Insurance Project A00256235
As part of my insurance elective I have chosen. I have been asked to carry out an insurance based project on a local business, where I have to investigate the types of insurance needed in for the business not to be at risk.
In this project I will highlight the difference types of insurance needed to successfully run a Hotel
Types of insurance needed to run a Hotel
Property liability insurance
This insurance covers loss damage or destruction of your buildings including walls, fittings, gates and fences around the building which in a hotel would be impossible to keep track on with so many people staying there at the one time problems are bound to happen. It also covers debris damages and architectural damages which could occur from the building getting older which can’t be ignored.
Risks the same to the pipes (water pipes, heating system) In hotels heating systems and appliances need to be checked regularly as they are a huge risk to cause a fire, they would be checked regularly and have to be kept up to date by the insurance company
-Risks the same to destruction of assets – such as lobby mirrors, stained walls/windows, luxury chandeliers and all other similar decoration fixed assets
-Risks the same to cleaning costs in case of an insured hosted event – in case a risks occurs, the costs of cleaning the space may be quite impressive sometime because it is unexpected an
One of the biggest risks in a hotel is fire as they can start from anywhere and the damage and repercussions of a fire are seriously damaging. The steps a hotel must undergo before and after a fire should ever occur are the following:
1. Review your insurance policies and check your deadlines
This refers to obligations to have a proper review of the hotel before it can be insured and the kind of coverage that is available to you. When reviewing your policy set a reminder to yourself before the deadline. Initial deadlines must include the date by which you give notice, file a sworn proof document, and file suit if you disagree with insurance company’s coverage determination.
Understanding your insurance claim can be difficult and timing for one is crucial, hiring a coverage lawyer is advised during the early stages of coverage claim
2. Place all insurance companies on notice
In the event of a fire, you should immediately give notice to your insurance provider. Fire and property damage are the most obvious source of coverage, do not forget about third party liabilities because a guest might have been injured on the property. Do not rely on coverage advice from brokers or assume your policy is not valid. Be sure to follow precisely the directions in each insurance policy regarding notice, and be aware that notice instructions may differ from policy to policy.
3. Asses all possible coverages
With respect to fire damages, a question that needs to be asked is to what extent the policy insurers against the peril of the fire. Typically, under ever insurance policy, fire is covered unless there is a sub-limit or exclusion. Even when a fire is not an insured peril, there is a chance of coverage if covered cause precedes, contributes to, or causes the loss.
4. Avoid fire hurdles and pitfalls
Fire is in high rise; Hotel buildings pose a number of difficult obstacles to insurance recovery. Being aware and familiar helps you avoid them from the outset:
• Insurance companies will always try to minimize fire losses. Policyholders should not settle for smaller payments as a fire could ruin a hotel and cause major damages.
• Insurance companies will try class smoke as a pollutant to not include it in the policy so you won’t be covered. A standard insurance policy must not exclude this loss
• In the case of a fire in a hotel owner might incur expenses for relocating and having to provide housing for guests. The owners, should seek insurance coverage for this also.
Employment Practices Liability Insurance (EPLI)
A type of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, the policies cover claims from a variety of other types of inappropriate workplace conduct, including employment-the same: defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. The policies cover directors and officers, management personnel, and employees as insureds. In a hotel having so many employees this insurance is very important in a huge company like the Sheraton as they have so many employees they can’t keep track of what everyone is doing and sometimes problems can arise between employees.). (IRMI, n.d.)
A survey conducted in the industry showed numbers are always rising with members of staff
Third Party Liability Insurance – Hospitality industry specific
A very common insurance policy constructed and implemented only for hospitality industry refers to the third party liability. Each special event hosted by the Sheraton Hotel puts third parties under risk. Risk managers must assess a number of factors for example
-Number of stars- this shows the quality of the hotel so Sheraton being a 4-star hotel would have an advantage as it’s a high end hotel meaning less risk and better facilities.
-Number of tables or chairs inside the Hotel
-Varieties of what is in the hotel for example the Sheraton has a gym, sauna, pool and restaurant and bar all of these will be assed for insurance purposes
-Parking the Sheraton has underground parking how much is visible is it secure, is their security working down there all questions a risk manager could have when evaluating the how much insurance is needed.
Business Interruption Insurance
If a disaster happens this would mean a business’s operations will likely be postponed until the problem is resolved. During this period, your business will suffer a crucial loss of income lost income due to your staff’s inability to work in the office, manufacture products or make sales calls. This type of insurance is especially applicable to companies that require a physical location to do business and as a hotel is such a big location this insurance is very important. Business interruption insurance compensates a business for its lost income during these events. By having the right insurance in place, a business can avoid a major financial loss due to a lawsuit or catastrophic event. Check with your insurer to find
out what forms of insurance are advised for your type of business and put those plans in place as soon as possible. (John Bailey Insurance, 2016)
Commercial auto Insurance
This insurance covers business that operate vehicles and because a hotel has deliveries coming in and out it is an insurance they need. People transporting in food deliveries new furniture and equipment are all covered under this insurance. But, companies who are using personal vehicles for the conduction of business purposes may find that the personal insurance will not help the business with related risks. Personal auto insurance on a vehicle used to carry out business needs might not have the correct amount of insurance needed, forcing the hotel to pay the losses.
Business Automobile Liability insurance was created to assist business from the unknown because they have bigger coverage limits than personal auto insurance, it rescues business and makes chances of continued business improve.
Commercial insurance contracts make a bond with company and insurance firms. Under the terms of the contracts insurers are made pay for physical damages under the terms of the contracted insurance policy and what the limits the insurance covers.
This insurance is regularly bought specifically for heavy trucks and semi-trucks.
Data Breach Insurance
Although this insurance wouldn’t be as highly needed as others for a hotel it is still necessary, if a hotels information on their clients or bank details are become breached electronically or from a paper file a data breach policy will provide protection against the loss.
A very common thing happening in hotels and other business is wiretapping people who hack into a system and get details from customers everything can be sold even addresses and data about the person.
Key words: Insurance, Hospitality Industry, Risk, Property, Liability.
JEL classification: G