Running a hotel or motel means you’re responsible for far more than rooms and reservations. You’re protecting a building that’s open 24 hours a day, guests who expect to feel safe, employees who do physically demanding work, and a business that depends on steady occupancy. Whether you own a 20-room roadside motel off I-40 or a full-service hotel near downtown Knoxville or the Smokies, the right insurance program is what keeps one bad night from becoming a business-ending event.
This guide walks through the coverages most Tennessee hotels and motels need, what each one does, and where owners most often find gaps.
Commercial Property Insurance
Commercial property insurance covers your building, furniture, fixtures, linens, kitchen equipment, and other business property against covered causes of loss like fire, wind, hail, theft, and vandalism. For most hotels, this is the largest single part of the insurance program.
- Insure to replacement cost, not market value. Construction costs have risen sharply in recent years. If your building limit hasn’t been updated, a large loss could leave you underinsured, and a coinsurance clause can reduce what the policy pays.
- Know your wind and hail deductible. Many Tennessee property policies now carry a separate percentage deductible for wind and hail. On a $4 million building, a 2% deductible is $80,000.
- Ask about ordinance or law coverage. If an older building is badly damaged, local codes may require upgrades when you rebuild. Standard property policies often don’t pay for those upgrades unless you add this coverage.
Business Interruption Insurance
When a fire, burst pipe, or storm forces you to close rooms, you lose revenue while many expenses keep coming. Business income coverage can replace lost net income and help pay continuing expenses like payroll, loan payments, and taxes while you repair. Extra expense coverage helps pay the added costs of reopening faster. Make sure your limit reflects a realistic restoration period. Rebuilding a hotel can take a year or more.
General Liability Insurance
General liability covers claims that your business caused bodily injury or property damage to someone else, such as a guest slipping in the lobby, a visitor tripping on a broken parking lot curb, or a child injured at the pool. It also typically covers legal defense costs, which can be substantial even when a claim has no merit. Hotels see more liability exposure than most businesses because of the constant flow of guests, visitors, and vendors.
Innkeepers Liability
A standard general liability policy usually doesn’t cover damage to guests’ personal property in your care. Innkeepers liability coverage fills that gap for things like luggage, valuables stored in your safe, or items lost from a guest room. Tennessee law can limit a hotel’s liability for guest valuables when the hotel provides a safe and posts the required notice, so ask your agent how your coverage and your posted policies work together.
Liquor Liability Insurance
If you have a bar, restaurant, or serve alcohol at events, liquor liability covers claims arising from serving someone who later causes injury or damage. General liability policies usually exclude these claims for businesses that sell alcohol, so this coverage is essential for any property with a liquor license.
Workers’ Compensation Insurance
Housekeepers, maintenance staff, kitchen workers, and front desk employees all face on-the-job injury risks, from back strains to slips to burns. In Tennessee, most employers with five or more employees must carry workers’ compensation, which pays medical bills and lost wages for injured workers and generally protects the business from employee lawsuits over workplace injuries. Read more in our article on how hotel workers’ comp claims are handled.
Commercial Auto and Hired and Non-Owned Auto
If you operate an airport or attraction shuttle, a maintenance truck, or any other vehicle titled to the business, you need commercial auto insurance. If employees run errands in their own cars, hired and non-owned auto liability protects the business if they cause an accident. Hotels that offer valet parking should also ask about garagekeepers coverage for damage to guests’ vehicles in your care.
Umbrella Liability
A single serious injury claim, such as a drowning or a shuttle accident, can exceed the limits of your general liability or auto policy. A commercial umbrella adds another layer of protection above those policies, often $1 million to $10 million or more, at a relatively low cost for the protection it provides.
Equipment Breakdown
Hotels depend on HVAC systems, boilers, elevators, commercial laundry equipment, and kitchen equipment. Equipment breakdown coverage pays for repair or replacement after a sudden mechanical or electrical failure, plus the business income you lose while the equipment is down. Standard property policies typically exclude these breakdowns.
Cyber Liability
Hotels process thousands of credit cards and store guest information in reservation systems. A data breach or ransomware attack can bring notification costs, forensic investigations, regulatory issues, and lawsuits. Cyber liability insurance helps pay those costs and can also cover lost income when systems go down.
Employment Practices Liability
With high turnover and many hourly employees, hotels face claims of wrongful termination, discrimination, harassment, and wage-and-hour disputes. Employment practices liability insurance (EPLI) covers defense costs and settlements for many of these claims.
Crime and Employee Dishonesty
Cash handling at the front desk, bars, and gift shops creates exposure to employee theft and fraud. Crime coverage can protect against losses from employee dishonesty, forgery, and certain kinds of electronic fraud.
Flood and Earthquake
Standard commercial property policies exclude flood and earthquake. Properties near rivers and creeks, especially in the mountains and river valleys of East Tennessee, should consider flood coverage, and properties in West Tennessee near the New Madrid Seismic Zone should look at earthquake coverage.
Packaging Your Coverage
Many smaller hotels and motels can combine property, general liability, and business income in a business owners policy (BOP) or a hospitality package policy, which can simplify the program and reduce cost. Larger or full-service properties usually need a commercial package policy built around their specific operations.
Work With an Agent Who Understands Hospitality
Every property is different. A limited-service motel, a mountain cabin resort, and a downtown hotel with a rooftop bar each have different risks. An independent agent can compare carriers that specialize in hospitality and build a program that fits your property. Contact Ace Insurance Consultants to review your hotel insurance program or request a quote.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
12 Ways Hotel and Motel Owners Can Lower Their Insurance Premiums
