Hotel Insurance - Coverage and Necessity

Hotel Insurance - Coverage & Necessity

Insurance is one of the most important investments a business can make. Having insurance protects not only you and your business, property but your clients as well. In simple words, insurance is a risk transfer mechanism, where you transfer your risk to the insurance company and get the cover for financial loss that you may face due to unforeseen events. With a good insurance policy, you protect both your business and the welfare of your clients. Hotel deals with many types of people coming and going every day. Insurance is critical for hotels and is something that should never be taken for granted or forgotten about.

Though, the hotel business comes under the hospitality industry, it deals with heavy infrastructure such as buildings, storages, capital investment machinery, year inventory, and also other contents/supplies such as cutleries, crockery, utensils, furniture & fixtures, electrical installations e.t.c

As an owner or an investor of a hotel business, you are also at risk of facing situations which can result in loss and damage to your business. These situations commonly include fire accidents, theft of contents, any catastrophe leading to damage of property or casualty to customer/employee, legal claims from customers, employer-employee dispute.

Thus, hotel insurance is very important for a hotel owner to cover all the possible financial issues related to the business. While choosing a hotel insurance policy, it is better to go for a single policy which covers all possible risks and damages that might occur and covered it. For instance the policy should cover all the following; 

1. Coverage against claims made by public:

Hotel business involves diverse dealing with the public. Thousands of people are dealt with everyday. No matter the size, Large or small hotel, there is high risk of liability in services because of unhappy customers who may sue you because of any damage occurred to them or their property, due to the negligence of your Hotel or Hotel employees knowingly/unknowingly.

Hotels also serve wide variety of exotic Foods and beverages. There is a high risk of liability associated with these food items. People may fall sick after eating! Hotel insurance protects your business against the claims that originate due to the faulty food items served by your carelessness.

2. Coverage against Employers and product liability claims:

Here, there are two segments: employers liability and product liability. The law instructs all employers to take care of the employees health and working conditions at the workplace. It is the employer's responsibility to take adequate measures for sickness or casualty. If any of the employees gets injured or dies in an on-job accident, he/she is entitled for compensation from the respective management. No matter where the accident happens, in the premises or outside the hotel, if the employee is on duty, he can file a liability claim. In case, the working conditions cause any harm to the employees health, then are there chances of facing a liability claimed by the employees which are huge.

Coverage against Product liability: 

It Ensures smooth run of the business without any business interruption. Apart from the risks associated with employees, the public and customers, you may face risks that are absolutely out of your control like economic recession, Natural calamities that interrupt your hotel business, and might result in temporary/permanent shutdown of the business. Hotel insurance cover for all these Employers and product liability claims.

3. Coverage against Property related damages:

As for property concerns, property insurance is necessary. If any of the property is lost, damaged, or stolen as a result of accident, disaster, vandalism, and more, you will need coverage under this insurance policy. With equipment breakdown coverage, the hotel or motel will be covered for equipment failure. Equipment can include all small and large items such as an elevator, a washing machine and dryer, or even a coffee machine.

Similarly, hotel property is also at risk due to natural calamities like floods, tsunamis, earthquakes e.t.c or due to other reasons such as theft, fire, terrorism e.t.c. Damages resulting from these events require huge repairing costs which are burdensome and create financial imbalance. Hotel insurance policy covers all the property related expenses and provides quick financial support in all such unpredictable events.

4. Coverage against Customer liability claims:

Many customers today are aware of the legal claims and compensation they can avail if anything goes wrong during their stay in the hotels. Any accident, as small as a guest falling due to a slippery floor, can make the hotel liable for compensation. In worst cases, the injury or the damage could become serious which leads to a higher compensation. As a hotel insurance policy covers all kinds of customer liability claims, hotels can effectively face all liability claims and can successfully avoid unnecessary expenses.

5. Coverage against Cyber Attack and data leakage:

Do you know hotel records your everything?yes, it's true! They record your preference, your favourite food, drinks, details, your name, address, birthday, spending nature in their computer. Every minute details is recorded and there is high chance that these data gets breached or leaked and guest may sue hotel for compensation on it. Cyber attack insurance helps protect against both malicious online attacks and data breaches.

6. Coverage against Business interruption:

Business interruption insurance is an important consideration for any kind of business. The main advantage of including this insurance in a hotel insurance policy is to ensure smooth run of the business even in worst case scenarios, like the death of the owner and some other serious issues that halt the operations of the hotel. This single feature helps owners to run their businesses even when situations force them to shut down their business.

7. Coverage against General liability:

Example 1 : A luggage carrier’s wheel locks up while a child is riding the carrier, causing the child to fall off the carrier. They sustain a head injury during the fall. General liability insurance would likely cover necessary medical care.

Example 2: A young child finds their way to the pool and gets in the water. They haven’t learned to swim, and the result is a tragic drowning accident. General liability insurance would likely cover any lawsuit filed against the hotel seeking compensation for the incident.

Example 3: While carrying luggage into the hotel, a guest slips on some ice in the parking lot and falls. General liability insurance would probably cover any settlements related to injuries that they sustained in the fall.

8. Coverage against Legal Expenses:

Running a hotel means that you will probably be employing staff and you will definitely be hosting guests and this type of insurance provides cover for any legal expenses which are incurred following any disputes with customers and also staff. For example, if a staff member decides to try and sue you for a particular reason, this type of insurance cover can help to pay the bills if the case goes to court.

The insurance company would be the ones responsible for any amounts that an ordinary business could not afford. However keep in mind to insure your business as fast as possible because most insurance companies do not like to insure older buildings as they present a much higher risk. Some of those risks include older wiring, weaker structural design and poor layout. If there is older wiring, there is a higher chance you could have a fire at your location and the insurance company would be the one stuck with the bill. If there is a poor layout, people could get trapped in your building during natural disasters & get seriously hurt and the insurance company would then again be forced to make a payout.

Overall, Hotel insurance is typically a package of various coverages that protect you from the many risks involved with running your hospitality business. Things like employee mistakes, destructive guest behaviour, injury or property damage, reputational risks, equipment breakdown, food contamination, and weather-related events or natural disasters can all be covered. Moreover, Hotel insurance also covers and claims for:

  • Income and future earnings.
  • Building and its contents/supplies.
  • Inventory, equipment, and fixtures.
  • Outdoor fixtures, fences, and signs.
  • Customer and employee data.
  • Harm or injury caused by food or beverages you sell.
  • Personal injury or property damage caused by your employees/guests.
  • False advertising.
  • Burglary and vandalism.
  • Loss due to: Weather-related events and power outages.
  • Earthquakes, floods, and wind.
  • Building collapse, explosion, and fire
  • Replacing or repairing broken equipment.
  • Business down time and loss of income due to equipment failure.
  • Food spoilage or goods lost as a result of equipment malfunction.
  • Loss of guest property from premises.
I will be talking about the best insurance service provider of hospitality businesses in my next article.

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