Bed & Breakfasts are a wonderful way to get a more personal experience from a local’s perspective when traveling. The Lake Erie Shores & Islands have so much to offer that Bed & Breakfasts are a great way to help tourists get more out of their stay. This has caused them to become a great part of our region to enhance the experience of our busy summer season for our visitors. Perhaps you are a Bed & Breakfast owner or are considering opening your home to this unique business opportunity. Well, before you have too much fun with your customers, let’s discuss some of the insurance coverages you need and why.
Perhaps the most important coverage you can get is liability coverage. This can come in a few different forms: Personal Liability – extended from a Homeowners Policy, Businessowners Liability or General Liability. For the intents of this blog, we will break these down into Personal Liability Policies (Homeowners) and Commercial Liability Policies (Businessowners and General Liability).
Personal Liability is acceptable for a Bed & Breakfast but can be hard to get. Most insurance carriers will limit the amount of rooms you can have for rent and require the owner to live at the residence full-time. These two requirements cut out many of our local Bed & Breakfasts. The most important aspect of this type of liability is to make sure you have an Incidental Business Endorsement as the base Personal Liability Policy excludes any business operation. Another important aspect is to make sure you have high enough liability limits. Many Homeowners policies have $300,000 in liability coverage which might be fine for your home but not when you are running a business out of your home. You should definitely consider $500,000 or $1,000,000 limits. Writing a Bed & Breakfast on a Homeowners Policy can also leave some coverage gaps such as Business Income Coverage, Coverage for Property of Others in your Care, etc.
Commercial General Liability may be more expensive but you are also getting broader coverage that is specifically designed for businesses. It also comes along with Commercial Property Coverage which is also more desirable than Homeowners Dwelling and Personal Property coverage when running a business. Make sure you do not have any exclusions that will apply to activities or amenities you may offer. You don’t want to have an exclusion for foodborne illness as a Bed & Breakfast! Many General Liability or Businessowners policies may come with “Designated Premises” exclusion which excludes any claims for activities that occur off premises. This is not a big deal if you don’t offer any amenities or any services off of your property but some Bed & Breakfasts do so be aware of this exclusion.
However, Commercial General Liability coverage and Businessowners Liability coverage only provide coverage for the business and not coverage for you personally. This means that any claim that happens due to the Bed & Breakfast operation will be covered. However, if you are sued personally for something you said or did unrelated to the business, there will be no coverage. An example of this would be that you are helping a friend move and drop an air conditioner out of a window and it lands on someone below. This is not related to running a Bed & Breakfast and isn’t related to an automobile so it would only be covered by Personal Liability coverage like you find in a Homeowners, Renters or Condominium Owners policy.
Personal Property coverage is going to be the same as your Homeowners insurance since all you will be doing is adding an endorsement to cover business liability and property, the Incidental Business endorsement. This is just fine for covering your building and personal effects that are in the building including yours. However, this does not include a number of coverages that Commercial Property coverage can provide you.
Commercial Property coverage will allow you to purchase a number of helpful endorsements or may have them included such as Business Income Coverage or Personal Effects and Property of Others. Business Income Coverage will pay for any loss of income that is caused by a direct loss to your building or property. Let’s say you have a tree land on the home and it crushes the building damaging the inside and outside. If your building needs 2 months to be repaired back to pre-loss condition, then you will not be collecting revenue during that period. This could result in a substantial loss of income especially if it is during the busy season between Memorial Day and Labor Day. Personal Effects and Property of Others covers, basically, just what is says: personal items and property that belongs to others, including customers and employees, that is in your care, custody or control. If you have customers’ items in their rooms and there is a fire that destroys all of their items, you can turn here to try to help them out with their personal loss.
Another important risk management item to consider is a proper rental agreement for your customers. You need to make sure you include the correct Hold Harmless language and spell out the responsibilities or do’s and don’ts for your customers. These can be immensely helpful if you enter into a legal dispute with one of your customers. Make sure the family member(s) that sign this agreement are at least 18 years old as that is the age to enter into a formal contract. You should consult a qualified attorney to draft the proper documents and seek advice on how to best implement your rental agreement.
There are a number of additional coverages that are helpful for Bed & Breakfasts as well as other small businesses. If you want to hear more or need insurance for your business, contact The Frederick Agency at 419-732-3171 today. We are here to help!
By: Brennan Madison