The Difference Between General House Insurance, Commercial Insurance and Guest House Insurance

It is estimated that some 10,000 guest houses in South Africa have no other cover than normal house hold insurance cover in place. Others have been advised on commercial polices that whilst providing some aspects of cover that a guest house should have, still fall short of protecting both the owner of a GUEST HOUSE and the guest.

Of course it can be that the guest house never suffers from having the incorrect insurance in place; however the repercussions and risk involved in not having the correct cover are huge.

For some examples of litigation involving guest houses see here.

Normal household insurance is designed to protect a family and its contents only, it carries no public liability cover and any commercial activity on the premises may well negate the policy in full should a peril occur.

Commercial insurance tends to focus on risks associated with a business; a guest house is a hybrid of the two – part home, part business.

A guest house insurance policy therefore represents a hybrid of the two insurance policies.

What having the wrong cover in place can do?

  • Insurance companies charge an appropriate premium based on the declared risk. In other words if you let out rooms (guest house) and you subsequently have a claim for an occurred peril, they can refuse to pay out anything. In this case there is not full disclosure by the insured, so the contract (insurance policy) is null and void.
  • In the event of a claim by a guest and no public liability cover in place, the guest house will find itself having to pay for legal fees and any successful claim made against it.
  • Normal household policies provide no cover against specific risks such as business interruption and bilking, leaving the guest house owner to carry the full risk themselves.

Why is the risk so large with a guest house?

  • Wherever the public are involved accidents can and do happen. A glass of wine too many and a slip near the pool, a break in and a guest assaulted, the theft of a guest property – all events that even the most diligent GUEST HOUSE owner cannot guarantee against.
  • Most GUEST HOUSE owners have considerable equity tied up in their guest houses, should the incorrect cover be in place and a claim is made that cannot be made by liquid assets or arranging a bond / mortgage, it could result in the loss of the guest house. This means in many cases the business and the family home are gone.
  • Increasingly the culture we live in is one of sue culture, awards are made that we sometimes cannot believe – both by the size and the apportioned guilt.

In summary, having the correct cover is simply not an option – it is required as having beds to put your guests in.

If you have concerns about whether your guest house insurance cover is adequate, Incompass would be delighted to discuss your insurance needs and provide you with a free quotation based upon your specific circumstances.

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