The have to haves of Insurance for a Bed and Breakfast or Guesthouse
There is no doubt that as the B&B and guesthouse industry grows in
South Africa so too do more and more owners rely on the establishment
as a primary or sole source of income or a supplement to an inadequate
pension.
So what then does this mean if any number of losses specific to this
industry were to happen and how would this affect the owner of the establishment?
The answer to this is simple. The owner would hurt!
Many owners of such establishments fail to understand the implication
of incorrect insurance on their B&B until after something has happened
and then the question is asked of insurers “What do you mean my
loss of revenue following the rape attempt at my B&B isn’t covered?
I have a commercial policy” or even worse “What do you mean
my personal policy doesn’t cover this liability claim for R8m against
me?”
Whilst this may not have happened there are certainly many more incidents
and examples which have, so what then is the answer?
That too is simple. Insure on a specialist policy specifically designed
for the B&B or guesthouse industry. A policy that understands the
risks and caters specifically for them, “The Have to Haves of Insurance”
Big Daddy of them all is obviously Liability. There is still a school
of thought that R500,000 or R1m is enough for a B&B but with several
claims outstanding from guesthouses in South Africa right it’s clear
that any B&B owner with R500,000 as a limit would be in serious trouble.
And that is before we get to the question of Legal Defence costs that
many insurers limit. A recent claim settled at R300,000 had legal expenses
of over R150,000.
Many people ask how much cover they should have if running a guesthouse.
The answer is “as much as you can get”.
And never forget to tell insurers about all the activities and facilities
offered by the establishment.
Number two big risk is probably Loss of Revenue and the B&B or guesthouse
has some very specific risks. What would happen if a murder took place
at the establishment? What impact would that have on reservations? What
would happen if a B&B run by a husband and wife team saw the death
of one of the partners? How would that affect the business? And so the
list of “different” risks goes on.
Another risk sees many B&Bs with restrictions regarding “forcible
and violent entry” as far as theft is concerned. Ask most owners
of these establishments and they’ll tell you that it’s almost
impossible to comply with this condition. Guests come and go and leave
doors unlocked or even open.
Another implication of this condition is that theft by guests –
and sadly this does happen – would also not be covered.
On top of that there are other risks that can certainly “hurt”
the guesthouse owner. Bilking where the guest leaves without paying. Accidental
damage where guests damage contents in some way are just two examples.
Then we get to motor insurance. The last thing a B&B owner needs
to hear because he or she has “saved money” by opting for
cheap personal motor insurance is that neither the car nor the passengers
are covered as the vehicle was being used for business and not by the
“retired person” insurers thought they were covering.
So to sum up the “Have to Haves”. Running a B&B or guesthouse
has some very specific risks and those risks need to be catered for by
some very specific insurance.
Credit Dave Jack
