Here are some commonly asked questions when considering insurance coverage for your inn, lodge or B&B.
How does owning a historic building impact my insurance?
Rebuilding a historic building takes highly skilled craftsmen, artists and stonemasons. Materials such as vintage stone and glass or hand-hewn timbers can be hard to come by. Additionally, detailed replicating is a must for historic renovation. All these factors add to the cost of rebuilding. It is critical that the coverage reflects the historic replacement cost of the building. Calculating an accurate replacement cost including debris removal is critical to having adequate insurance. Having an Ordinance and Law endorsement would be highly recommended.
- Replacement Cost: Cost to replace damaged property with like kind and quality without depreciation.
- Ordinance and Law: This endorsement is intended to protect the insured from ordinances and laws that require undamaged portions of the building to be torn down and rebuilt. Without this endorsement the insured would be caught with having only enough coverage to repair the damaged portion of the building and no coverage to tear down the undamaged portion of the building required by ordinance and law.
Do I need flood insurance?
Floods and flash floods happen in all 50 states. Everyone lives in a flood zone. Hurricanes, winter storms and snow melt are common (but often overlooked) causes of flooding. New land development can increase flood risk, especially if the construction changes natural runoff paths. Anyone can be financially vulnerable to floods. People outside of high-risk areas file over 20% of claims and receive one-third of disaster assistance for flooding.” (Source: Floodsmart.gov)
In addition to obtaining flood insurance through FEMA there is also a private flood insurance market. The private market offers Loss of Income and Rents coverage, whereas FEMA does not have this coverage available.
- Flood Insurance: According to Floodsmart.gov “Flood insurance covers direct physical loss caused by flood. In simple terms, a flood is an excess of water on land that is normally dry. The official definition used by the National Flood Insurance Program is: A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property).”
- Loss of Income and Rents: A provision in the insurance policy that allows for recovery of lost income due to a covered claim.
What are the common property insurance settlement options available to me?
There are three common settlement options; Actual Cash Value (ACV), Agreed Value (AV) and Replacement Cost (RC).
ACV can be defined as a depreciated settlement based on the age of the damaged property. Generally, the older the property the more depreciation, resulting in less of a payment settlement.
AV is what the insured and the insurance company agrees to. The insurance company will most likely ask for documentation of property values prior to agreeing to this amound.
RC is generally defined as the cost to replace damaged property with “like and kind” quality of materials. Regardless of what settlement option your policy states there are other provisions in the policy that can impact the final settlement. One such provision is coinsurance.
- Coinsurance: A provision requiring the property is adequately insured. If the property is not insured to the correct value a “coinsurance penalty” will be applied to the claim. Example: At the time of the claim the adjuster determines that the replacement of the building will cost $250,000.The policy declarations state that there is an 80% coinsurance clause. The adjuster takes 80% of the $250,000 and knows the insured needs at least $200,000 of coverage stated on their declarations page to be adequately insured and avoid any coinsurance penalty.
Do I need Liquor Liability Insurance?
If you sell and or distribute alcoholic beverages you have a liquor liability exposure. Most general liability policies exclude coverage for liquor liability. Exposure can vary from state to state depending on the Dram shop laws in the respective state.
- Dram Shop Laws: Named after establishments in 18th Century England that sold gin by the spoonful (called a “dram”), these laws are enforced through civil lawsuits, allowing DUI victims or their families to sue alcohol vendors or retailers for monetary damages. Dram shop is a legal term in the United States referring to a place that sells alcohol. This could include a bar, a restaurant, or a liquor store. There are special laws, called Dram shop laws, which impose certain liability for damages on vendors of alcohol. Although they are not considered alcohol establishments, Dram laws can affect anyone who profits from alcohol, such as caterers and vendors at concession stands.” (Source: Findlaw.com)
What is an endorsement?
An endorsement is an addendum to the insurance policy restricting or adding coverage. Common endorsements include restricting or broadening coverage for liquor liability, earthquake and spa or massage liability. Endorsements will often help clarify the coverage in the basic policy form.
Why should I require wedding parties to purchase insurance and list me as an additional insured?
Weddings increase your exposure to a liability and/ or property claim. In allowing someone to use your facilities, you transfer risk control responsibility to that party. Regardless of what controls you have in place you will never be able to anticipate the actions of the wedding party or guests. A glass of wine spilled on an antique rug or someone tripping on the same rug could be the least of your problems; depending on the laws in your state, you may be held liable for the actions of intoxicated or underage persons served at the venue. Requiring your party to purchase insurance, and naming you as an additional insured specifies that you will have rights to the insurance policy and coverage. If you would like an estimate for wedding insurance click here.