Did you know that bilking (when a patron does a runner from a restaurant without paying their bill) affects guesthouses too? In fact, it is a common pain point for guesthouse and B&B owners in South Africa – guests sneaking out and leaving their hosts out of pocket.
Guesthouse owners (including B&Bs, backpackers and boutique hotels) have a lot to think about when it comes to risk management, with a long – and often bizarre – list of things that can go wrong. From a guest who tucked a standalone heater into bed to warm it up, to liquid foundation spilt over expensive Egyptian cotton sheets. At SATIB, we have heard it all!
Tourism establishments have specialised insurance needs. From liability exposure to business risks, it’s important to chat to your broker about comprehensive cover with tourism-specific extensions.
It can be overwhelming, but here is Stacey’s easy-to-understand check-list of 10 things to consider when assessing your insurance needs in this ever-changing environment:
- Bilking
Have guests ever departed under cover of darkness? There are plenty of examples of guests who have booked online, agreed to pay their balance on departure, spent a night or two and then left without anyone seeing them go.
Specialist tourism insurers do provide cover for bilking; however, a regular insurer won't have this type of cover automatically included, so it’s important to ask whether or not your insurer can accommodate this requirement.
- Theft of contents by guests
And we’re not talking about soaps, shower caps or those teeny bottles of shampoo, body lotion or shower gel. You need to protect your business against guests stealing anything from cellphones (belonging to staff or other guests), appliances or furnishings! Sadly, this is on the rise and the main perpetrators are domestic travellers who are able to transport big items back home without being conspicuous.
- Fraudulent credit cards
Firmly in the top three, says Stacey, is the rise in use of fraudulent credit cards. “We have seen many cases where guests book online but don’t pay online. They agree to pay at the end of their stay and then swipe someone else’s credit card when they leave. It happens more often than you would expect, so it’s really crucial that you have a plan and protection in place.”
- Accidental damage
Accidental damage (and here we mean ‘unexpected’ damage not related to fire or flood) is not covered under a normal contents policy, but for guesthouses, accidental damage (which is often expensive!) occurs more frequently than you would imagine.
It’s also not a costly addition to your insurance package. For example, you can get up to R20 000 cover for just R67 a month – so it’s definitely a conversation worth having with your broker.
- Burst geysers
A burst geyser can result in lost business if guests decide not to continue their stay – or pay for the remainder of their stay if they need to relocate their room. This would fall under insurance cover for business interruptions but – and this is where specialist advice is invaluable – geysers may not automatically be included by a regular insurer. It is important that you speak to your broker or insurer to find out when and how you are covered.
- Machinery breakdown
This cover is for key pieces of machinery that would result in a business interruption, such as a generator or the malfunction of a walk-in fridge/freezer, especially if you cater for weddings or big events and the machinery failure results in a loss of business or expenditure recovery.
- General public liability
Public Liability is absolutely essential for guesthouses, and the liability would vary depending on what activities are available. For example, you may have a standard guesthouse that offers only overnight accommodation, or one that provides meals, which introduces the risk of food poisoning. The message is, once again, to chat to your broker or insurer about your individual offering/s and unique needs.
And when it comes to general public liability cover, inclusions are key. For example, legal defence costs are one of the most important inclusions. Right or wrong, court cases can be drawn out and very expensive. Make sure that your legal defence costs are covered up to at least R5 million to ensure peace-of-mind, and watch out for insurance policies that place a cap on this.
The same goes for insuring against the spread of fire. Imagine if there was an electric fire in your kitchen and your property is only worth R2 million but the neighbour’s house is worth R20 million and is affected by fire damage as well. You will be held liable to cover the cost of their damage as well as the cost of your damage. So, you need to make sure that your insurance policy provides you with sufficient cover for the full expense of damage incurred by the spread of fire in your location.
Load-shedding is unfortunately not covered under public utilities, but if there is a fire at the local electricity box and that results in a loss of electricity then you need to be able to claim for this. You can also protect against damage from power surges as a result of load-shedding by having surge arresters fitted on to your DB-board and including power surge cover in your insurance policy.
- Business all-risks
This protects you if a guest’s personal effects (including clothing, a cellphone or laptop) are stolen from their room by a criminal who has broken into the property. In instances like these, your client is likely to hold you liable. It’s your reputation on the line and you don’t want to go through a legal process with your liability policy. So, an alternative is to take out all-risks cover. You can start with cover from R20 000 per annum and rest easy that the situation will be taken care of without further risk to your business.
- Motor and passenger liability
If you offer shuttles for fare-paying passengers or guests (regardless of whether or not they pay you), then this becomes an essential part of your insurance cover. You have a simple duty of care to look after their safety and if there is an accident, you may well be held liable for any damages/costs. The Department of Transport requires you to have passenger liability cover in place and an operating permit for your vehicle. Don’t take chances – either get the cover or recommend Uber or taxis that have this cover in place.
- Buildings and contents
This should cover your standard insurance requirements for guesthouse-associated risks such as insurance against fire, standard theft, flooding and natural disasters etc. Most insurance providers present adequate and informed coverage for these requirements.
So, the long and short of it is, engage with a specialist broker who knows what questions to ask and who has access to insurers who know the risk and provide the right cover for YOU.
