Hotel Insurance

How much Hotel Insurance and what cost?

You generally get what you pay for, so try not to leap in with both feet and opt for the cheapest quote. It pays to thoroughly research your market before you buy.

You'll find that hotel insurance policies vary widely in terms of:

• the premium you pay
• the level of cover you get
• the excess (how much you pay if you have to make a claim)
• the service

The following is a guide to the level of cover to consider taking out. Just remember that insurers apply what they call the rule of average. This means that if you insure stock for 50% of its real value, they'll generally only pay out 50% of the claim, so make sure your sums are accurate.

Buildings - consider insuring for their current rebuild or replacement cost, rather than the market value. Include outbuildings, walls, gates and signage.

Also take into consideration rebuilding design costs to meet current regulations especially for insulation and fire. Include site clearance costs, and professional fees to solicitors, architects, surveryors and engineers (usually 10-15% of the rebuild cost). If in doubt get a professional valuation.

Contents - furniture, fixtures, fittings, equipment, and stock at the premises - you might like to insure for their current replacement value so your business can be up and running at minimal cost. Consider including employees' personal belongings and visitors' effects (up to £1,000 per person) and guests' belongings and owners' household goods and effects.

Public liability - if you have 20+ employees, £5 million cover may suit actual needs rather than the £2m legal minimum.

Employers' liability - £5m is the legal minimum. Some insurers offer twice that based on experience.

Products liability - £2m is the legal minimum but you can extend this to £5million if you consider risk to your business is high.

Business interruption - work out how much profit you'd lose if couldn't use your premises for a year, plus extra expenses (eg alternative premises), this may provide a guide to what you may need.

Deterioration of stock - work out the value of stock you hold and which could be written off because of unforseen circumstances.

Goods in transit - the maximum value of goods you transport in any one shipment.

Specified items - the value of equipment you need to cover away from your hotel premises (eg. for outside catering events, meetings).

VAT - If you are't registered, exempt or partially exempt, ensure all insured sums are adjusted to include the non-recoverable VAT element.

More Than Business (an online hotel insurance provider reviewed on this site) helpfully offers a quote comparison for a small hotel/guest house with a maximum of 6 bedrooms.

Cost Example

• Price current at Sept. 2008
• Trading since 2002
• Location Bournemouth
• Buildings £200,000
• Contents £30,000 (inc personal contents)
• Stock £1,000
• Wines & spirits £180
• MORE TH>N BUSINESS Premium £456.09*
• Monthly instalment £38.00

*including Insurance Premium Tax

How to get Cheap Hotel Insurance

• Make your business premises as safe and healthy as possible to reduce premiums and cut the likelihood of expensive claims by customers and employees
• Make premises secure (BS standard locks, intruder alarms, CCTV etc) to deter break-ins
• If you can, locate your premises in an area that's free of flooding and subsidence and with a low crime rate
• Comply with the requirements of the Health and Safety At Work Act
• Complete a thorough risk assessment of the workplace
• Keep business money in a secured locked safe
• Don't operate your business outside Great Britain, Channel Islands or Isle of Man
• Buy an insurance package where you can pay the annual premium monthly, interest free
• Don't supply products directly or indirectly to the USA or Canada
• Don't leave premises unoccupied for long periods
• Don't store stock in basements where it's liable to dampness
• Make sure premises and mechanical equipment are well maintained
• Choose premises that are self contained with their own lockable entrance door
• Ensure all exit doors meet minimum security requirements

Risk Factors

• The number of letting rooms
• Your location (eg high crime area, or subject to flooding). If you're near a seafront or promenade you'll pay a higher premium
• Leisure facilities (eg swimming pool, gym and spa facilities) will crank up the premium
• Outdoor activities and excursions
• High turnover of employees
• If you're over 10 miles by road from the nearest fire brigade
• Hotels that shut down for winter (Nov - March) are looked on as a higher risk
• Providing permanent accommodation to students and DSS claimants
• Self-catering facilities
• If you're closed to guests for a period of 3 consecutive months and there's no-one living in the property

How to cut premiums

• Look for a policy where you can pay premiums monthly, interest free
• Let fewer rooms
• Put a risk management programme in place
• Install CCTV
• Keep your insurer up to date with changes if you take on fewer staff or cut back on stock levels
• Consider you operation of leisure facilities (health/beauty treatment spa, gym/fitness centre, swimming pool, sauna, steam room, hot tub, etc)
• Consider whether you organise excursions and the financial impact this has

Health and Safety at Work etc Act 1974

All owners of hotel premises must comply with the Health and Safety at Work Act. You face a hefty fine or even imprisonment if you don't. You'll also be vulnerable to claims from staff and the general public.

Overseen by the Health and Safety Executive (HSE), the Health and Safety at Work etc Act aims to create a safe working environment in all types of commercial premises.

Visit the HSE website for useful information and advice on all matters relating to health and safety in the hospitality sector.

You can also phone the HSE INFOLINE on 08701 545500 (fax: 02920 859260).

Another good source of help and advice is your Local Authority Environmental Health Department.