Guesthouse insurance is a unique type of insurance, falling in a category between personal and business insurance. The owners of guesthouses, Bed And Breakfast and even Boutique Hotels are faced with some rather unique perils – and they need to find the correct insurance to cover them against these perils!
The correct guesthouse insurance should be tailored to each individual guesthouse, meeting both the needs and the budgets of the owners. Not only will this protect the owners from forces of nature, accidents, visitors or crime but it could also have an impact on aspects such as marketing and grading of the guesthouse.
I have taken the time to analyse a number of guesthouse insurance policies and decided it might be appropriate to share the wide range of perils that threaten the guesthouse business. It might well be that you do not need to be insured against all these risks. – but it remains prudent to be aware of the full spectrum of potential hazards!
Insurance to cover damage to buildings / structures
The first and obvious risk is the risk to the guesthouse building, structures and even garden on the premises. The guest house insurance policy will normally cover the main property, small outside buildings, walls, gates and fences against these perils:
- Fire, lightning, explosion, aircraft, storm, flood, escape of water, theft, impact by vehicles or animals, riot, civil commotion, malicious damage and accidental damage.
- Subsidence, ground heave and landslip cover.
- Signs and signposts.
- Garden plants damaged or destroyed during fire fighting operations or by a motor vehicle.
Insurance to cover appliance maintenance and household maintenance services
Guesthouses have to deal continuously with important services such as Maintenance and Repair. This is also sometimes described as the Household Services section of the policy. The guesthouse insurance policy could provide cover for the expenses incurred for labour and parts costs of electrical and plumbing services to repair and attend to the following:
- Faulty lights
- Blocked drains
- Plugs Leaks (toilets, etc.)
- Geyser thermostats
- Tap washers
- Geyser elements
- Toilet rubbers
- Power failures
- Geyser valves
- Distribution boards
- Burst pipes
- Earth leakage
- Blocked baths, sinks and traps
- Shower outlets
- Light switches
- Water connections
- Burnt plug points
- General house wiring
- Electric gates, electric garage doors, jacuzzi pumps, swimming pool pumps etc
- Appliance repair of Television sets, Fridges, Hi-Fi sets, Freezers, Video cassette recorders, Washing machines, Microwave ovens, Tumble driers, Stoves, Dishwashers etc
Important contents within the guesthouse is usually included in the guesthouse insurance policy. These contents include:
- Business Contents: The contents which guests will have access to or which will be used in conjunction with your business, i.e furniture, carpets, cooking equipment etc.
- Stock (In Trade): The stock in trade for standard perils like food, or any other items that you may sell.
- Stock (Refrigerated): Damage to frozen or chilled stock in any freezer, in the event of breakdown of refrigeration units, usually less than 10 years old or accidental failure of public electricity supply.
- Cigarettes, Cigars & Tobacco: As it says, this covers the stock of cigarettes, cigars and tobacco. This is often added to a policy if you have a public bar.
- Wines & Spirits: If your guest house is licensed and you sell alcohol you may require cover for wines and spirits. Again this can be a popular feature if you have a public bar.
- Goods In Transit: Covers stock whilst in transit for damage caused, say if the vehicle has an accident and it ruins your stock.
- Fixed Glass: The buildings section will normally cover glass in windows or internal doors, and contents cover will cover the glass in fixed items like a display cabinet etc. If you don’t own the property then you may be responsible for damage caused to window panes.
- Fixed External Signs, and Canopies: Covers any external signs and canopies outside your guest houses which normally advertise your guesthouse on it.[If not already covered under the Building and structures]
- Loss Of Licence: If you have a licensed guest house, i.e. you sell alcohol, then you may require loss of licence cover. It covers the reduction in value of your business as a result of non-renewal or withdrawal of your licence from causes beyond your control.
- Money: This can cover money, crossed cheques, postal orders kept at the premises during and outside of business hours which may be stolen or damaged by one of the standard perils.
- Personal Effects of Customers, Guests and Employees: It covers customers, guests or employees personal effects, like baggage etc for the standard perils. Optional but again can be a useful addition to the policy.
- Legal Expenses: Cover is provided for costs incurred in pursuing or defending the legal rights of the business in relation to statutory employment and taxation legislation, contract disputes and in pursuit of common law actions against third parties for nuisance and property damage. You will normally be charged extra for this cover.
- Outside Catering: If you provide catering outside the guest house then you may require extra liability cover. Most insurers will charge extra for this and is not normally automatically covered under policies.
- Own Personal Contents: If you have your own private quarters within the guest house it’s advisable to include cover for your own contents and valuables, like furniture, clothing etc, against the standard perils.
- Unspecified Personal Possessions: If you take any of your contents AWAY from the property, then you may want to insure them whilst outside the guest house, like jewellery, cameras, video cameras etc. This section includes this cover, usually for an additional fee.
Insurance to cover threats presented by guests
Unfortunately not all guest are hassle free guests. You may need to consider cover to protect from:
- Bilking: Provides cover in case your guest disappears without paying.
- Accidental damage: Where guests damage contents in some way.
Insurance to cover against claims from visitors
The most important aspect a guesthouse owner has to consider is insurance to protect from Public Liability. This provides the owners with peace of mind in the event of a claim (or law suit) being laid against them should something happen to a guest while staying at the guest house. The Public Liability cover will insure the client against claims that they are legally liable to pay for in the event of bodily injury to third parties or employees and damage to their property etc.
It is often mandatory for establishments hosting international guests to have a specific amount of public liability cover (such as the recent football world cup).
Perils covered under public liability would generally include:
- Food poisoning – Should your guests suffer from an ailment that could have been caused by a meal that they had at your establishment, you will be covered for this liability.
- Damage to personal effects of guests.
- Cover for activities, wildlife, spa’s etc that you possibly host.
- Trauma counseling costs following a violent event for guests.
- Damage to laundry of guests
Insurance to cover threats to business / operational wellness
How would you best protect your guesthouse from sudden loss of revenue/ business income? What would happen if a violent crime is committed at your guesthouse, a major event is cancelled or your business partner passes away? If your property is damaged by one of the insured perils, for example has a fire and you are unable to let any rooms out for 12 months whilst the property is being repaired, you may lose out on your income due to the rooms not being let out. Will you be covered and will you be reimbursed for your financial losses?
These are all questions the owners of a guesthouse have to consider. Guesthouse insurance could be tailored to cover the following:
- Cancellation of event or cancellation beyond the control of the guest
- Loss of data in computers up to a specified amount
- Telecommunications breakdown
- Suicide, murder or rape or any attempt thereat
- Staff stayaways – legal or otherwise
- Failure of essential equipment eg. air conditioners
- Death or hospitalisation of a “key member” being a spouse, partner or manager
- Noise pollution from premises within 500 meters of the establishment
- Legal service and medical services
Insurance to cover transportation perils
A very important aspect often neglected is the insurance required for vehicles used by the guesthouse. The insurance policy for the business should take into consideration whether visitors are transported with the vehicle to the guesthouse from the airport etc.
No guesthouse owners would like to hear that neither the car nor the passengers are covered, as the vehicle was being used for business and not for personal use. It is best to enquire from the insurer whether the vehicle is insured for business purposes and whether a PrDP license is required by the driver where passengers are transported at a fee.
This insurance could also include the following:
- Assistance with mechanical and Electrical Breakdown
- Emergency assistance such as a towing service to the nearest place of repair or safe keeping
- Jump Start Service, Tyre change Service, Assistance when keys are locked in the vehicle etc
Insurance to cover damage caused by employees
This is also known as Fidelity insurance. Even if you have done all the due diligence and appointed the best employees, they might still cause some damage. This section of the policy covers money or goods of the insured stolen by an employee who causes a financial loss to the insured. Common Fidelity claims include employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting, and other criminal acts.
We have named a rather comprehensive list of perils and challenges facing owners of guesthouses. It might well be that you need less insurance cover and that your insurance policy, without you knowing this, might cover most of these perils.
We would like to advise that you discuss this in detail with your insurer to confirm that your policy meets your specific needs!