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What is hotel insurance?

Hotel insurance is a customized business insurance package designed to address the specific risks faced by the hospitality industry. Whether you run a boutique motel, a large luxury resort or a bed and breakfast, this coverage protects your physical assets, your liability and your financial stability. It safeguards your business against claims related to property damage, guest injuries, theft and other operational liabilities.

What hotel insurance includes

A standard hotel insurance policy typically bundles several key coverages to provide a baseline of protection. Here’s what to expect:

• Commercial general liability (CGL): General liability insurance protects hotels against claims of bodily injury or property damage sustained by guests or third parties on your premises (e.g., a guest slips in the lobby).
• Commercial property: Commercial property insurance covers damage to your building and its contents, such as furniture, equipment and inventory, due to insured perils like fire, vandalism, theft or severe weather.
• Business interruption: This coverage replaces lost income if your hotel is forced to close temporarily due to a covered event, helping you pay ongoing expenses like payroll and rent.

Recommended add-ons for hotel insurance coverage

Depending on the amenities and services your hotel offers, you may need additional coverage, including:

• Cyber liability: Essential for hotels storing guest data (credit cards, personal info) to protect against financial and reputational damage. It covers costs associated with data breaches and cyberattacks.
• Equipment breakdown: Covers the cost to repair or replace essential machinery like HVAC systems, elevators, or kitchen equipment if they break down suddenly.
• Liquor liability: Crucial if your hotel has a bar or serves alcohol. It protects you if an intoxicated guest causes damage or injury.

Common types of hotel insurance claims

Hotels are bustling environments, making them susceptible to a variety of claims. Being aware of these common issues can help you better understand your coverage needs. Here are some examples:

• Guest injury: While walking through your lobby, a guest accidentally slips on your wet floor, severerly injuring their neck. Your hotel is held liable, which leads to a lawsuit, costing you over $40,000 in legal and medical fees. Fortunately, you have the funds to cover all of these, thanks to your general liability coverage.
• Property damage: A guest lights a cigarette inside one of your rooms and accidentally ignites a fire, causing significant damage to the room and its contents, such as furniture, fixtures and electronics. Using your commercial property coverage, you are able to cover the necessary repair and replacement costs.
• Lost income: Due to a fire making one of your rooms unlivable until it’s repaired, you can’t use it to generate income. Thankfully, while those repairs are being done, your business interruption coverage reimburses your lost income.

How much does hotel insurance cost?

When it comes to hotel insurance, your costs can vary widely. That said, you should expect premiums starting at $1,000 per year, at minimum. Multiple factors, specific to your business, would be at play here, of course, including:

• Type of coverage: If your policy includes multiple add-ons, such as cyber liability and liquor liability, for example, you’re likely to pay more for your insurance.
• Coverage amount: The higher the coverage limits, the more expensive the policy. If, for instance, you opt for $5-million coverage limit for your general liability coverage instead of a $2-million one, your premiums will be higher, and vice versa.
• Size and revenue: Larger hotels with more rooms and higher annual revenue generally pay higher premiums.
• Location: Hotels in areas prone to natural disasters or high crime rates may face higher costs.
• Amenities offered: Features like swimming pools, gyms, spas, and bars increase liability exposure and premiums.
• Building age and condition: Older buildings may have higher premiums due to outdated electrical or plumbing systems.
• Claims history: A history of frequent past claims often leads to higher insurance rates.

How to get the cheapest hotel insurance rates

While you shouldn't compromise on necessary coverage, there are strategies to manage your insurance cost, such as these:

• Bundle policies: Purchasing multiple policies, like commercial property, general liability and cyber liability, from the same provider often unlocks discounts.
• Increase your deductible: Opting for a higher deductible can lower your annual premium, provided you can afford the out-of-pocket cost in the event of a claim.
• Maintain a good record: Filing fewer claims can lead to lower premiums in the long run. One way to avoid filing claims is by assessing whether the issue at hand has been caused by wear and tear or an unexpected disaster. For instance, if a piece of furniture breaks because it’s been around for over a decade, it may be more cost-effective to replace it out of pocket.
• Implement risk management: Installing security cameras, upgrading fire suppression systems and training staff on safety protocols can demonstrate lower risk to insurers.