated that three out of five businesses will be sued by their employees. Hotels, just like any other business, are vulnerable from the pre-hire process through to a possible reduction in workforce. Claims can stem from just about anything, such as someone taking a “joke” the wrong way and being offended.

Solution

Coverage to protect you against this risk normally comes as a standalone policy. The right coverage is critical to your risk management process as it protects against discrimination, wrongful termination, sexual harassment, and other employment-related allegations. Typically, the policy will cover your business as well as your directors and officers. Third party coverage is an added option, usually accomplished via a policy endorsement, and addresses claims made by customers or vendors against you from acts committed by employees.

Business or Commercial Auto
Risk Factor

When you own or operate a vehicle for your hotel, you expose your business to liability risks to other drivers, property owners, and your own guests while being driven.

Solution

A business auto insurance policy should be maintained if the vehicles are owned by the company. If employees are using their own vehicles at any time as part of their job duties, then hired and non-owned auto liability coverage should be maintained. Both will defend you if you are named in a lawsuit as a result of an employee getting into an accident while working for you.

Business Income
Risk Factor

What would you do if a fire impacted your operations? Or what if a pipe leak caused an extended downtime of a significant block of rooms? These and other events can destroy your ability to serve guests and bring in revenue, which can have a major long-term impact on the viability of your hotel.

Solution

Business income insurance compensates you for lost income if the business cannot operate as normal due to damage that is covered under your commercial property insurance policy, such as fire or water damage. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the incident not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.

Commercial Umbrella
Risk Factor

What happens when your business faces a large liability loss that exceeds the basic limit of your standard policy?

Solution

You should consider purchasing a commercial umbrella insurance policy which provides higher limits, typically between $2,000,000 and $10,000,000, and often broadened coverages. Coverage is extended over various policies, including general liability insurance, business auto, and directors and officers liability insurance.

Protecting your business in the event you can’t serve guests.

In the hospitality industry, like most industries, you have to be able to serve your guests in order to remain profitable. What would you do if you were not able to rent out rooms due to a fire or another covered loss? Business income insurance can protect you in the case of lost revenue. Understanding this risk and your operation’s specific needs can mean the difference between staying in business or not after a disaster.

Hospitality businesses need general coverages, too.

Hotels, motels, inns, and bed and breakfasts need a whole host of coverage options that are common to most businesses, such as cyber liability insurance, general liability insurance, workers’ compensation insurance, employment practices liability insurance, among others.

To learn more about how specialized insurance can benefit your hospitality business, contact us today.

FAQs – Hotel & Motel Insurance

What types of insurance coverage do hotels need?

Hotels typically require several types of coverage, including property insurance, general liability insurance, workers’ compensation, business interruption insurance, cyber liability insurance, and sometimes specialized coverage like liquor liability and employment practices liability insurance (EPLI). The specific coverage will depend on the hotel’s size, location, and services offered.

Why is general liability insurance important for hotels?

General liability insurance is essential for hotels because it protects your business from claims related to guest injuries, property damage, or accidents that occur on your premises. Without this coverage, your hotel could face costly lawsuits and settlements that can seriously impact your bottom line.

How does property insurance protect my hotel?

Property insurance covers the physical assets of your hotel, including the building, furniture, equipment, and inventory. This coverage protects you from financial losses due to events like fire, vandalism, theft, or natural disasters. Property insurance is crucial to ensuring that you can repair or replace damaged assets without disrupting your operations.

What is business interruption insurance, and why do hotels need it?

Business interruption insurance helps cover lost income and additional expenses if your hotel is forced to close temporarily due to a covered event, such as a fire or natural disaster. For hotels, every day of closure can mean lost bookings and revenue, so this coverage ensures you can recover financially during these disruptions.

Do hotels need cyber liability insurance?

Yes, cyber liability insurance is increasingly important for hotels due to the high volume of sensitive guest data (including payment information) processed daily. Cyber insurance protects your hotel from financial losses related to data breaches, ransomware attacks, and other cyber threats, ensuring that your business can recover from digital security incidents.

How much hotel insurance coverage do I need?

The amount of insurance your hotel needs depends on several factors, including the size of your property, guest volume, amenities offered, and your geographic location. It’s essential to work with an experienced insurance advisor who can assess your risks and recommend appropriate coverage limits tailored to your business.

What is liquor liability insurance, and does my hotel need it?

If your hotel serves alcohol (through bars, restaurants, or events), you likely need liquor liability insurance. This coverage protects your hotel from claims that arise if a guest becomes intoxicated and causes harm to themselves or others. Many states and jurisdictions require hotels to carry this coverage if alcohol is served on the premises.

Why is workers' compensation insurance necessary for hotels?

Workers’ compensation insurance is required by law in most states and provides coverage for employee injuries or illnesses that occur on the job. For hotels, where staff work in various environments (kitchens, housekeeping, maintenance), this coverage ensures that you can provide medical care and wage replacement for injured employees while protecting your business from lawsuits.

How can umbrella insurance benefit my hotel?

Umbrella insurance provides additional liability coverage above and beyond the limits of your general liability, auto liability, or employer’s liability policies. This is especially beneficial for hotels that host high volumes of guests or provide premium services, as it offers extra protection against large claims that could exceed standard policy limits.

Can I bundle different types of hotel insurance to save money?

Yes, many insurers offer package policies or allow you to bundle multiple types of coverage (such as property, general liability, and business interruption insurance) to save on premiums. Bundling can streamline your coverage and reduce costs while ensuring you have comprehensive protection for your hotel.

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What is Business Interruption Insurance? Business interruption insurance, also called business income insurance, is designed to help businesses like hotels recover financially after unexpected events that halt operations. This type of insurance doesn’t cover property damage itself—that's what property insurance is for—but it covers the financial losses associated with downtime, such as lost revenue, ongoing fixed costs, and additional expenses required to reopen. For hotels, this can include revenue loss from unbooked rooms, fixed costs like employee wages and mortgage payments, and relocation expenses if the property needs major repairs. Why Hotels Need Business Interruption Insurance Hotels are highly vulnerable to business interruptions because of the nature of the hospitality industry. The smooth running of a hotel relies on uninterrupted services, from guest bookings to events. When a disaster such as a fire, flood, or earthquake strikes, the hotel may need to close temporarily, which can lead to significant revenue loss. Business interruption insurance steps in to help cover these losses, ensuring that hotels can maintain financial obligations, such as loan payments or staff wages, even when the income stream is interrupted. It’s a crucial component of risk management for the hospitality industry, allowing businesses to recover more smoothly and quickly. What Does Business Interruption Insurance Cover? Here’s what typical business interruption insurance for hotels covers: Lost Income: Covers revenue lost due to the temporary closure of the hotel. This includes lost room bookings and event cancellations. Fixed Costs: Ensures that fixed expenses, such as rent or mortgage payments, utility bills, and staff salaries, are still covered during the interruption. Temporary Location Costs: If a hotel needs to temporarily relocate its operations, business interruption insurance can cover relocation expenses. Employee Wages: Helps maintain payroll, ensuring employees are paid even during downtime, preventing staff turnover during closures. Loan Payments: Continues to cover loan or mortgage payments even when income has stopped. Common Causes of Business Interruption for Hotels Hotels face a variety of risks that can cause unexpected closures. Some common causes of business interruption include: Natural Disasters: Events like hurricanes, floods, and earthquakes can cause significant damage, forcing hotels to close for repairs. Fires: A fire can result in major property damage, leading to temporary closures and income loss. Pandemics: As seen during the COVID-19 pandemic, health crises can lead to widespread hotel closures and severely impact revenue. Without business interruption insurance, hotels may struggle to recover financially from these events, potentially leading to permanent closure. Calculating the Right Coverage for Your Hotel When determining how much business interruption insurance your hotel needs, consider the following factors: Hotel Occupancy Rates: The higher your average occupancy rate, the more income you stand to lose during a closure. Daily Room Rates: How much revenue does your hotel generate daily, based on room rates and other services? Operating Costs: Evaluate your fixed expenses, such as mortgage payments, utilities, employee wages, and loan obligations, to ensure you have enough coverage to maintain these payments during a closure. How to File a Business Interruption Claim When filing a business interruption insurance claim, it’s important to: Notify Your Insurer: Contact your insurance provider as soon as the interruption occurs. Document Everything: Keep detailed records of lost income, ongoing expenses, and any additional costs incurred during the interruption. Work with Your Insurer: Collaborate with your insurance agent to ensure you receive the full payout needed to recover from the disruption. Conclusion Business interruption insurance is an essential safeguard for hotels, providing financial protection when unexpected events halt operations. By covering lost revenue, ongoing expenses, and additional costs, this insurance ensures that hotels can maintain financial stability and bounce back from interruptions without facing overwhelming financial strain. If you're ready to secure your hotel with business interruption insurance, contact us today for a customized quote.
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