Hotel Insurance
Obtaining a hotel insurance quote is one of the main considerations before you start running your hotel business. Insurance for a hotel should be one of your most important business considerations to ensure adequate protection for your livelihood. If you are running a hotel of what ever size or description, you will certainly need a range of insurance policies to protect your business. The good news is that, most of these covers can now be purchased under a ‘Hoteliers Combined’ insurance contract. A modern hotel insurance policy will cover various different contingencies and will be arranged in different sections.
The insurer issuing the policy will require a certain number of minimum sections to be purchased. Whilst many of these sections will be a matter of personal choice and budget, some will be compulsory to enable you to trade legally. If you have any employees, you will need employers liability insurance as this is a requirement of the Employers Liability Protection Act 1969. If you have purchased the building of your hotel on a mortgage or other type of bank loan, then the lender will want you to effect building insurance, with their name mention on the policy, thus protecting their interest. When starting any new business, cash flow is a major consideration and there may be a tendency to cut down on the number of sections of the hotel Insurance policy taken out to make it as cheap as possible.
However, if you are to fully protect your business, it’s worth while taking a moment to fully understand each section of the policy and what it has to offer in terms of protection for your hotel business. As mention above, most policies are now arranged on a package basis as is the norm with business insurance polices, this makes them easier to administer for both the policyholder and the insurer, if you are looking for a cheap hotel insurance policy with a wide variety of covers, buying on this basis could help to keep the cost down. Briefly, the sections covered on a hotels insurance policy, will include the following:
Hotel Insurance for Buildings
if you own the property, insuring the hotel buildings will be one of the core necessary policy sections for you. If you have a mortgage on the property, the lenders will probably want their interest noted on the schedule and will provide you with a list of perils that must be included under the cover. You will need to provide an accurate sum insured for rebuilding costs, your lender may be able to help you with this, particularly if they carried out a survey on the premises. If they didn’t, then you should obtain professional help, it’s not worth having a guess at it which could end up having some severe consequences. It is essential that this sum insured is adequate for your needs as it is the maximum amount that the insurance company will pay and in some cases, if the sum insured is not adequate, compensation for an incident may be reduced. The building sum insured should also include all the fixtures and fittings, walls, fences & gates and the piping & cabling belonging to the hotel or for which it is responsible. The perils insured are fairly similar to a standard building insurance policy although there is no section for loss of rent or alternative accommodation. If you are an owner occupier, then you will need to effect the business interruption section of the policy to protect you against loss of income following an insured event. If you are a landlord, looking for buildings insurance, that has been rented to a hotelier, then you should be able to include loss of rent cover but the building may be better covered under a different form of policy.
Stock, Trade Contents & Tenants Improvements
This section of the policy will cover you against material damage from a wide range of hotels insurance perils, such as fires, floods thefts etc. The three sections are as follows; Stock, which is defined as stock and materials in trade (such as foods or foods to be prepared, wines & spirits etc) or stock which is being held in trust for which you are responsible. Contents relates to all contents within the hotel, such as tables, chairs, beds, including machinery & plant, equipment, fittings, frontage & signs & blinds. In many cases, where the hotel is rented from a landlord, the proprietor will be responsible for signs & glass etc as the insurers of the building may not cover them. Glass in the property, should be included in the glass section of the policy, again in you rent your hotel, you may be responsible to insure the glass. Tenants improvements relate to any improvements and internal decorations which are your responsibility or which you own, again this applies if you are renting the hotel from a landlord. The range of perils is quite wide, but with regard to damage to Stock, ‘spoilage’ can be covered to refrigerated stock in another section of the policy. Before requesting your quotation, you may need to spend sometime calculating the replacement amounts of the above as these figures will be required by the insurers in order to calculate a premium.
Business Interruption (Loss of Income)
This a very important section of the hotels insurance policy and one that is sometimes overlooked by many persons buying insurance, especially if it is being sold on a non package basis or it may be an optional add on. In essence, this section of the hotel insurance policy will cover you in the event of a loss occurring at your property that interrupts your trade, resulting in a loss of income for you. Whilst the above sections will cover you for material property damage, it is this section of the policy that will protect your livelihood, whilst the insurance company are reinstating your property. In many cases, particularly following a serious event, it may not possible to run your business for several months which could result in a loss of bookings, especially if the loss occurs within your peak season. In other cases, you may be able to keep trading but with a smaller turnover. There are a number of ways of calculating a sum insured for this section of the policy. The easiest way is if the insurance company selects a sum insured for you, in most cases, this is a sum far in excess of what is actually needed and is ideal for a small business. For larger concerns, insurers may want to know the gross profit of the business and they will base there premium on this amount.A simple way to calculate gross profit for a business is as follows: Sales (turnover) + Closing Stock – Purchases & Opening Stock . So if you turnover over £250,000 per annum (the amount you take in return for accommodation, food beverages etc) and at the end of your twelve month trading period you have £1,000 stock remaining you subtract the amount you have spent on buying your stock say £50,000 and the stock you had at the start of the year (say £2,000). This will give you a gross profit of £199,000. This is probably the safest way of calculating gross profit as it leaves in the equation, fixed costs that may or may not reduce in the event of a serious loss. You can insure for a period of up to 12 months but this sometimes can be extended for up to 36 months. There are some useful extensions to this section which include: denial of access ( in case you are effected by a problem occurring in the vicinity of your property, which prevents access to your hotel premises) murder, disease or public health closure, or failure of public utilities.
Loss of Money
Business money can be covered under the policy and there are usually pre-set limits on the policy which you may have the option to extend. Money will be covered on the premises and in transit to the bank. One notable exclusion is theft from unattended motor vehicles, any theft by employees must be reported with in seven days of the occurrence. The insurance company will usually choose the sum insured for you. In most cases, this is perfectly adequate although larger concerns will need to consider the amounts on offer carefully.
