What Determines Guest House Insurance Costs?

Guest house insurance costs can vary significantly from one property to another. Two guest houses with the same number of rooms can pay very different premiums depending on their risk profile, location, facilities and how the business is operated.

Insurers calculate premiums by assessing both the likelihood of a claim and the potential size of a loss. Guest houses combine property risk, public access, overnight accommodation, staff exposure and (often) food service - all of which influence pricing.

This guide explains how UK insurers calculate guest house insurance costs and how owners can estimate premiums and avoid common pricing mistakes.

Buildings Insurance & Rebuild Value

Buildings insurance is usually the largest component of guest house insurance costs. Insurers base pricing on the rebuild value - not the market value - of the property.

Rebuild value includes demolition, materials, labour, professional fees and compliance with modern building regulations. Older, listed or character guest houses typically cost more to rebuild, increasing premiums.

Underestimating rebuild value may reduce premiums initially but can result in underinsurance and reduced claim payments.

Contents, Furnishings & Equipment

Contents insurance covers furniture, beds, soft furnishings, appliances, décor and guest amenities. Boutique or higher-end guest houses often require higher contents limits, which increases premiums.

Insurers will consider:

• Total replacement value of contents
• Security and storage arrangements
• Risk of theft or malicious damage

Public & Employers’ Liability Costs

Liability insurance protects against injury or property damage claims. Premiums are influenced by the number of guests, staff and the nature of activities offered.

• Higher guest turnover increases public liability exposure
• More staff increases employers’ liability costs
• Food service, alcohol and events raise liability risk

Business Interruption & Loss of Income

Business interruption insurance covers lost income following insured damage. Costs are based on annual turnover and the indemnity period selected (typically 12–24 months).

Guest houses with high seasonal income or peak-period reliance often require higher limits, which increases premiums but protects cashflow.

How Risk Management Can Reduce Insurance Costs

• Fire alarms, extinguishers and emergency lighting
• Secure locks, CCTV and intruder alarms
• Documented health & safety procedures
• Regular property inspections and maintenance
• Clear accident and incident reporting

Well-managed guest houses are viewed as lower risk and often benefit from better premiums and policy terms.

Common Mistakes That Increase Guest House Insurance Costs

• Using market value instead of rebuild value
• Failing to disclose food service or alcohol
• Overestimating or underestimating turnover
• Duplicating cover across multiple policies
• Not reviewing insurance annually