What does hotel insurance cover?

As the hospitality industry prepares to welcome back guests after the Covid-19 pandemic, many hoteliers have been making the most of their enforced downtime to reassess their business needs.
 
One of the key areas that’s worth re-examining is your hotel insurance. Is your policy right for your hotel or guesthouse? Do you know what cover you have – and is it enough to ensure your business is protected over the coming years?
 
Insurance for the hospitality sector is quite a complex subject, with several different options for you to consider as part of your package.
 
As insurance specialists, we want our clients to understand exactly what protection our policies offer. So, we’ve put together a brief guide to help you assess what you need.
 
Plus, we’ve included an overview of the roadmap out of lockdown so you can see how quickly you need to get your business up and running again.
 

Commercial insurance: the basics

All hotels need to be covered by insurance to protect you, your staff, your guests, your buildings and contents, and your business.

Commercial insurance is a package. There are certain core elements, then it’s up to you to decide which extras you want to include, and what level of cover works for you and your business. Lenders and licensing authorities may also set requirements.
 

Buildings insurance

If you own your premises, cover for the actual building is a core element of any hotel insurance policy. For mortgage holders, this will be a condition set by your lender.

It provides cover for damage caused to your buildings, which are usually by far your most valuable assets, and will help you pay for any necessary repairs – or even a total rebuild.

So how do you work out how much cover you need? By determining what the cost would be of a rebuild – including outbuildings, walls around your grounds, and fittings such as bathrooms and kitchens. You’ll find calculators online to guide you. Remember, rebuild costs may be higher if your building is listed.

Contents insurance

You should take out cover for both hotel and guest contents.

For the hotel, you need to calculate what’s in each bedroom: furniture, bedding, televisions and so on. Then add on your business equipment: computers, phones etc. Consider kitchens, maintenance, cleaning equipment and so forth, too. For a large establishment, this is no easy task!

Guest contents – or personal effects – insurance will provide cover for their belongings. As all hotels do, sadly, attract thieves, it’s a good idea to have this in place. Your policy might set a limit per guest, or an overall amount that you can claim.
 

Public liability insurance

It’s every hotelier’s nightmare that guests should get hurt on your premises – but accidents do happen.

Public liability insurance covers your business for legal fees and compensation if a guest raises a claim due to an injury, or loss or damage to their property, that is suffered on your premises.

So, if they slipped and fell on recently mopped stairs, resulting in a broken leg and broken spectacles, they could claim compensation for both – if they could prove your business was at fault, for example, through negligence.

It’s a legal requirement that your hotel business has public liability cover. It’s often set at around £2 million, as the costs of compensation claims plus legal fees can be hefty.

However, if you host large events at your hotel, you might need a higher level of cover. It can even be a condition of your premises licence.
 

Employer’s liability insurance

This is like public liability insurance but applies to injury or damage suffered by you or your staff in your hotel. Again, this is a legal requirement.

No hotel manager wants to see their staff, or their guests hurt – and liability claims can damage your reputation hugely, too.

So, it’s always best to avoid any claims by carrying out thorough risk assessments, ensuring staff are well trained, and putting health and safety plans into action.
 

Business interruption cover

This is a common add-on to insurance packages and is also known as loss of profits cover.

If your hotel is hit by a fire or flood, it may require extensive restoration work that is included under your buildings cover.

However, your hotel might also have to close its doors while the work is underway – yet will still have to pay certain fixed costs, such as staff wages.

Business interruption cover helps you absorb such costs, allowing your hotel to remain viable while closed. When you’re ready to reopen, you can do so with confidence.

The “indemnity period” is the maximum time covered under business interruption insurance – often set as standard at two years. Make sure this is long enough for your needs: for major hotels, a total rebuild, and refit could well exceed this period.
 

Hotel insurance: other elements

Each hotel is unique. You know your own establishment best, so it’s up to you to assess your business and decide what else you need to protect.
 
Accidental damage is one element you should consider. While perils such as fires and floods are covered under your buildings and contents insurance, accidents are often excluded. You’ll be glad of this cover if, for example, you drill through a cable and plunge your hotel into darkness.
 
Fixtures and fittings are a common add-on, as the cost of damage to these can add up quickly. You could include cover for cash kept on the premises, too.
 
Legal protection is another element that is often chosen, in case of a dispute with a third party.
 
If your hotel has a busy restaurant, you might choose to add on extra cover for stock such as food and alcohol. You could include cover for loss of licence, too, which provides compensation for the reduction in turnover if you were to lose the right to sell alcohol.
 
And finally, don’t forget personal effects cover for you and your staff, especially if you live at the premises.

Common exclusions on hotel insurance policies

As with all insurance policies, exclusions apply – it’s essential that you check the terms and conditions before you sign up.
 
You will need to keep up a certain maintenance schedule to protect your building from damage and staff and guests from injuries, e.g. regular wiring and gas checks. Failure to do so could render any claims invalid. Normal wear and tear are not covered under any policy.
 
You should also double-check what types of theft are covered under your policy, as hotels are more open buildings than regular houses, allowing guests and staff to come and go. Make sure you understand what security you need to be sure you are covered.
 
Finally, check that your kitchen is fully protected, as certain types of fittings or appliances increase your fire risk and may be excluded under standard policies.
 

Deciding on your cover

It can be tricky to get your level of cover just right. How can you foresee every eventuality that could affect your hotel and its guests? How much cover is enough?
 
Carrying out a thorough risk assessment gives you a good grounding. It will help you think through the hazards in your business – and find ways to reduce them.
 
You need to consider the size of your hotel, the number of staff, the needs of guests, and the type of events you run.
 
Online calculators can guide you through your decision. For tailored advice, just chat to Insurance Choice’s friendly staff about your business, and they’ll help you find a commercial insurance package that suits your needs.
 

When can hotels reopen?

Great news for the beleaguered hotel industry – after a year like no other, it will soon be time to fling open the doors and welcome back guests.
 
During lockdown, guest accommodation has been open only for very limited reasons, such as to accommodate those on essential business travel, vulnerable people, or those who need a temporary place to stay while moving to a new house. Leisure travel has been banned, and overseas visitors severely restricted.
 
Now that the vaccination programme has got off to a successful start, the restrictions are beginning to be eased.
 
Under the government’s roadmap out of lockdown, self-contained holiday accommodation in England can reopen from 12th April, including self-catering lets and campsites.
 
Hotels and B&Bs must wait until the third stage of the roadmap, which will begin no earlier than 17th May. Dates differ for Wales, Scotland, and Northern Ireland, but throughout the UK, things are looking up.
 
We could be in for a summer of staycations, with hotels and guest houses at the heart of the UK holiday season. And business travellers are likely to be making up for lost time, too.
 
So make sure you’re ready for a potential boom in bookings by checking you’ve got suitable insurance for a hotel cover in place.
 

Quarantine hotels

If you’re located by a port or airport, your establishment might already be in full swing: as a quarantine hotel.
 
Travellers from certain high-risk countries, or UK residents returning from those places, have had to stay in hotels for 10 days to ensure they’re Covid-free.
 
While many hoteliers have been glad of the business, and eager to prevent new strains of Covid from entering the country, this is hardly the career you envisaged when you entered the trade!
 

What are the rules once hotels reopen in England?

If all goes according to plan, overnight stays will be once again permitted throughout England from Monday 17th May – just in time for the second May bank holiday and the summer half-term.

Only two households or six people will be allowed to stay together at first. On 21st June, assuming conditions are met, we will reach the next stage of the roadmap, when there will be no restrictions on numbers.

It looks likely that some overseas travel will be allowed, too, under a traffic light system. Travellers from “green list” countries will simply have to take a quick lateral flow test to be allowed into the UK.

Weddings of up to 30 people will be back on the cards – and there’s going to be quite a backlog from last year!

So hopefully, you’ll soon be swapping your dismal view of empty beds and closed doors for the cheering sight of holidaymakers, business travellers and tourists entering your lobby.

What about the rest of the UK?

Each nation of the UK differs slightly in its roadmap out of lockdown.
 
In Scotland, the date for hotels to reopen is a little earlier than in England: 26th April. However, it’s not yet known when people from outside Scotland will be allowed into the country.

In Wales, hotels were able to start reopening from Saturday 27th March – but only if they offered self-contained accommodation, including en-suite bathroom facilities and room service. At first, only travel within Wales was allowed, but that restriction was lifted in mid-April.

In Northern Ireland, no dates have yet been set for the reopening of hotels.

But wherever your hotel is located, it’s time to check you’ve got suitable hotel insurance. We hope you now understand what the different elements mean and can choose your policy with confidence.

And if you’re looking for further ways to protect and grow your business, check out our recent blog on making your hotel stand out from the competition.
 

Get a quote from Insurance Choice Commercial today

At Insurance Choice Commercial, we are as excited as you are about the upcoming reopening of the UK’s hotel industry.
 
Our priority is to make sure that you, your buildings, and your business are all protected as we get ready for a great summer season.
 
We understand that each hotel or guest house is unique. So, we arrange bespoke packages to suit the requirements of your own establishment.
 
With more than 20 years’ experience in arranging commercial insurance, we can find the right solution for your business. Flexible payment options are available, including spreading the cost by paying by monthly instalments.
 
Get a quick quote by calling 01384 429900 or contacting us online.

Policy benefits, features and discounts offered may very between insurance schemes or cover selected and are subject to underwriting criteria. Information contained within this article is accurate at the time of publishing but may be subject to change.