Hotel & Guest House Insurance
Hotels present particular fire and life-safety exposures because guests may be unfamiliar with the building. Unlike premises evacuated by people who know the layout, a hotel cannot rely on that. This has important implications for fire precautions, underwriting and risk management.
The fire risk is spread across the whole building rather than concentrated in a plant room. Bedrooms contain the ignition sources, the corridors are the escape route, and the kitchen, laundry and boiler plant add their own. Compartmentation, detection in every room and a protected escape route are factors insurers consider when assessing the risk.
There is also a liability to guests which creates particular liability considerations. Under the Hotel Proprietors Act 1956 a hotel can be liable for guests' property, and where a notice is properly displayed that liability is limited, which makes the notice itself worth checking.
We can advise hotel and guest house owners, including owner occupiers and those letting to an operator, on insuring the building, the contents, the guests and the trade.
Common claims and risk exposures
The exposures that produce claims in this trade, rather than a generic list.
Fire with guests asleep
The defining exposure. A bedroom fire at night involves people who do not know the layout, may be unfamiliar with the alarm and are woken into smoke. Detection in every room, compartmentation between them and a protected corridor are the difference between an incident and a catastrophe.
Kitchens, laundries and plant
Hotels run commercial kitchens, tumble driers and boiler plant continuously. Lint in laundry ducting and grease in kitchen extraction are both ignition sources, and both sit inside a building where people sleep upstairs.
Water systems and legionella
Stored hot and cold water, long pipe runs to rooms and periods of low occupancy create the conditions for legionella. A written risk assessment, temperature monitoring and flushing of unused rooms are expected, and low occupancy makes them more important rather than less.
Guests' property and the 1956 Act
A hotel can be liable for property lost or damaged in the building. The Act allows the liability to be limited where the prescribed notice is displayed conspicuously at reception, which means the position depends on a sign nobody looks at until there is a claim.
Function rooms and events
Weddings, conferences and parties bring numbers, alcohol, temporary equipment and outside suppliers into the building. Marquees, staging, outside caterers and entertainers all create exposures the ordinary bedroom trade does not.
The cover we arrange
We arrange insurance around the property, its use, construction, occupancy and ownership structure. The cover available will depend on the individual risk and the terms offered by insurers.
Buildings
The structure and landlord's fixtures on a reinstatement basis, including outbuildings, grounds, pools and car parks. Many hotels are older or listed, which raises the cost of reinstating them properly.
- Structure, outbuildings and grounds
- Pools, plant and car parks
- Professional fees and debris removal
- Listed building requirements where applicable
Contents and guest property
Furniture, fittings, linen, kitchen and laundry equipment, together with cover for guests' property under the operator's liability. The guest element is usually a stated limit per guest with a higher limit for items deposited for safe keeping.
- Furniture, fittings and equipment
- Linen and consumables
- Guests' property, limit per guest
- Higher limit for deposited valuables
Public and employers' liability
Injury to guests, visitors and staff. On this class the exposure is broad: bedrooms, stairs, pools, kitchens, grounds and function spaces, with employers' liability required by law and included as standard.
- Injury to guests and visitors
- Pools, spas and leisure facilities
- Employers' liability, legally required
- Food safety and allergen claims
Business interruption
Gross profit lost while the hotel cannot trade, with an indemnity period long enough to rebuild and then rebuild the bookings. Seasonal trade means the timing of a loss matters as much as its size.
- Gross profit during closure
- Indemnity period of 24 or 36 months
- Seasonality reflected in the figure
- Loss of bookings and forward reservations
Engineering inspection
Lifts, boilers, pressure systems, pool plant and lifting equipment require statutory thorough examination. A hotel typically has more inspectable plant than owners expect.
- Lifts and pressure systems
- Boilers and calorifiers
- Pool plant where present
- Statutory, separate from damage cover
What an underwriter will ask
Having these to hand shortens the process considerably, and usually improves the terms.
- Number of bedrooms, floors, and the year and type of construction
- Fire detection: coverage of bedrooms and corridors, grade, and whether monitored
- Compartmentation, fire doors and the protected escape route
- Kitchen and laundry arrangements, extraction and cleaning regimes
- Water system risk assessment, temperature monitoring and flushing records
- Facilities: pool, spa, gym, function rooms, and whether events are held
- Occupancy pattern through the year and any seasonal closure
- Claims history, split between property, liability and guest property
What affects the cost of your insurance?
The main factors insurers consider when assessing the premium.
Fire protection and escape
Detection throughout, compartmentation and a protected escape route are the strongest influences on both price and availability, because they decide whether a night time fire is survivable.
Construction and age
An older or listed hotel with timber floors and concealed voids rates higher than modern construction, and costs more to reinstate sympathetically if the worst happens.
Facilities offered
Pools, spas, gyms and function business each add liability exposure. Events with alcohol and outside suppliers add more, and insurers rate the busiest night rather than the average one.
Seasonality and occupancy
A hotel trading year round with steady occupancy rates better than one earning most of its income in four months, because a loss in the wrong month is disproportionate to the annual figures.
Conditions and exclusions to consider
Terms vary between insurers, so treat these as the questions to ask rather than a description of any one policy.
Fire precautions not maintained
Wedged fire doors, isolated detection and blocked escape routes are the conditions most often breached in a working hotel, and each is also a fire safety offence in its own right.
Guests' property beyond the stated limit
Cover for guests' belongings is limited per guest, with a separate higher limit where items are deposited for safe keeping. Valuables kept in a room rather than the safe usually fall under the lower limit.
Legionella where no assessment exists
Where there is no written risk assessment or monitoring record, an insurer defending a legionella claim has very little to work with, and some policies condition cover on the assessment being in place.
Seasonal closure without notification
A hotel closed for the winter is an unoccupied building with stock, plant and water systems in it. Unnotified, the usual unoccupancy restrictions apply at the time the building is least attended.
Common questions
Are we liable for guests' belongings?
Under the Hotel Proprietors Act 1956 a hotel can be, but the liability can be limited where the prescribed notice is displayed conspicuously at reception. Items deposited for safe keeping usually attract a higher limit. It is worth checking the notice is actually up and legible, because the limitation depends on it.
What do insurers expect on legionella?
A written risk assessment, a scheme of control, temperature checks and flushing of outlets in rooms that have not been used. Periods of low occupancy increase the risk rather than reduce it, so the records matter most in exactly the periods when people stop keeping them.
We close for two months over winter. What should we do?
Tell the insurer before you close. Terms for a seasonal closure are normally straightforward, usually with inspections, heating maintained or systems drained, and alarms kept set. The problem only arises when the closure is not mentioned.
How long should the business interruption period be?
Long enough to rebuild and to rebuild the trade. Twenty four months is a common minimum and thirty six is often right for a larger or older property, because bookings do not return the week you reopen, particularly if you have missed a season.
How do I get a quote from True Risk Solutions?
Call 01304 262880 and speak to a broker, or email info@truerisksolutions.co.uk with what you do, what you need cover for and a phone number with the best time to call, and a broker will call you back. We need a phone number to quote, because the cover and the price depend on questions that are quicker to answer on a call than by email.
Related trades
Speak to a specialist who understands your industry
Tell us about your business and the work you undertake, and we will come back to you with cover options built around it. Call 01304 262880, or email us with a phone number and the best time to call and a broker will ring you back.