A hotel is a building that earns money every night it is open, and the insurance has to be built around the nights it is not. On most hotel programs business income is the largest number on the policy, larger than the building, because a closed hotel loses room revenue from the first day, loses group bookings months ahead, and keeps paying management fees, debt service and key staff while it waits to reopen. The property form, the brand's requirements and the location's catastrophe exposure all feed into how long that closure lasts and who pays for it.
This page covers hotel insurance the way a hospitality underwriter reads it: the difference between flagged, boutique and independent properties and what a franchise or management agreement requires, business income with an extended period of indemnity, ordinance or law coverage on older buildings, guest property and guest injury liability, and the seasonal revenue patterns that should set the income limit. It ends with what moves the premium, what we need to quote, and what happens at claim time.
Flagged, boutique and independent hotels, and what each agreement requires
Hotels are underwritten by who controls the standards as much as by the building.
- Flagged hotels operate under a brand through a franchise agreement. The agreement sets minimum insurance requirements, usually including replacement cost property coverage, a defined period of business income, liability limits with the franchisor named as an additional insured, and sometimes a minimum financial rating for the carrier. After a loss, brand standards also decide how the property must be rebuilt, which can extend the time the hotel is closed.
- Managed hotels are run by a third party management company under a management agreement, which carries its own insurance requirements and its own questions about who insures the employees and who is named on what.
- Boutique hotels are smaller, design led properties, often in converted historic buildings. Their exposures cluster around older construction, restaurants and bars, and events.
- Independent hotels and resorts set their own standards. Resorts add pools, beaches, golf, spas and activities, each with its own liability exposure.
We write flagged, managed, boutique, independent and resort properties. Motels and extended stay properties are underwritten as a different class, and we do not place them.
Who insures what is a question in its own right when ownership and operation are split. Under most management agreements the owner buys and pays for the property and business income coverage while the management company is named as an additional insured, and the agreement decides which party insures the hotel staff, the liability and the employment practices exposure. When those responsibilities are unclear, two parties can each assume the other bought a coverage that neither did. We read the agreement and assign every line to a named party before quoting.
A change of ownership on a flagged hotel usually comes with a property improvement plan, the list of renovations the brand requires before it will relicense the hotel to the new owner. That work matters to the insurance twice: the renovation period needs coverage for the work in progress, and the values afterward need to reflect what the upgraded hotel would cost to rebuild.
A hotel program has more moving parts than most commercial property. Property cover for the building and its contents takes in the building, furniture, fixtures and equipment, and the contents of restaurants and back of house areas. Business interruption and extra expense cover replaces room, food and beverage, parking and event revenue during a closure and pays the extra expense of reopening sooner. Boiler and machinery breakdown coverage responds to failures of chillers, boilers, elevators, kitchen equipment and electrical systems, which can close floors or the whole hotel without any fire or storm. General liability cover handles guest injuries on the premises, supported by liquor liability where the hotel serves alcohol and by an umbrella or excess liability layer, since hotel liability claims can be large. Workers compensation for a hospitality workforce covers housekeeping, maintenance and kitchen staff, and cyber and data breach coverage matters for any hotel that stores guest payment cards and personal information in its reservation and property management systems.
Business income, old buildings, guests and catastrophe
Business income and the extended period of indemnity
Standard business income coverage pays for lost income during the period of restoration: the time it should reasonably take to repair the building and reopen. For a hotel that is not enough. When a hotel reopens, occupancy does not snap back to where it was. Group business booked for the closure period has gone elsewhere, conventions and weddings have been moved, online travel rankings have fallen and corporate accounts have found other hotels. Revenue often takes months to recover after the doors open.
The extended period of indemnity extends business income beyond the reopening date for a set number of days, and on a hotel it is one of the most valuable terms on the policy. Many forms include a short extension by default; hotels usually need a longer one. We set it from the property's own booking pattern: how far ahead group business books, how dependent the hotel is on events, and how long its market took to recover after previous disruptions.
Closures without damage to the hotel
Hotels lose revenue from events that never touch the building. A civil authority order that evacuates a coastal area ahead of a hurricane, a road closure that cuts off access, or a regional power outage can empty a hotel for days. Civil authority, ingress and egress, and utility service interruption coverages respond to some of those situations, and each carries its own conditions: a waiting period before coverage starts, a limit on how many days it pays, and usually a requirement that physical damage from a covered peril, within a set distance of the hotel, caused the order or the outage. That last condition matters most on the coast. An evacuation ordered before a storm arrives, when nothing has yet been damaged, often falls outside civil authority coverage entirely. Those conditions decide whether an evacuation week is covered at all, so we check them on every coastal and resort placement and tell owners plainly where the gaps are.
Seasonal occupancy and revenue based limits
A beach resort, a ski town hotel or a property near a stadium can earn a large share of its year in a few months. A business income limit set from average monthly revenue will fall short if a loss closes the hotel in its peak season. The limit should be revenue based and calculated across the months the hotel would actually be closed, including the extended period, and the policy structure should not cap recovery with a monthly limitation that assumes flat revenue. We build the calculation from monthly revenue history rather than from the annual total.
Ordinance or law on older properties
Many hotels, especially boutique and historic properties, were built under older codes. When one is damaged, the building department can require the repaired portion, and sometimes the whole building, to meet current code: sprinklers, fire alarms, accessibility, elevators, electrical and energy standards. A standard property form does not pay for those upgrades. Ordinance or law coverage does, in three parts: the value of the undamaged portion that must be demolished, the cost of demolition, and the increased cost of construction to meet code. On an older hotel the third part can be a large number, and code work also lengthens the period of restoration, which affects business income as well.
Guests, their property and their safety
Hotel liability starts with the familiar premises claims: slips in lobbies and bathrooms, falls on stairs, pool and fitness center injuries, and food illness in restaurants. It extends into areas that are particular to lodging. Guest property is one. Most states have innkeeper statutes that limit a hotel's liability for guests' valuables when a safe is offered and the required notice is posted, but those protections depend on following the statute's conditions, and loss of guest property beyond them is covered by innkeepers legal liability coverage, not by general liability. Valet parking brings customer vehicles into the hotel's care, which general liability excludes and garagekeepers coverage covers.
Guest safety claims are the other area. Allegations of negligent security after an assault, claims involving bed bugs, and claims brought under federal human trafficking law (18 U.S.C. 1595) against hotels where trafficking allegedly occurred have all become part of hotel liability underwriting. Some policies now exclude or sublimit these allegations, and we read that wording on every quote.
Catastrophe exposure by location
Location sets the catastrophe terms. On the Florida coast, Florida's named storm deductibles are expressed as a percentage of insured value, and a two percent deductible on a forty million dollar hotel is an eight hundred thousand dollar retention before the policy pays anything; storm surge is flood, excluded from the property form and bought separately. Louisiana's named storm market runs percentage deductibles higher than almost anywhere else, and interior drainage flooding in south Louisiana is routine rather than rare. On the South Carolina coast, wind cover often comes from South Carolina's coastal wind pool, paired with a policy excluding wind for everything else, and lenders on larger Charleston area assets sometimes require earthquake coverage. Inland, Tennessee's nighttime tornadoes make life safety planning a genuine underwriting question for hotels, and Arizona heat turns a cooling system failure into a business interruption problem, because a hotel without air conditioning cannot sell rooms.
What we need to build a hotel submission
- Current declarations pages for property, general liability, liquor liability and umbrella, with endorsements.
- The franchise or management agreement insurance requirements, and any property improvement plan in progress.
- A schedule of values with building, contents and business income values, construction, year built, stories and room count.
- Monthly revenue for the last two to three years, split by rooms, food and beverage and other sources.
- Updates to roof, electrical, plumbing, HVAC and fire protection, with years.
- Amenities: pools, restaurants and bars, event space, spa, valet and shuttle services.
- Five years of loss runs for every line.
- Security measures, staffing and any incident history involving guest safety.
For resorts and hotels with meeting space, the event calendar and group contracts help as well. They show an underwriter how much of the revenue is booked ahead and how exposed the property is to a closure during its busiest dates.
The brand's insurance requirements are worth sending first. They set the floor for the program, and building to them from the start avoids a certificate being rejected after binding.
What happens when a hotel claim comes in
Hotel claims are mostly about time. After a fire, storm or major water loss, the questions that decide the outcome are how long the hotel will be closed, how long its revenue will take to recover, and whether the policy's business income terms match that reality. A business income limit that runs out before the hotel reopens, or an extended period of indemnity that ends while occupancy is still recovering, leaves the owner carrying the difference.
Brand standards shape the timeline. A flagged hotel must usually be rebuilt to the brand's current specifications, which can differ from what was there before, and the franchisor may need to approve the work before the hotel reopens under the flag. Ordinance or law requirements add further time on an older building. We factor both into the business income calculation at placement, so the limits are built for the actual rebuild rather than an idealized one.
Contents claims on hotels have their own complication. Furniture, fixtures and equipment in guest rooms are often replaced to the brand's current specification rather than matched to what was lost, and soft goods such as carpet, drapery and bedding damaged by smoke or water usually have to be replaced across a whole floor rather than room by room to keep a consistent standard. Contents values that reflect current brand specifications, not the original purchase price, keep those claims from falling short.
Business income claims are documented with revenue records, so the claim moves faster when the hotel's monthly revenue history, forward bookings and group contracts are organized and available. Forward bookings in particular show what the hotel would have earned during the closure, which is the heart of the calculation.
Valuation matters at total loss. Georgia's valued policy statute is written for one and two family dwellings and limited to fire, so it gives a commercial hotel no protection, and a total loss settles on the policy's own valuation terms. That makes accurate replacement cost values and annual valuation review the protection. In Texas, the 2021 freeze remains visible in how carriers approach burst pipe and business income exposure on hospitality risks across the state, and owners should expect questions about freeze protection at renewal; the Texas freeze and hail picture is set out on our state page.
Liability claims, especially those involving guest safety, arrive later and turn on what the hotel did before the incident: security procedures, staff training, incident reports and how complaints were handled. Keeping those records complete is the best defense the policy can have.