When running a hotel, there are many insurances that you can purchase to help protect your business. Whilst some of them are compulsory ( Employers Liability if you have employees, Buildings insurance, if you have a mortgage and your lender have asked you to provide cover, and engineering inspection insurance on certain types of plant or lifting equipment), the remainder are a matter of personal choice. If you buy your hotel insurance on a package basis, that choice may be whittled down to a few peripheral covers, with insurers including the major eventualities or business threatening risks as part of a core policy wording.
One of the most important covers for a hotel, is business interruption insurance and thankfully must insurance companies do seem to include it under their package polices. Also referred to as loss of profits insurance, this type of cover can help protect a hotel owner by providing insurance against a reduction in income following a loss at the property. The perils section of a policy will cover against most known perils that can effect a hotelier, but sometimes, the real damage to a business comes from it’s loss of income. Sometimes, especially following a serious loss such as a fire or, a flood, the restoration work can take many months to complete that’s even if there are no major complications the longer the delay, the longer the loss. Claims, tend to happen at the most inopportune moments and a serious loss at a hotel in the height of season can lead to a large if not total loss of income. Unfortunately, some hotel running costs are fixed, even if the hotel is not trading some of these costs will remain and the business will, have to finance them. Many hotels would simply not be able to absorb this type of loss without adequate insurance protection being in force. Most covers come with with an indemnity period of twelve months, although some contracts can be extended up to 36 months, if required. ( at an additional cost) The period of insurance begins with the occurrence of the damage and ends no later than the number of months stated on the schedule of insurance.( this is known as the indemnity period).
Hotel business interruption insurance-claims.
In the event of a loss, the insurance company will want access to the business accounts to help them settle the claim. The claims is usually settled by the insurance company providing an indemnity of the amount by which the gross income during the period of insurance as a result of Damage caused, falls short of the gross income which would have been received during the insured period had no damage occurred.
Some hotel insurance policies, especially those arranged on a package basis may come with a pre determined sum insured, whilst this may be acceptable to smaller business, larger concerns need to be careful that the sum insured is adequate for their needs. That said, the sums insured are usually quite generous, a sum insured of £500,000 is not unusual. In the main, the sum insured should represent the gross income of the business. A really simple way of calculating gross income is to take your turnover and deduct the cost of purchases needed to run the business. When calculating the sum insured, things such as staff wages and overheads are not deducted as these can of course still be due, even if the business is not trading for a while. Mainly claims from this section of the policy are attributed to serious events such as Fires or Floods but there are some interesting additions which may be applicable to some hotels and are worthwhile considering:-
- Prevention or Denial of Access.-
- Sometimes, access may not be possible because of an occurrence happening at a neighbouring property. Location will of course pay a big part in determining if this addition is required.
- Failure of Public Utilities-
- If there is an accidental failure of public utilities serving the hotel ( as opposed to a deliberate action such as cutting off services following failure to pay a bill) you may find that trading is affected, there are of course exclusions that can not be covered.
- Failure of Suppliers- Sometimes an event occurring at a main business supplier to your hotel business can result in you not receiving essential business supplies. The event would have to one of this perils insured by your own policy. Although, this is unusual and doesn’t often result in a big loss, many hotel business can be effected by a loss occurring at a booking agent, especially if they rely on them for large numbers of bookings. The cover provide is a small percentage of the total sum insured.
- Death or Disease or Closure- Sometimes hotels are forced to close for a period of time following a death or suicide at the premises. ON other occasions, illness or disease force a hotel to close for a period of time. Some hotels are also closed by authorities following problems with drains, sanitation or vermin.