UNDERSTANDING INSURANCE
For the Bed & Breakfast or Country Inn Innkeeper
A Homeowners Policy Verses A Commercial/Business Policy
There are very important issues that must be addressed concerning the limitations of various insurance policies.
A Homeowners Policy
A standard Homeowners policy that does not have a specific B&B/Country Inn endorsement will cause serious problems in the event of a loss.
A standard Homeowners policy covers personal property only. In light of this, make a list of the following: 1) To what property do my guest have access? 2) What property do I depreciate for tax purposes? The property listed constitutes business property is are not covered by your homeowners policy under any endorsement unless it is B&B specific. Can you afford to replace your "business property" out of your own pocket? If not, do not purchase a Homeowners policy.
Another issue with the standard Homeowners policy is guest liability. A standard homeowners policy will not cover bodily injury or property damage to a guest or their property.
If you have a standard homeowners policy, you would be responsible, not the insurance company, for providing your own lawyer, paying for your own defense costs and paying for any settlement a jury awards. You run the risk of incurring a large financial burden in the event of a loss.
There are many other problems with Homeowners Policy (for example, your income or loss thereof cannot be insured), however, the business property and guest liability issues are more than enough reason not to purchase a standard Homeowners policy without a specific Bed & Breakfast endorsement.
A Commercial/Business Policy
The second type of insurance policy is a Commercial or Business policy which is a viable means of providing insurance protection. To ensure that you are obtaining the best possible coverage, make sure the policy is written with the following:
1). Replacement Cost Basis
2). Special Cause of Loss Coverage Form
3). Commercial General Liability Coverage Form with at least a $1,000,000 occurrence limit
Although the Commercial policy is the best type of policy to purchase, there are gaps in coverage which need to be addressed. Please note, most of the gaps in coverage can be filled by purchasing the proper endorsement.
