Understanding Business Interruption Insurance for Boutique Hotels

by Sachin

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Business interruption insurance for hotels is similar to having personal coverage for yourself with income protection insurance. The two insurances are also very different, but in essence, business interruption insurance will cover your financial losses because your hotel cannot operate. You might also want to cover yourself personally with income protection insurance at the same time. You might have hurt yourself on holiday, and you cannot work in your own hotel.

At this time, you are not earning your income, and although you could still be paying yourself, you are not getting the work done for you not being there. You might need to employ someone to do your job for you, and therefore, you will need to pay them the income you would normally take.

Both insurances are important. They can overlap in some cases as some self employed income protection insurance will cover your business. It is important you have these two insurances calibrated to have the most coverage without overpaying. In this article, we take a closer look at loss of income insurance for your hotel, and the different situations it will normally cover you for.

  • Fire, Flood and Water. Insurance companies do not get their premiums from magical numbers in the air. They have experience with what has happened in the past. They can calculate the risk. The majority of claims under loss of income insurance come from fire, flood and water damage. It is important you understand the terms of your policy and understand the wording of such terms. Water damage and flooding are very different, for example.
  • No Entry. Sometimes it might not be possible for you to access your own hotel. There could be an issue in your neighbourhood or on your street. Your street might be closed by the police. In this case, the insurance will cover you for the loss of income during that time. Your location will have a lot to do with the need of this type of insurance.
  • Public Utilities. A burst water main, a gas leak or just the stopping of public utilities can render your business inoperable. This does not mean you are covered if you fail to pay your electricity bill, but at the same time you do not know if something like this will happen. Your customers could be upset and refuse to pay. You need to know you are covered.
  • Supplier Failure. While most issues related to suppliers are limited, but not being supplied with what you need to do business can have an impact. These claims are generally smaller but do exist.
  • Death and Closure. Unfortunately, sometimes people die or even suicide. This can have a huge impact on your business. You could be forced to close for an extended period of time due to police investigations or other reasons. This is a small, often made type of claim made under this protection.

Personal income protection insurance for the self employed, and business income loss insurance are imperative for hotels and particularly important if your hotel is your only source of income and essentially everything you have invested in.

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