Hotel insurance:

A business owner’s guide

Sometimes you just want to get away. We’ve all been there. A few days at a secluded B&B or luxurious resort can be refreshing and reinvigorating.

As a hotel owner, you create that respite. It’s a rewarding career – but with reward comes risk.

With the right insurance and risk management plan, you can protect your business, employees, and customers.

In this guide, we’ll cover:

• Who needs hotel insurance?
• Why do hotels need insurance?
• What kind of insurance do hotels need?
• How much does hotel insurance cost?
• Do restaurants need alcohol surety bonds?
• Managing risk in hospitality
• Choosing a risk partner that understands your hotel business

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Who needs hotel insurance?

Hotel insurance provides essential protection for all hotel owners, whether they own a small bed and breakfast or a large luxury resort. This includes:

• Boutique hotels
• Chain hotels
• Motels
• Inns
• Resorts
• Extended stay accommodations

Why do hotels need insurance?

Hotels need insurance to protect them from financial, legal, and reputational risks.

Businesses face a variety of risks in the hotel and accommodations industry. One of the biggest: property damage and loss.

Hotels host hundreds of thousands of guests at a time, and are often located in areas prone to severe weather events. These traits can put them at risk of costly property damage or destruction.

Other risks in the hotel industry include:

• Guest and employee injuries
• Theft and vandalism
• Business interruption
• Employment-related claims

Insurance coverage can help you safeguard your assets and mitigate potential liabilities.

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What kind of insurance do hotels need?

There are many types of insurance that could benefit your business. That’s why it’s important to follow a consultative approach to understand the full scope of your exposures. Then, your agent can help identify insurance solutions to mitigate your risk.

The policies we typically recommend for hotels are:

• General liability insurance
• Workers’ compensation insurance
• Business interruption insurance
• Commercial property insurance
• Crime insurance
• Cyber insurance
• Employment practices liability insurance
• Liquor liability insurance

Let’s explore each policy and when your business might need it.

Required insurance for hotels

Legal insurance requirements are determined by your state’s Department of Insurance, health regulatory agency, and lease contracts. Thus, the coverage required for your business depends on which state(s) you operate in and your contractual obligations.

Your insurance agent can help you identify the specific requirements for your business.

General liability insurance

General liability insurance covers claims that your business caused third-party injury or property damage. It helps protect your company from financial losses due to lawsuits or other legal claims stemming from your operations such as a trip and fall, illness, or even personal injury.

When we recommend general liability

Some states require certain types of businesses to carry general liability coverage. Even if not required, GL provides fundamental protection for your business. We recommend it for every business that interacts with the public or customers.

Workers’ compensation insurance

In most states, businesses with a certain number of employees must carry workers’ compensation. Workers’ comp covers medical bills and lost wages for employees who are injured or become ill on the job.

When we recommend workers’ comp

This no-fault insurance policy protects you and your employees from the financial impact of workplace injuries. Each state has different workers’ comp requirements, but we recommend it for most businesses with employees.

Essential insurance policies for hotels

These policies are likely not required, but we consider them essential coverage for hotels.

Business interruption insurance

Business interruption coverage, also called business income insurance, protects businesses against financial losses due to unexpected interruptions to their operations. It typically covers:

• Lost profit
• Payroll
• Rent or mortgage payments
• Utilities
• Ongoing business expenses

Examples of covered interruptions include natural disasters, power outages, and unforeseen equipment failures.

When we recommend business interruption insurance

We recommend business interruption coverage for any business owner who wants to mitigate the risk of disruptions caused by unexpected events.

Commercial property insurance

Commercial property insurance protects your building and physical property from events like:

• Fire
• Theft
• Vandalism
• Hail, windstorm, lightning
• Natural disasters

It covers financial losses from property damage, lost income, and other expenses while recovering.

When we recommend commercial property

We recommend commercial property coverage for most businesses that own or rent property, including buildings, equipment, inventory, and supplies.

Crime insurance

Crime insurance covers losses caused by criminal acts like:

• Theft
• Robbery
• Fraud
• Embezzlement

These acts could be by your own employees or third parties. It covers the costs of investigations, legal defense, and judgments.

When we recommend crime insurance

We recommend crime insurance to most hospitality businesses as they’re vulnerable to crimes like theft, robbery, and fraud.

Cyber insurance

Cyber insurance covers losses caused by a security failure or data breach. It’s beneficial for any business handling customer data. It covers a range of expenses, like:

• Credit monitoring
• Public relations
• Legal fees
• Regulatory fines
• Business interruption
• Deceptive and fraudulent instruction

When we recommend cyber liability

Nearly every business is exposed to cyber risk. We recommend cyber insurance for any business that uses technology to conduct business or store sensitive information.

Employment practices liability insurance

EPL insurance covers employee claims of wrongful employment practices like discrimination, harassment, or wrongful termination. It covers:

• Legal defense costs
• Settlements
• Judgments

When we recommend EPL

We often recommend EPL insurance for businesses with larger numbers of employees, but any company with employees faces the risk of employment-related claims.

Liquor liability insurance

Liquor liability insurance protects you from legal claims and financial losses arising from alcohol-related incidents. This essential coverage is required by many states and commercial leases.

It typically covers:

• Legal defense costs
• Settlements
• Judgments

When we recommend liquor liability

In most states, a liquor license and liquor liability insurance are legally required if you serve alcohol to be consumed on the premises. 

Even if your business’s primary purpose is not serving alcohol, if you serve it at special events, you should consider liquor liability coverage.

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How much does hotel insurance cost?

Insurance companies calculate your premiums using several factors:

• Business size and revenue
• Location
• Claims history
• Coverage limits

Because insurance costs can vary, it’s important to work with a risk manager to find the best solution for your business. Businesses with complex risk profiles will find the most value from partnering with an independent agent that will help them proactively manage risk for long-term success. Learn more about the benefits of integrated risk management.

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Managing risk in hospitality: 5 common risks

1. Property damage and loss

Hosting hundreds or thousands of patrons on your property can lead to costly property damage. Events like fire, flooding, and extreme weather can also destroy property and disrupt your operations.

To reduce your risk of property damage claims:

• Properly maintain all systems like fire protection, electrical, plumbing, and HVAC
• Train employees on guest management and responsible alcohol service
• Carry adequate commercial property insurance

2. Guest and employee injuries

Safety is crucial in the hospitality industry for both your employees and your guests.

A serious employee injury can cost a business hundreds of thousands of dollars, impact operations, and lower employee morale. And if a customer is injured on your premises, you could be held liable for medical expenses and other damages.

To mitigate the risk associated with injury liability:

• Create clear safety policies and protocols and provide regular staff training
• Conduct regular inspections and maintenance of your facilities
• Display safety signage and mark emergency routes
• Get adequate workers’ compensation and general liability coverage

3. Theft and vandalism

Because the hospitality industry often deals in cash, these businesses are especially vulnerable to theft and other crimes – by employees or outsiders.

To mitigate these risks:

• Implement security measures like surveillance systems, access controls, and inventory control systems
• Train employees on security protocols, cash handling, opening and closing routines, and recognizing suspicious or dangerous behavior
• Protect your business with a crime insurance policy

4. Business interruption

A hotel’s success depends on a steady flow of guests. Natural disasters, power outages, or other unexpected events can disrupt operations and lead to financial losses.

To prepare for the unexpected and minimize these losses:

• Create a comprehensive business continuity plan outlining your responses to various scenarios
• Invest in backup generators and redundant systems to minimize the interruption of these events
• Carry business interruption insurance to minimize financial losses

5. Employment-related claims

Hotels and other hospitality businesses usually employ a significant number of staff members. This increases the potential for employment-related claims, such as:

• Discrimination
• Harassment
• Wrongful termination
• Wage disputes

To foster a positive workplace culture and reduce this risk:

• Create equal employment opportunity programs with anti-discrimination, reasonable accommodation, and zero-tolerance harassment policies
• Deploy diversity and inclusion initiatives and provide training for employees
• Get an employment practices liability insurance policy

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Choosing a risk partner that understands your hotel business

To protect the business you’ve worked hard to build, insurance alone is not enough. It’s crucial to identify the most critical threats and make strategic decisions that will allow you to grow your business without disruption.

When it comes to risk, hotel owners face unique challenges. We’re right there with you – we work in the hospitality industry too. We just happen to be on the risk management side.

When you partner with POWERS, we’re more than your insurance agency. We’re a true business partner invested in your success. Our philosophy combines: