About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren’t legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A HOTEL
Example 1: A luggage carrier’s wheel locks up while a child is riding the carrier, causing the child to fall off the carrier. They sustain a head injury during the fall. General liability insurance would likely cover necessary medical care.
Example 2: A young child finds their way to the pool and gets in the water. They haven’t learned to swim, and the result is a tragic drowning accident. General liability insurance would likely cover any lawsuit filed against the hotel seeking compensation for the incident.
Example 3: While carrying luggage into the hotel, a guest slips on some ice in the parking lot and falls. General liability insurance would probably cover any settlements related to injuries that they sustained in the fall.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It’s always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
Cost Of General Liability Insurance
The average hotel in America spends between $350-$700 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
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Other Types Of Coverage Hotels Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all hotels should obtain:
Commercial Property Insurance
Commercial property insurance covers business-owned real estate from perils such as fire and wind. Most policies also cover equipment and supplies that are kept at the insured property. Hotel buildings are often worth substantial amounts. Make sure your hotel’s policy provides enough coverage to rebuild the hotel building if it’s destroyed by a covered peril.
Commercial property insurance is often included in a business owner’s policy (BOP).
Workers’ Compensation Insurance
Hotels usually need workers’ compensation insurance because they employ staff. This coverage protects against work-related illnesses and injuries, and most states require businesses that hire employees to carry the coverage.
Cyber Attack Insurance
Cyber attack insurance helps protect against both malicious online attacks and non-criminal data breaches. These sorts of incidents are commonly excluded by general liability policies. When selecting cyber attack insurance, check to see whether the policy includes coverage for ransomware attacks. More than one hotel has had their data seized by ransomware, and sometimes the attacks have rendered electronic room locks inoperable.
Cyber attack insurance can be procured on its own or within a package policy.
Types Of Coverage Some Hotels May Need
In addition to the policies outlined above, there are a few other types of coverage your hotel may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Commercial Auto Insurance
If your hotel has a shuttle van, the van needs to be insured with commercial auto insurance. States generally require businesses to get minimum levels of coverage for their vehicles, and many businesses purchase more than the minimum coverage requirements.
Commercial auto insurance can be procured on its own or within a package policy.
Business Interruption Insurance
Operating a hotel comes with regular expenses that must be paid even when there’s a disaster. If your hotel is shut down following a covered disaster, business interruption insurance might help cover recurring expenses while the hotel isn’t generating revenue.
Business interruption insurance is often included in a BOP.
Additional Steps To Protect Your Business
Although it’s easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business’ financial losses after an incident occurs, but it’s much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Streamline your business’ internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
FREQUENTLY ASKED QUESTIONS
What is included in a business owner’s policy?
A typical business owner’s policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
What is the difference between business insurance and general liability insurance?
“Business insurance” is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.