The Guesthouse Insurance Policy should be tailored to YOUR needs!

Guesthouse Insurance policies should always reflect the needs of each individual scenario – Insurance is never about a “One size fits all” approach. We have earlier discussed the numerous perils facing the guesthouse business  but how would this be addressed within a policy for a Guesthouse, Bed and Breakfast or Boutique hotel?

We decided to raise these and other questions with an experts from Outsurance, and believe that the very detailed and comprehensive response will contribute to a much better understanding of the insurance requirements for anyone running a Guesthouse, Bed and Breakfast or Boutique Hotel!

[Outsurance is currently finalising our new product development for guesthouses. This is a unique product specifically designed for guesthouses. The target date to release this to the market will be July 2011.]

• Does insuring your guesthouse fall under Business Insurance or would it be similar to Household Insurance?

With OUTsurance guesthouse insurance will fall under business insurance.

• How does Guesthouse insurance differ from normal household insurance

Household policies do not cater for business risks. Some of the existing products available in the market is however a combination of a personal and a business policy.

• What would you advise guesthouse owner keep in mind when they are looking for insurance for their guesthouse?

The guideline below will assist the client with the possible risks that could exist and that should be considered when a decision is taken on insurance:

SASRIA	Covers politically motivated riots and damage caused by non-political riot, public disorder including labour disturbances, civil unrest, strikes and lockouts.
Vehicle	These include passenger vehicles, LDVs, commercial vehicles, motorcycles, trailers and caravans. All sound equipment and any non-standard factory accessories must be specified. Optional cover is available for car hire, business use outside SA, vehicle credit shortfall and loss of or damage to your vehicle, while it is in the possession of another party who is selling it on your behalf.
Buildings	Covers immovable structures, which you own or for which you are responsible. This includes the main building itself, the outbuildings and all other permanent fixtures, fittings and improvements. Optional cover is available for theft, accidental and malicious damage to fixed glass, machinery breakdown, subsidence, loss of rent and geyser and pipes wear and tear.
Contents	Refers to movable property and movable property designed to exist or operate outside at the premises. It does not include tenant’s fixtures and fittings, fixed glass forming part of the structure of the building, stock on your premises and stock in transit, electronic business equipment, money and items which you have specifically covered under the Out-of-Office section. Optional cover is available for damage caused accidentally, loss or damage caused by mechanical-, electrical- or electronic breakdown, theft and subsidence.
Electronic equipment	Refers to your televisions, satellite television decoders, computers, licensed software, scanners, printers, photocopiers, fax machines, projectors, audio and visual equipment and other electronic business equipment inside the building at the premises. It does not include stock items as this must be covered under the Stock section.
Stock	Refers to stock items used as part of your stated business activity inside the building at the business premises. Optional cover is available for stock designed to exist or operate outside the building, theft, damage caused accidentally, deterioration of refrigerated stock and subsidence.
Stock in transit	Refers to stock used as part of your stated business activity while being transported within SA. Optional cover is available for theft, when 3rd party carriers are used and when goods are being transported to countries outside SA.
Money	Refers to your cash, cheques, credit card vouchers, pre-paid vouchers, gift vouchers and other negotiable instruments. The money must be contained inside the building during your usual business hours at the business premises. Optional cover is available for money contained inside the building at the business premises where the incident occurred outside your usual business hours. Optional cover is also available for money while being taken to or from the business premises by a member, partner, director, employee or professional money carrier.
Out-of-Office	Refers to your possessions, which are normally taken away from the business premises. All possessions that are taken away from the premises need to be specified under OUT-of-Office. This will include items such as notebooks, GPS devices, cellular phones, cameras etc. This is also referred to as “All Risk” cover.
Watercraft	Refers to any motorboat, ski boat or wet bike which consists of the hull, motors, machinery, equipment, standard fittings and accessories that would normally be sold with it. The watercraft trailer must be covered under the vehicle section.
Business interruption	Refers to the financial loss you suffer following interruption of your business. The monthly fixed expenses and the operating profit can be covered. We define operating profit as your earnings before interest, tax and depreciation. Additional working expenses can also be covered and is the maximum amount of additional expenses necessary and reasonably incurred for the sole purpose of avoiding or diminishing the loss of profit which would otherwise have been lost as a result of the damage.
Public liability	Covers the business where it is legally liable for incidents which occur in the course of or in connection with your business. Death, illness or bodily injury caused to any person is covered. Loss of or damage to tangible property belonging to other people is also covered. Optional cover is available for:
	Defective products: Covers accidental death, illness or bodily injury to other people that occurs away from your business premises and which is caused by goods or products sold or supplied in connection with your business. Veld fires: Covers damage or bodily injury caused by the spreading of a veld- or forest fire.
Employee dishonesty (Fidelity)	Refers to cover for losses following acts of fraud or theft by any employee who obtains direct financial gain by these actions.
Personal accident	Refers to cover for members, partners, directors, principals, or employees. They are covered for death or disability directly caused by an accident occurring anywhere in the world, provided that the death or disability occurs within 12 months of the injury. Cover is provided on a named person basis or a department/position basis.
Employer’s liability	Covers damages you are liable to pay arising from accidental death, injury or illness of any employee in the course of their employment with you.

How easy would it be for the Guesthouse owner to find insurance?

Obtaining insurance cover for a guesthouse with OUTsurance should be a fairly easy process for the owner due to following advantages:

–          We deal direct – so there are no brokers or commission involved making the cover cheaper

–          The owner will be guided through the entire process by one of our sales consultants

–          The OUTbonus will reward clients that remain claim-free – guesthouses are usually small and managed by the owner who also lives on the premises so the owner can manage the risk better in terms of remaining claim-free

–          We rate scientifically and good risks don’t subsidise bad risks

–          The premium is fixed for 12 months and reviewed annually based on the clients profile

–          We offer a monthly or an annual facility

–          Client can select or “tailor” the cover to suit the specific needs of the business

–          We are also prepared to cover certain risks on a stand-alone basis

–          Our documentation is easy to understand

–          We have a fast, service orientated and hassle-free claims process

–          We will usually inspect and survey the risk based on certain underwriting rules (risk values, premium etc.) but we will also gladly do this on request and assist and explain all the relevant covers, special conditions, underwriting requirements  and answer any questions the owner may have

• Does guesthouse insurance cover the belongings of guests staying over as well?

As mentioned before we have designed a specific product for guesthouses that will be launched in July 2011. The product is designed to offer certain benefits at no additional cost when cover on specific risks is selected. For example Contents cover must be selected to qualify for some of the benefits.

• What would be the benefits included in such a Guesthouse Insurance Policy?

The benefits include the following:

(A limit on the number of claims or an excess may apply on some of these benefits)

Benefits available under Vehicle cover:
Help@OUT roadside assistance	Applies to vehicles with a mass of less than 3500kgs. A R 5,000 annual limit and a maximum of 2 incidents apply. The following will be covered: –          Breakdown (excluding accidents) covers the tow to the nearest service provider or place of safe keeping. The tow–in cost is covered. The costs of additional tows are not covered –          Safe storage of your vehicle – R400 –          Flat tyre – Call out + 1 hour labour –          Flat battery – Call out + 1 hour labour –          Keys locked in vehicle – Call out + 1 hour labour –          Run out of fuel – Call out + 10 litres of fuel When you are stranded more than 50 kms from home: –          Hotel accommodation or alternative transport – R 400 –          Repatriation of your vehicle – R 400 The costs for materials, parts and additional labour are not included.
Benefits available under Contents cover:
Locks and keys	Covers the cost of replacing locks, keys and access control devices for the insured premises following a burglary or attempted burglary up to R 2,500.
Property belonging to employees	Covers theft of the personal contents of any watchman, caretaker, domestic employee or gardener in the permanent employment of the guesthouse up to R 5,000.
Stock, stock in transit and deterioration of stock	Covers the stock for the cost price for loss or damage caused by the insured perils covered under the Contents section. It also covers the deterioration of stock in a fridge or freezer where damage is caused by a power failure, mechanical or electrical breakdown where the cooling unit was out of order for more than 24 hours. When the guesthouse transports groceries this will also be covered for theft and accidental damage. This benefit offers R 5,000 cover. Cover for higher amounts are available under our Stock and Stock-in-Transit section.
Medical and funeral cost	Covers the medical and/or funeral cost due to a fatal injury caused directly by a fire or crime at the premises up to R 10,000.
Injury to your pet	Covers veterinary costs resulting from a motor accident in which your household pet is injured up to R 2,000.
Help@OUT home and office assistance	Home assistance applies if you have selected Contents or Buildings cover. An annual limit of R 5,000 and a maximum of 2 incidents apply. The following will be covered: –          Locksmiths  – Call out + 1 hour labour –          Electricians – Call out + 1 hour labour –          Plumbers  – Call out + 1 hour labour –          Tree fellers – Call out + 1 hour labour –          Bee keepers – Call out + 1 hour labour –          Builders – Call out + 1 hour labour –          Glaziers – Call out + 1 hour labour –          Security – Call out + 12 hour shift We also offer a referral service for the following: –          Public emergency services –          Notification to the SAPS, Traffic, Ambulance and Fire Brigade Services –          Home gadgets – referral to service providers for home appliance repairs and services The costs for materials, parts and additional labour are not included.
Benefits available under Buildings cover:
Tree removal	Covers the cost of removing fallen trees up to R 5,000.
Garden damage	Covers the cost to replace grass, trees, plants, shrubs, water features and statues on the premises following damage by fire, fire fighting operations, explosion, damage caused maliciously, impact by vehicles, aircraft or articles dropped from them up to R 5,000.
Escape of beverages	Covers the damage caused by the escape of liquor and other beverages from fixed installations including the actual loss of the liquor and beverages during this incident up to R 10,000.
Help@OUT home and office assistance	Home assistance applies if you have selected Contents or Buildings cover. An annual limit of R 5,000 and a maximum of 2 incidents apply. The following will be covered: –          Locksmiths  – Call out + 1 hour labour –          Electricians – Call out + 1 hour labour –          Plumbers  – Call out + 1 hour labour –          Tree fellers – Call out + 1 hour labour –          Bee keepers – Call out + 1 hour labour –          Builders – Call out + 1 hour labour –          Glaziers – Call out + 1 hour labour –          Security – Call out + 12 hour shift We also offer a referral service for the following: –          Public emergency services –          Notification to the SAPS, Traffic, Ambulance and Fire Brigade Services –          Home gadgets – referral to service providers for home appliance repairs and services The costs for materials, parts and additional labour are not included.
Benefits available under Public Liability cover:
First aid treatment	Covers the liability associated with injuries caused when first-aid treatment was administered by the insured. The Public Liability insured value will apply.

We have also added specific optional cover under some of the sections of the cover. For example Business Interruption cover must be selected and the Tourist attraction loss optional cover must be selected to qualify for the cover provided by this option.

• What are the optional cover options that a guesthouse owner might consider?

The optional cover options include the following:

(A limit on the number of claims or an excess may apply on some of these optional covers)

Optional cover under Money:
Bilking	Bilking covers the cost where booked-in guests leave without paying the bill for their accommodation. The amount of cover required can be selected. The cover is limited to 2 x the insured value.
Optional cover under Contents:
Property of guests	Covers the uninsured property of guests and visitors at the premises. The amount of cover required can be selected.
Optional cover under Business Interruption:
Tourist attraction loss	Covers a financial loss the business suffers when an interruption of the business is caused by: –          Murder, rape or suicide occurring at the premises –          Food poisoning caused by food and drinks sold or supplied at the premises –          Closure of the premises on instruction of the local authorities due to defective sanitation, vermin or pests –          A shark attack or attack by wild game occurs –          Pollution, contamination or seepage that occurs –          Abnormal noise caused by construction activities occurring within 500 meters of the insured premises –          A bomb scare where the access and use of the premises were prevented on instruction of the police service –          A loss of visual appeal in consequence of damage to property forming part of or contained in the complex of which the premises form part of –          The prevention of access as a result of a veld fire –          The death of animals due to a veld fire (the animals itself is not covered only the financial loss incurred because the attraction these animals offered no longer exists) The Business Interruption insured values will apply.
Optional cover under Public Liability:
Break out of wild animals	Covers the liability arising from wild animals breaking out of the perimeter fencing on the premises and the recovery and relocation of these animals. The amount of cover required can be selected.

• Would the premium purely be based on the value of the Guesthouse – or would the fact that several people stay in different rooms also increase the premium?

A guesthouse is considered to be a fairly low risk. The premium will be calculated scientifically based on the information the guesthouse owner provided. The type of items covered and the insured values selected will also be used to calculate the premium

• What are the most often encountered claims you receive from damage to Guesthouses?

 

Most guesthouse businesses are fairly small and the owner may not always recover from a loss if the guesthouse did not have proper insurance cover in place. Typical losses that such a business may encounter can include the following:

• Vehicle accidents, thefts and the associated liability claims resulting from vehicle accidents.
• Thefts and robberies that occur. The most attractive items will include property belonging to guests and employees, stock, money and electronic equipment. We also know that guests are sometimes careless or they are so relaxed that they forget to look after their belongings and they then blame the guesthouse owner if something goes wrong.
• Water damage – This is also one of the main culprits for losses. Accidental flooding, burst pipes and geysers can also add to large losses in terms of the fixtures and fittings, contents and electronic equipment inside the premises. To reduce the exposure and to obtain a discounted premium the sensitive items should be lifted from the floor where possible.
• Electronic equipment is very vulnerable in terms of lightning and power surges. To reduce the exposure and to obtain a discounted premium these items should be properly protected with lightning and surge protection devices to reduce the lightning and surge damage exposure.
• Guests leaving without paying their bill often occur and it can leave the owner with quite a big loss especially when it is a fairly small guesthouse.
• Floods – Some guesthouses could be located close to flood risks like rivers, the ocean etc. because of the tourist attraction it offers. Flood damage will be very expensive and can lead to major losses. The main problem with flooding is the fact that it will re-occur again. It is sometimes not possible to remove the flood hazard and this could lead to cover exclusions or restrictions being placed on the cover.
• Fire – Fires can result in total losses. Almost 60% of fires occur due to cooking taking place at these risks. Dirty equipment, defective appliances, unattended cooking and staff negligence all contribute to these losses from occurring. Flammable gas is also often used for cooking and leaks, faulty appliances and defective installations can increase losses. Always make sure reputable appliances, equipment and suppliers are used where possible.

• Are there any other claims that the owner of a guesthouse should be aware of?
  

The following losses may not be encountered that often, but it should still be considered as it can lead to expensive losses:

• When a valid claim occurs and extensive damage was caused the business will be interrupted and without Business Interruption cover this can result in expensive financial losses.
• Employees can be tempted at times and they may commit theft and fraud while they are employed by the guesthouse. Guesthouse owners should consider Employee dishonesty (Fidelity) cover as most insurance policies exclude theft and fraud committed by employees unless the optional cover was selected.
• Employers can be liable to employees where the incident occurred in the course of the employee’s employment with the business. An employee can get injured at the guesthouse and this may result in legal action against the guesthouse owner. Guesthouse owners should consider taking Employer’s liability cover when their employees are not registered for workmen’s compensation.
• The guesthouse can be liable for incidents which occur in the course of or in connection with the business. This can include death, illness or bodily injury, loss of or damage to tangible property belonging to other people. Typical incidents could include “slip and fall” incidents and food and drink poisoning. Guesthouse owners should consider taking Public liability cover.
• Personal accident – Should a member, partner, director, principal or employee die or be disabled directly by an accident it could also lead to a loss. The guesthouse can select to cover “key” individuals on a named basis or on a department/position basis. It may also be costly to replace someone like a manager or a chef because a new employee must be sourced and then trained.

Also view:

How do we distinguish between a Bed and Breakfast, Guesthouse and Boutique Hotel?