Protection money for pubs

Adequate insurance is absolutely vital for pubs. Michelle Perrett finds out from those in the know how to obtain the best cover at a good price and avoid the pitfalls.

It's tough out there and all pubs need to be analysing every one of their outgoings to see where savings can be made. But don't be fooled into scrimping on your insurance.

The increase in online companies offering business insurance can make it seem like there are cheaper deals out there.

However, much of it is not pub specific and can leave big holes in your cover and as a result, although you may find a cheaper option, you could also be raising your liability. As full insurance on a standard pub comes in at less than £1,000, attempting to save the odd £100 or £200 really is not worth it.

Katrina Curd, director at insurance broker Terry Osborne Insurance Services, warns: "The cheapest quote does not necessarily provide the best level of cover."

Covering the basics such as pub buildings and contents is imperative and there is a legal requirement for all businesses to have employer liability insurance. Add to that insurance cover for public liability, business interruption, loss of earnings, loss of liquor licence, loss of money, loss of freezer contents... it goes on.

That is why using a broker, with specific sector knowledge, can be invaluable, and may be the only way to get the full cover you require.

"It is our job as insurance brokers to guide you through the cover, ensuring that each section is tailored to your needs," says Curd. "You can have peace of mind that it will cover you in the event of an insured loss."

The under-insurance trap​

A major problem in the current economic climate is "under-insurance." In an attempt to cut their premium costs licensees may be tempted to drop the amount of cover for their contents and buildings.

Ross Edgar, schemes development and sales manager at Morgan Richardson, warns this could be a "false economy", which will cost you a lot more money in the end.

"Sometimes licensees try to cut their contents cover to something like half," he says. "That is a false economy because even though it might save £200 off the premium, it could cost more in the longer term. If you are under-insured by 50% and you make a claim for a loss of £10,000, you have the potential to lose 50% of that claim and only receive £5,000 of the loss."

Another common pitfall is the valuation of contents or fixtures & fittings (F&F). When a lessee buys a pub, the cost of F&F is worked out in a deal with the pubco. However, what the licensee paid may not be the actual cost of replacing old for new.

"You may have paid a second-hand price, but that is not the price to replace your contents," warns Edgar. "You need to assess this."

Another common problem affecting contents and buildings is insurance renewals. It is easy if the price looks good to simply renew, but it is essential to look at what has changed in the business over the past year.

"If your cover level has not been checked for two to three years you should look at whether you have had a refurb, bought new equipment or installed new TVs," advises Edgar.

Liability insurance​

Under law, businesses are required to have employee liability insurance. This covers anything from a dispute with an employee to an accident on the premises. To keep costs low some licensees choose to avoid public liability insurance. But what happens if a customer trips over in your pub?

"Public liability is very important, especially as there has been an increase in financial awards being handed out by judges," Edgar says.

He advises licensees to ensure they have adequate health and safety procedures in place. Having a check list and keeping records of the upkeep of the premises could be essential if there is a claim. This should take into account trip hazards such as carpets as well as trailing wires.

"For example, we had a claim, where a man had fallen over in a pub, hitting his head on the radiator. It didn't matter if the man was responsible for falling or not because the radiator valve did not have a cap on, so the pub was liable," Edgar adds.

Even though cutting business costs is essential in the current climate, it really is not worth putting yourself, staff, customers and your pub in a risky situation. It may cost a few hundred pounds more, but it is essential that you ensure full cover.

Business interruption​

It is unlikely that you will need to claim for this type of cover, but what happens if you suffer a flood or fire and are forced to close your pub? What about something unrelated to your premises such as an incident locally, perhaps a fire at a neighbouring premises, for example? It could mean many of your customers would not have access to your pub and the result is a potential loss of thousands of pounds of revenue on a normally busy weekend. For possible longer term closures licensees need to ensure they are covered for a long "indemnity period". Many policies offer 12 months cover, but some insurers cover for longer so it is important to check the fine print.

Top tips​

• Make sure all material facts are disclosed — for example, if you offer late-night entertainment or if you've had any previous claims.

• Discuss with an area representative or your pubco what you are responsible for.

• Always discuss cover, excesses and any applied terms or warranties with your insurers as there may well be hidden excesses or terms that you would only become aware of once you need to claim.

• Make sure you are covered for contents and buildings at the right value for your business.

• Don't insure your building for market value, but for rebuilding costs.

• Maintain your renewals and update your cover.

• Keep an assessment book and monitor your health and safety.

• Pay that extra £50 on your policy and don't cut corners.

Flood advice​

Towergate Risk Solutions provides specific advice for pubs in the event of an incident. When it comes to a flood, for example, it advises:

• Turn off all electrical equipment. Isolate all utility supplies, including water. Move equipment upstairs if possible. Keep a battery-powered radio tuned to a local station.

• Inform insurers. Follow instructions relating to emergency repair work, disposal of damaged goods, handling of business loss/interruption, scheduling of additional building and other restorative works.

• Contact your landlord — your lease or tenancy agreement will set out clearly who is responsible for which repairs.

• Do not use utilities until advised it is safe to do so, including tap water, which may be contaminated with sewage.

• Record the damage. Get photographic/video evidence.