A couple buys a Victorian house in Fernandina Beach, restores six guest rooms and opens a bed and breakfast with a full breakfast served on the porch. They live on the third floor, and the house is still insured on the homeowners policy that came with the purchase, with a note to the agent that they “take in a few guests.” The first claim is a guest who slips on the wet porch steps after a morning rain. The homeowners carrier denies it, because the policy excludes business activity, and the couple learns that the house they live in has been operating as an uninsured lodging business.
Bed and breakfasts and small inns sit in an awkward place in the insurance market. They are homes, and often historic ones, but they are also public lodging establishments with paying guests, food service and the exposures that come with both. The program has to be built for the business, while still protecting the family that lives there.
Why a homeowners policy does not work
A homeowners policy is written for a residence. It typically excludes or severely limits business pursuits, and renting rooms to the public on a nightly basis is a business. Some homeowners forms offer a limited endorsement for occasional room rental, but those are designed for a single boarder or a spare room, not for a property that markets itself to travelers, takes reservations and serves meals. Relying on one of those endorsements for a true bed and breakfast is one of the most common and expensive mistakes in this class.
A bed and breakfast needs a commercial policy that recognizes the lodging operation, either a business owners policy written for small lodging or a commercial package that combines property and general liability. The application should describe the property as it actually operates, including the number of guest rooms, whether meals are served and whether the owners live on site.
The owners’ living quarters
Most bed and breakfast owners live in the building, and that creates a question the policy has to answer clearly. The commercial property policy covers the building and the business contents, but the owners’ personal belongings, their own furniture, clothing and valuables, may not be covered as business property. Some commercial programs include a limited amount of personal property for resident owners, and others require a separate policy for the owners’ quarters. Personal liability for the family’s activities away from the business, and for household members, needs a home as well.
The right answer depends on how the program is written, but the gap is easy to miss. Owners should know exactly where their personal belongings and personal liability are covered before a loss tests it.
Guests, breakfast and the liability side
The liability exposures are the same as a small hotel’s, concentrated in a house that was not built for commercial traffic. Guests fall on stairs, porches, garden paths and in bathrooms. Older houses have narrow staircases, uneven floors and steps without handrails, and each of those shows up in claims. Food service adds the risk of foodborne illness and allergic reactions, which is why the policy should include products and completed operations coverage and why the kitchen should follow the state’s food service rules for the number of guests served.
Many bed and breakfasts offer wine at check-in or a small bar. Serving alcohol to guests, even complimentary wine, raises the question of liquor liability, and a property that sells drinks needs that coverage written separately. Amenities such as pools, hot tubs, bicycles and kayaks each add their own exposure and should be disclosed.
The building is often the hardest part
Bed and breakfasts are frequently older or historic homes, and older buildings raise the same questions underwriters ask of any older property: roof age, wiring, plumbing, heating and fire protection. A roof near the end of its life, original wiring or the absence of smoke detectors in every guest room can limit the market or the price. Documentation of updates, with permits and invoices, makes the property easier to place.
Rebuilding a historic house to its original character after a fire or storm costs more than replacing a standard home, and current building codes add more. Ordinance or law coverage pays for the increased cost of rebuilding to code, and the building limit should be based on the cost to rebuild this specific house, not its market value. For coastal properties, wind and flood need the same attention they get on any Florida building. Our article on older boutique hotel insurance problems covers what underwriters look for in older lodging buildings.
Lost income when rooms are out of service
A bed and breakfast with six rooms depends on every one of them. A kitchen fire, a burst pipe in a guest bathroom or storm damage to the roof can close several rooms or the whole property during the season that pays the year’s bills. Business income coverage replaces lost revenue while the property is repaired, and the limit should reflect the busiest season rather than an average month. A closure caused by a power outage or a road closure after a storm, with no damage to the property, needs utility service and civil authority extensions to respond.
Staff and the rest of the program
Many bed and breakfasts are run by the owners alone, but those that employ housekeepers, cooks or front desk help need workers’ compensation under Florida’s rules for their size and class. Guest data and card payments taken through a booking platform or a card reader raise a cyber exposure, and a modest cyber policy is inexpensive relative to a breach. An umbrella over the general liability is worth considering for any property with stairs, a pool or alcohol.
Worth confirming on your policy
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That the property is written on a commercial policy, not a homeowners policy with a rental endorsement
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That the application accurately describes your guest rooms, meals and amenities
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Where your personal belongings and personal liability are covered if you live on site
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That products and completed operations coverage is included for breakfast service
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Whether you need liquor liability for wine or drinks you serve
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That the building limit reflects the cost to rebuild your specific house, with ordinance or law coverage
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That business income fits your busiest season, with utility service and civil authority extensions
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That smoke detectors, handrails and lighting are in place throughout the guest areas
Talk to us
Prestige Insurance Group works with bed and breakfasts, small inns and independent lodging properties across Florida, including historic homes that standard carriers are cautious about. Tell us how many rooms you operate, whether you serve meals and how the owners’ quarters are arranged, and we will build a program that covers both the business and the family that lives there. Our page on hospitality insurance in Florida covers the wider program for lodging properties.
Call the office nearest you. Se habla español.
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Miami: 305-969-8776
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Orlando: 407-993-2331
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Stuart: 772-247-3788
This article is general information, not legal advice. Coverage forms, exclusions and carrier appetite vary and change over time, and Florida lodging and food service rules can change; confirm current requirements with the state and counsel. Prestige Insurance Group, Florida agency license L057894.
