Liga Asuransi – Friends of entrepreneurs, managers and hotel workers, how are you? Hope you are well and your hotel business runs smoothly.
In this blog, we always focus on discussing risk management and insurance, especially in the hotel industry. Understanding the risks faced by hotels and how to protect assets and operations with the right insurance is an important step for the sustainability of your business.
If this article is useful, please share it with your colleagues so that they can also gain useful insights. Don’t forget, find hundreds of other interesting articles on this blog to help you understand more about business protection!
The hotel industry is a business with large investments involving buildings, equipment, facilities, employees, and guests who come and go every day. With high asset values and high levels of interaction with the public, hotels face a variety of operational and financial risks that can have a serious impact on business. Therefore, having hotel insurance is not just an option, but a primary necessity to protect property, operations and business continuity.
Without proper insurance protection, hotel owners have to bear the losses themselves which can reach billions of rupiah due to fire, natural disasters, theft, lawsuits from guests, and business disruption due to unexpected incidents. For example, a hotel that experiences a fire must incur large costs for repairs, not to mention the loss of income because it cannot operate during the renovation. Additionally, if a guest has an accident on hotel premises and demands compensation, the hotel owner could face huge legal costs.
One factor that hotel owners often pay attention to is the cost of hotel insurance premiums. Many consider insurance to be an expensive additional expense, but with the right strategy, premium costs can be managed and optimized according to business needs. Understanding the factors that influence insurance premiums, how to calculate them, and how to save costs without reducing protection coverage is very important for hotel owners and managers to be able to allocate budgets efficiently.
This article will discuss in depth:
✅ The main factors that determine the cost of hotel insurance premiums, such as asset value, location, business scale, and claims history.
✅ How to save on insurance costs without sacrificing protection, such as choosing appropriate coverage and increasing risk mitigation.
✅ Example of calculating hotel insurance premiums, to give hotel owners a realistic picture of the costs that must be prepared.
✅ Insurance brokers play an important role in helping hotels get the best protection at competitive premiums.
By understanding all these aspects, hotel owners can make the right decisions in choosing insurance, ensuring that the business remains protected from various risks without burdening the company’s finances.
Factors that Determine the Cost of Hotel Insurance Premiums
Choosing hotel insurance is not just about getting coverage, but also understanding how premiums are calculated. Hotel insurance premiums vary depending on various factors, including asset value, location, policy coverage, and claims history. Hotel owners need to understand these factors in order to adjust their budget without sacrificing coverage.
The following are the main factors that determine the cost of hotel insurance premiums:
- Value of Hotel Property and Assets
The value of hotel property and assets is the main factor that determines the amount of insurance premiums. The greater the property value, the higher the financial risk that the insurance company must bear, so the premiums are also more expensive.
🏨 Hotels with high-value properties are at greater risk of claims because:
- Larger and more luxurious hotel buildings require higher repair costs in the event of a fire or natural disaster.
- Expensive furnishings, works of art, and advanced technology in hotel rooms and facilities increase the amount of insurance coverage.
- Hotels that have restaurants, spas and other luxury facilities also need broader protection because more assets are at risk of damage or loss.
Example of premium calculation based on asset value:
Small hotel with an asset value of IDR 10 billion → Property premium of around IDR 20 million – IDR 50 million per year.
Five star hotel with assets of IDR 100 billion → Property premium of around IDR 200 million – IDR 500 million per year.
The higher the value of the asset you want to protect, the greater the premium cost that must be paid.
- Hotel Location
Hotel location greatly influences insurance costs because risks differ in each region.
Hotels located in areas prone to natural disasters, such as areas with high earthquake rates or coastal areas prone to tsunamis and floods, will have higher premiums. This is because the possibility of building damage is greater compared to hotels that are in safer locations.
Location risk factors that influence premiums:
- Earthquake → Hotels in earthquake-prone areas such as Sumatra, Sulawesi or West Java have higher premiums.
- Flooding → Hotels located in areas with high rainfall or near rivers are at greater risk of flood damage.
- Tsunami → Hotels located near the coast are more at risk of damage due to large waves.
- Crime → Hotels located in city centers with high crime rates also have a greater premium because the risk of theft and robbery is higher.
Examples of premiums based on location:
- Hotels in safe areas with low disaster risk → Property insurance premium 0.2% of asset value.
- Hotels in disaster-prone areas → Property insurance premiums can reach 0.5% – 1% of the asset value.
- Hotel Scale and Capacity
🏨 The size and facilities of the hotel affect the cost of insurance. Larger hotels with more capacity have higher premiums because:
- More rooms → More properties to insure.
- Additional facilities such as restaurants, swimming pools, spas, fitness centers and conference rooms add to the value of assets that must be covered by insurance.
- Higher guest traffic → Increases the risk of guest accidents, so Liability Insurance premiums are also higher.
Example of premium calculation based on business scale:
- Small hotel with 50 rooms → Total premium around IDR 50 million – IDR 120 million per year.
- Five star hotel with 300 rooms → Total premium can reach IDR 500 million – IDR 1 billion per year.
- Types of Insurance Policies and Coverage
Each insurance policy has different coverage, and the wider the coverage taken, the greater the premium that must be paid.
✅ Hotel Property Insurance – Protects buildings, furniture, electronic equipment, and other assets from fire, natural disasters, or theft.
✅ Business Interruption Insurance – Replaces lost income when a hotel must temporarily close for repairs.
✅ Liability Insurance – Covers legal costs if the hotel faces claims from guests due to accidents on hotel premises.
✅ Employer’s Liability Insurance – Protects employees from work accidents and guarantees medical compensation.
The more types of insurance you take, the higher the total premium cost.
- Hotel Insurance Claim History
Hotels that frequently submit claims will face higher premiums in the following period.
If a hotel experiences a major fire and claims billions of rupiah, their premiums will increase the following year.
On the other hand, hotels with a history of low claims can get premium discounts from insurance companies.
Tip: Hotels should only submit claims for large losses, while small losses can be borne by themselves to maintain a good claims history.
- Security and Risk Mitigation
Hotels with good security systems can reduce risks and lower insurance premiums.
Facilities that can reduce insurance premiums include:
- 24 hour CCTV to reduce the risk of theft.
- Smoke detector and automatic fire extinguishing system to prevent major fires.
- Safety training for staff to reduce work accidents.
Hotels with high security can get premium discounts of up to 10%-20%.
- Number of Employees and Job Risks
The more employees there are at the hotel, the higher the Employer’s Liability Insurance premium.
Factors that determine employee insurance premiums:
- Job types → High risk jobs such as chefs and technicians have higher premiums than receptionists.
- Number of staff → Large hotels with hundreds of employees have to pay more for employee protection.
Estimated premium based on number of employees:
- Hotel with 50 employees → Premium around IDR 30 million – IDR 60 million per year.
- Hotel with 300 employees → Premiums can reach IDR 200 million – IDR 500 million per year.
How to Save on Insurance Costs Without Reducing Protection
Having hotel insurance is a strategic step to protect assets, income and operations from various risks such as fire, natural disasters, theft and lawsuits. However, many hotel owners are concerned about the high cost of premiums and are looking for ways to save money without reducing the coverage they need.
Here are some effective strategies to save on hotel insurance costs without compromising the security of your business:
- Choose an insurance policy that suits your needs
One common mistake made by hotel owners is purchasing an insurance policy with coverage that is irrelevant or too broad compared to their business needs.
✅ Identify your hotel’s key risks: Is your hotel more susceptible to fire, theft or operational disruption? Focus on the most relevant risks.
✅ Avoid purchasing excessive coverage: If your hotel does not have a restaurant, then product liability insurance for food may not be necessary.
✅ Adjust coverage based on business size: Small hotels may not need the same extensive coverage as a five-star hotel.
Benefits: By customizing your policy based on your hotel’s specific needs, you can avoid unnecessary premiums and still get optimal coverage.
- Improving Hotel Security
Hotels that have sophisticated security systems are considered to have lower risk, so insurance companies tend to provide premium discounts.
🔹 Install modern security systems, such as:
✅ 24-hour CCTV to monitor activities in public areas and increase the security of guests and hotel property.
✅ Automatic fire alarm and smoke detector to reduce the risk of loss due to fire.
✅ Electronic door access and key card system to prevent unauthorized entry.
🔹 Provide safety training for employees, including:
✅ Firefighting training for hotel staff so they can handle fires before they spread widely.
✅ Training in emergency evacuation procedures to reduce the risk of injury when an incident occurs.
✅ Increased hygiene and safety standards in the kitchen for hotels with restaurant services to reduce the risk of product liability claims due to food poisoning.
Benefit:
- Reduces the possibility of incidents that could lead to large claims.
- Get premium discounts of up to 10% -20% from insurance companies.
- Increase guest confidence in hotel security.
- Collaborating with Insurance Brokers
Insurance brokers have access to a variety of insurance companies and can help hotel owners get the best premiums with optimal coverage.
✅ Benefits of using an insurance broker:
- Negotiate more competitive rates: Brokers have relationships with multiple insurance providers and can compare the best rates for you.
- More accurate risk analysis: Brokers will help identify the policies that best suit your hotel’s specific needs.
- Assistance in filing claims: If an incident occurs, the broker will ensure claims are processed quickly and fairly.
Why use an insurance broker like L&G Insurance Broker?
- Experienced in the hotel industry.
- Understand the risks faced by hotels and provide the best solutions.
- Helps save costs by getting the best policy within your budget.
Benefit:
- Save up to 10%-30% on premium costs through policy negotiation and comparison.
- Get maximum protection without spending more.
- The claims process is easier and faster.
Example of Hotel Insurance Premium Calculation
Calculating the cost of hotel insurance premiums is very important for hotel owners and managers to allocate the budget appropriately. Insurance premium costs are influenced by various factors such as asset value, business scale, location, and type of protection chosen. In this simulation, we will see how the premium is calculated for a 4-star hotel with 150 rooms and assets worth IDR 50 billion, as well as a budget hotel with 50 rooms and assets of IDR 10 billion.
Premium Calculation Simulation for 4 Star Hotels
A 4-star hotel with 150 rooms and a total asset value of around IDR 50 billion has a higher risk than a small-scale hotel. These hotels usually have various additional facilities such as restaurants, spas, fitness centers and conference rooms, which increase the amount of insurance coverage.
For hotel property insurance, premiums usually range from 0.2% to 0.5% of the total asset value. With assets worth IDR 50 billion, the premium that must be paid is around IDR 100 million to IDR 250 million per year, depending on the hotel’s location, disaster risk and the security system it has.
In addition, the hotel also requires Business Interruption Insurance, which covers lost income due to business interruption. The premium for this cover ranges from 0.1% to 0.3% of the hotel’s annual turnover. If the hotel has an annual turnover of around IDR 50 billion, then the business interruption insurance premium can reach IDR 50 million to IDR 150 million per year.
In addition, Liability Insurance is very important for hotels that receive hundreds of guests every day. If an accident occurs on hotel premises that results in a lawsuit, this policy will cover legal costs and compensation. The premium for this legal liability insurance is usually 0.1% to 0.25% of turnover. With a turnover of IDR 50 billion, the estimated premium costs are in the range of IDR 50 million to IDR 125 million per year.
Lastly, hotels with a large number of employees must also have Employer’s Liability Insurance to protect staff from the risk of work accidents. The premium for this policy ranges from 0.1% to 0.2% of total employee expenses. If a hotel has labor costs of IDR 30 billion per year, then this insurance premium can reach IDR 30 million to IDR 60 million per year.
Taking into account all types of protection required, the total annual premium for this 4-star hotel is estimated to be between IDR 230 million to IDR 585 million per year, depending on the level of risk and coverage of protection taken.
Comparison with Budget Hotels (50 Rooms, Assets IDR 10 Billion)
In comparison, a budget hotel with 50 rooms and an asset value of IDR 10 billion will have a lower premium because the business scale is smaller and the risks are more limited.
For property insurance, with a premium range of 0.2% to 0.5% of the asset value, this hotel needs to pay around IDR 20 million to IDR 50 million per year for protection against fire, theft and natural disasters.
Because this hotel has a smaller business scale, Business Interruption Insurance is also cheaper, with a premium of around 0.1% to 0.3% of turnover. If the hotel’s turnover is around IDR 10 billion per year, then the premium costs will be around IDR 10 million to IDR 30 million per year.
For Liability Insurance, premiums are also calculated based on annual turnover. With a turnover of IDR 10 billion, this hotel can pay a premium of around IDR 10 million to IDR 25 million per year to protect against lawsuits from guests.
Meanwhile, Employer’s Liability Insurance is calculated from total labor expenditure. If this budget hotel has labor costs of around IDR 5 billion per year, then the premium will be around IDR 5 million to IDR 15 million per year.
Overall, the total estimated annual premium for this budget hotel ranges from IDR 45 million to IDR 120 million per year, much lower than 4-star hotels due to smaller assets and a simpler business scale.
Conclusions and Recommendations
Understanding the factors that influence the cost of hotel insurance premiums is very important for hotel business owners and managers. By knowing how asset value, location, business scale, and type of protection affect premium costs, hotels can choose the right insurance policy without burdening the company’s finances.
There are various ways to save on insurance costs without reducing protection. Improving hotel security systems, such as installing CCTV, fire alarms and electronic door access, can reduce risks and provide premium cuts. Additionally, choosing insurance coverage that suits your needs and avoiding irrelevant coverage can also help reduce costs.
The estimated results of premium calculations show that hotel insurance costs vary depending on business scale, assets and location. A five-star hotel with complete facilities certainly requires wider coverage than a small budget hotel. Therefore, working with a professional insurance broker like L&G Insurance Broker will help hotels get the best premiums with maximum protection.
Don’t let risk destroy your business! Protect your hotel with the best insurance from L&G Insurance Brokers. Contact us now and get the most competitive insurance solution that suits your business needs! 🚀
Looking for insurance products? Don’t waste your time and contact us now
HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: oktoyar.meli@lngrisk.co.id
—
