Most pub insurance policies that are sold do not cover the actual structure or buildings. There will usually be a commercial building insurance policy in place with a single insurer that is arranged by the property owner, which will usually be a pub group or property owning commercial landlord. As part of their insurance arrangements, they will need to declare, under the business building insurance cover, if the premises are of non-standard construction.
Each insurer’s interpretation of “non-standard” can be different, but in essence what they want to be notified of is if the building is constructed of combustible materials. For example, brick, stone or concrete block walls are fine, whereas timber walls (even in part) need to be declared. It is the same story for the roof, slate or tile is fine but insurers need to know if there is any flat roof, glass roof or felt/asphalt on timber roof. If the roof is thatched then you really do need to notify the insurers as this will cause a sharp intake of breath, particularly if you also have an inglenook merrily flaming away in “ye olde worlde” bar.
If you do not insure the buildings and you are the tenant arranging the insurance, you will still need to declare if the property is non-standard, as defined by the particular insurer that is providing the quote. The reason being that a non-standard building could still be susceptible to a loss that will cause damage to the contents and stock. Water ingress into a building, for example, following a storm can cause immense damage and may then lead to the contingent loss of business cover.
When assessing a particular cover, insurers will ask certain questions about the construction, if you do not know or are unsure then you will need to speak to the landlord, property owner or managing agent to clarify exactly what materials have been used to build the property. If you do not declare, to your insurer, the correct details you could potentially be faced with a claim that is turned down.
Most insurers will accept non-standard construction at a fifth of the overall structure, this means that where an extension has been built a claim cannot be turned down due to the mis-declaration of the construction of the building.
Some optional extra coverage that a pub owner might want to consider is computer breakdown, terrorism insurance, employee theft, flood, goods in transit (for outside bars) etc. In short if you think you have a risk that you wish to cover your broker/insurance company will be able to arrange cover for that risk.
Using a General Insurance Broker or Specialist Pub Insurance Broker
Insuring a public house, its contents and your business interests is a complicated business and you should use an insurance broker to negotiate the most favourable terms and comprehensive cover for you.
As all pubs are different it is important to get a personalised quote to understand what you are getting for your money. Many consider insurance as something they have to have and buy the cheapest policy they can find without understanding the specifics of that policy. Choose cover that is specifically designed for pubs and deal with an insurance broker who understands your kind of business. For example, while some insurers put pubs in the same risk class as nightclubs or hotels, you may want to be treated as a separate class, with your own particular risks and rewards, and a broker may have access to specialist pub policies that reflect these differences.
Ask an independent business insurance broker to arrange your insurance cover, the broker’s job is to serve you, the insurance purchasing customer. They will ensure, through the questions that they ask you, that the correct details are declared to the insurers that ultimately underwrite the risk. For any pub or bar owner, having an insurance agent that does the job correctly is the most important thing.
Your agent has a duty to make sure you get the correct policy that best meets your demands and needs, and in today’s competitive market place sometimes insurance agents forget about treating customers fairly as all they want to do is make the sale. You should always expect to receive the best advice. Listed below are five top tips you need to know before choosing the correct insurance policy.
- Price, make sure you know what the total annual premium is including insurance premium tax; make sure the broker has advised what fee they may have added in addition to knowing what commission the broker earns from the insurer, make sure this is not excessive. Ask what the finance charge will be added if the policy is paid by monthly instalments.
- Cover, make sure the insurance cover provided is what you require and never below what you need, ask about the standard covers again make sure they are what you need; in some circumstances you may be being charged for extra cover, so always ask the broker to delete any covers not required.
- Under insurance, make sure the material damage sections represent full new value for replacement and not second hand value or the building represents full rebuild costs including architects fees, removal of debris etc; check stock cover represents your most busy period, and business interruption cover is from your most up to date accounting figures. Failure to insure for the correct amounts may allow insurers to reduce the amount they pay out or reject an otherwise legitimate claim in its entirity.
- Terms and conditions, always ask for a full list of the insurer’s main policy features and benefits, ask about any special endorsements or warranties that have been added and always ask your broker to explain these in detail and the consequences for your business if you breach or fail to comply with the terms and conditions.
- Insurer, always ask for ask if the insurer is a UK based insurer and check they are authorised and regulated by the Financial Services Authority and ask for details of their financial strength.
Pubs are difficult businesses in the eyes of some insurers, your business revolves around bringing in the general public and allowing them to drink alcohol and sometimes make your business seem like a high insurance risk. Whilst standard insurance sources may give you basic cover you may find that this isn’t quite enough for your own particular needs and that it doesn’t allow for the way that you run your own pub.
A specialist public house insurance policy, however, may be worth investigating. These policies will usually give you all the essential and general cover that any business needs, plus offer features specific to protecting a business within your industry.
Remember that as with all types of insurance, public house insurance, will come with a certain amount of excess that would have to be paid by you if you should have to make a claim on the policy.
The amount of excess that you would need to pay before the insurance company would payout on the rest of the claim could differ. While you might think that £500 of excess is a lot of money to payout on a private dwelling bear in mind that if your stock was to be stolen or destroyed and this could easily be £10,000 then the excess would be a trivial amount to have to pay out of your own pocket.
My penultimate piece of advice is to remember that claims paid out will be net of VAT at the prevailing rate. 20% VAT, in terms of cash flow, means you will need to find a further fifth of the amount recovered to cover VAT on most purchases.
Top Tip – A rule of thumb is that the more you are prepared to risk as excess to the policy the less the insurer is at risk and the less the premium they will charge.