The bed and breakfast market is a potential growth area forinsurers as this comfy niche of the travel industry attracts agrowing number of travelers seeking unique, but budget-friendlyaccommodations.

“There is a lot of growth in the B&B segment. It seems to bestaying profitable, even with the shrinking economy,” says BrentSkiles, assistant vice president for Bala Cynwyd, Pa.-basedPhiladelphia Insurance Cos., which has been offering B&Binsurance nationally for nine years.

B&Bs began to gain in popularity over large hotel chainsaround the summer of 2008. “That's when gas prices started going upto $4 a gallon,” says Jay Karen, CEO of the ProfessionalAssociation of Innkeepers International, based in Haddon Heights,N.J.

Skiles, who works in his company's Colorado branch, adds,“Locally in Denver, people go downtown or up to a mountain for a'staycation.' They're staying close to home and spending lessmoney, and B&Bs are getting that business. It's nice lodgingfor a relatively inexpensive cost.”

Only a few insurance providers specialize in B&Bs, Karensays. “It's a unique niche. Some 82 percent of innkeepers live onthe premises. It's a strange blend of home and business. A lot ofinsurers don't know what to do with them.”

Capt. Yohn and Melanie Gideon, owners of theCaptain's Inn Bed & Breakfast in the small fishing village ofMoss Landing in central Monterrey Bay, Calif., learned that all toowell. The couple could not find an insurer when they began torenovate their three historical buildings nine years ago.

“I didn't have pipes that were up to code yet. The particularsmade agents nervous to write it up,” Melanie Gideon says. “Ifinally went to an historical building association and got amembership, [and that's how] my building got covered. It washard.”

B&Bs are small businessesthat have special needs, so B&B owners tend to stick withinsurance providers that understand their unique requirements,Gideon notes. “We do a lot of small packages, like offeringmassages, and I rent bikes and backpacks for beach walks. I need tobe able to insure those—and not on a huge scale.”

UPGRADED RISKS (GHOSTS INCLUDED)

As the innkeeping industry attracts a wider range of clients,many B&Bs have adapted by adding new types of amenities nottraditionally associated with this lodging type. This, in turn, haschallenged insurers and agencies to work to keep up with theseevolving needs, says Jayme Stewart, vice president at CalvistaInsurance Agency Inc. in Hollister, Calif.

In California, for example, shared bathrooms are out atB&Bs, Stewart says. “Now they're remodeling rooms with privatebathrooms with Jacuzzi tubs and even gas fireplaces.”

Other inns are becoming more focused on family-friendlyactivities, like inflated jumping pillows and blowup castles forthe kids. While these efforts are understandable from abusiness-development perspective, they do create additional typesof liabilities, Skiles notes.

One entertainment extra that is both a unique attraction and anunusual insurance risk: Some B&Bs claim to be haunted and hostghost tours for their guests.

B&B owners with such ghost tours—like theLizzie Borden House in Fall River, Mass., and The MyrtlesPlantation in St. Francisville, La.—need to make sure they'reworking with their agent and put proper controls in place from arisk-management standpoint.

“If you're going to be taking people up to the attic, you needto be prepared. You don't want to kill Grandpa or put him in thehospital,” Skiles says. Get the controls in place, make sure thetours are appropriately conducted, and get waivers. “Everybodyhates waivers, but if you're going to [offer] a ghost tour, youprobably need a waiver.”

STEADY RATES, SPECIAL PACKAGES

In terms of insurance rates, prices for policies in this line ofbusiness will remain stable for 2011, says Stephanie Maynor, seniormarketing specialist for Markel Corp. of Richmond, Va., whichincludes B&Bs and country inns among its categories ofcoverage.

Markel, which continually reviews its coverage enhancements tomeet the B&B industry's evolving needs, offers variousspecially designed packages such as guest-inconvenience coverageand historic-property coverage. It also has special endorsementslike specialty-inns enhancement.

Every B&B should carry commercial packages for building andcontents, business income, general liability, as well as inlandmarine and commercial auto if the vehicles are owned in thebusiness name, Maynor says. The most common risk-management issuefor the B&B niche continues to be slip, trip and fallincidents.

“Since many of the buildings are older, sometimes the floors areuneven,” Maynor says.

Alcohol can increase the risk. “You do have a lot ofslip-and-fall claims, especially in wine-tasting country inCalifornia,” says Stewart.

Another coverage area that needs to be considered: historicalconstruction. “A lot of these inns are 100 years old,” saysStewart. “You need a replacement-costs endorsement and, in somecases, historical endorsements.”

Calvista represents five different insurance companies thatoffer parts-and-replacement costs and content limits. Markel offerscoverage for historic buildings and unique property, as well as forspecial events, pools, ponds, lakes and other unique B&B risks,Maynor says.

Technology cover is now being offered for innkeepers concernedabout online reservations and hackers gaining access to customers'personal information—but it can be expensive, Stewart says.

Bedbugs are also a hot topic right now, but B&Bowners have been proactive in this area for quite some time, Maynornotes.

For coastal B&Bs in hurricane alley, the biggest factor ishaving any insurance at all. Some innkeepers are going “bare”because they can't afford $20,000 property insurance on a four-roomB&B, Karen says. Others have considered creating a captiveinsurance program for B&Bs, he adds.

Yet there has not been much B&B movement in the captivearena. “We have not heard anything,” says Louisiana Commissioner ofInsurance Jim Donelon, who says there have been no applicationsfrom B&B owners “in a couple of years.”