Hotel & Motel Insurance in Texas: An Owner's Guide

Key Takeaways

Set business income limits from your own numbers (rooms, occupancy and average daily rate) for as long as a real rebuild would take, not from a round guess.
Read the liability exclusions closely; many hotel policies limit or exclude assault, battery or other security-related claims, and the wording varies between quotes.
Franchise agreements usually set minimum limits and wording, so compare every quote to your brand's insurance requirements before you bind.
On the Texas coast, wind and hail may be excluded from a private policy and written by TWIA instead, and flood always needs its own policy.
Keep the named insured, renewal dates and documents in one place, especially when several family members or companies own the hotel.

On This Page

What Insurance Does a Texas Hotel or Motel Need?
How Should You Value a Hotel Building and Its Contents?
How Should Business Income Be Calculated for a Hotel?
Why Is Hotel Liability Insurance Harder to Place?
What Do Hotel Franchise Agreements Require?
Do You Need Liquor Liability and Employment Practices Coverage?
How Do Hotels Handle Water Damage and Freeze Risk?
What Changes for Hotels on the Texas Coast?
How Do You Get Organized for a Hotel Insurance Quote?

What Insurance Does a Texas Hotel or Motel Need?

Most hotels need building and contents coverage, business income, general liability, an umbrella and equipment breakdown. Liquor liability, employment practices, auto and flood are added based on how you operate and where you are.

Common coverages for Texas hotels and motels. Each policy's wording controls.
Coverage	What it pays for	Typical trigger
Building and contents at replacement cost	Rooms, lobby, furniture, linens and equipment	A fire closes a wing
Business income and extra expense	Lost room revenue and extra costs to keep operating	A storm takes 40 rooms offline
General liability	Guest and visitor injury claims, and legal defense	A guest slips by the pool
Umbrella / excess	Liability above the primary limit	A serious injury lawsuit
Equipment breakdown	Boilers, chillers, elevators, laundry and kitchen gear	The main boiler fails
Liquor liability	Claims tied to alcohol you serve or sell	A guest served at the bar causes a crash
Employment practices liability	Employee claims of discrimination, harassment or wrongful firing	A former manager sues after termination
Hired and non-owned auto	Liability when staff drive personal or rented cars for work	An employee crashes while buying supplies
Flood	Flood damage, which property policies exclude	Rising water enters the ground floor

If you run a shuttle, you also need commercial auto coverage for those vans. For a quick overview, see our hotels and motels page.

How Should You Value a Hotel Building and Its Contents?

Use what it would cost to rebuild and refurnish today. Purchase price and tax value usually miss the mark, and a low value can trigger a coinsurance penalty that cuts every claim.

Building. Include the structure, built-in equipment, pool and parking lot improvements.
Contents. Count furniture, beds, linens, TVs, room HVAC units, laundry machines, kitchen equipment and supplies.
Renovations. After a brand-required renovation, update your values. New finishes usually cost more to replace.
Code upgrades. Older hotels may need ordinance or law coverage to pay for code work after a loss.

Equipment breakdown matters more for hotels than most properties. Boilers, chillers, elevators and commercial laundry run all day. A standard property policy usually doesn't pay when they simply break down.

How Should Business Income Be Calculated for a Hotel?

Start with rooms × occupancy × average daily rate (ADR), add other revenue, and project it over a realistic rebuild time. Then subtract costs that would stop while you're closed.

Example (Hypothetical): Sizing Business Income

An 80-room hotel runs 65% occupancy at a $110 ADR. That's about $5,720 a day in room revenue, or about $171,600 a month. A fire closes the hotel for eight months, so lost room revenue is about $1,372,800. If $300,000 of costs would stop during the closure, such as supplies, card fees and revenue-based brand fees, the business income loss is about $1,072,800. A $500,000 limit would leave a large gap.

A few more details shape the right limit:

Seasonality. If you're busiest during events or summer travel, use a full year's numbers, not a slow month.
Payroll. Decide how long you would keep paying key staff during a closure.
Time to reopen. The period of restoration normally ends when repairs should be done. An extended period of indemnity can help while occupancy recovers.
Outside causes. Civil authority coverage can apply when officials block access, and utility services coverage can apply when off-site power or water fails.

A business income worksheet helps you lay this out with your accountant.

Why Is Hotel Liability Insurance Harder to Place?

Because security-related lawsuits against hospitality properties can be large, many carriers have narrowed what they cover. Some exclude assault and battery claims; others cap them with a lower sublimit.

Texas law says an owner who controls the premises has a duty to use ordinary care to protect invitees from criminal acts by others when it knows or should know of an unreasonable and foreseeable risk. Courts look at similar crimes on or near the property, and how close, recent, frequent and publicized they were (Fifth Circuit summary of Texas law). These are often called negligent security claims. For legal questions, talk to an attorney.

Underwriters commonly ask about:

Cameras, exterior lighting and electronic key cards.
Front desk hours, ID checks at check-in, and night staffing or patrols.
Written procedures for incidents, and staff training.
Pool safety: fencing, self-closing gates, depth markings and posted rules.
Past incidents and police calls at the property.

When you compare quotes, read the assault and battery wording side by side. A lower price can hide a gap that matters more than the savings.

What Do Hotel Franchise Agreements Require?

Most franchise agreements spell out minimum insurance. If your policy doesn't match, you can be out of compliance with your brand even when the coverage is otherwise strong.

Requirements often include:

Minimum general liability and umbrella limits.
The franchisor (and sometimes the management company) named as an additional insured.
Minimum insurer financial ratings, often stated as an AM Best rating.
Required coverages such as liquor liability, employment practices or business income.
Notice to the brand if a policy cancels, and certificates by a set date.

Send your agent the insurance section of your franchise agreement and any brand standards manual pages on insurance. Lenders add their own rules. Your quote should meet both, or you should know exactly where it doesn't before you bind.

Do You Need Liquor Liability and Employment Practices Coverage?

You likely need liquor liability if you sell or serve alcohol, including a bar, restaurant, room service or an evening reception. Employment practices liability is optional but common for hotels with steady staff turnover.

Liquor Liability

General liability policies usually exclude alcohol claims for businesses in the business of serving it. The Texas Dram Shop Act sets a narrow test. A provider can be liable only if the person was obviously intoxicated to the point of being a clear danger, and that caused the damages (Alco. Bev. Code §2.02). Requiring TABC-approved seller-server training can also support the TABC safe harbor (§106.14). Free drinks at a reception may still count as providing alcohol, so tell your agent about them.

Employment Practices Liability (EPLI)

EPLI responds to claims from employees, such as discrimination, harassment, retaliation and wrongful termination. It usually pays defense costs, which can be large even when you win. Some policies can add coverage for harassment claims made by guests. A written handbook and a clear complaint process can help both prevention and pricing.

Workers' compensation is elective for most Texas private employers. But an employer without it loses key defenses in an employee injury lawsuit (TDI).

How Do Hotels Handle Water Damage and Freeze Risk?

Plan for it, because one failed pipe on an upper floor can soak several floors below. Many policies now have a separate water damage deductible and a low limit for mold.

Example (Hypothetical): An Upper-Floor Supply Line

A toilet supply line breaks in a third-floor room overnight. Water reaches six rooms on the floors below. Repairs cost $90,000 and the rooms are closed for five weeks. The policy has a $25,000 water damage deductible, so the building claim pays $65,000. Business income may also pay for the closed rooms after any waiting period, if the policy includes it.

Hard freezes add risk. In Winter Storm Uri, commercial property was about 10% of Texas claims but about 53% of incurred losses, according to the Texas Department of Insurance (TDI). Water leak sensors, automatic shutoff valves, regular checks of room HVAC drain lines and a winter plan for exposed pipes all help.

What Changes for Hotels on the Texas Coast?

Wind and hail coverage may be harder to buy. In the 14 first-tier coastal counties and parts of Harris County east of Highway 146, private policies often exclude wind and hail, and TWIA is the insurer of last resort (TWIA).

Generally, you must be declined by a private insurer before TWIA will write wind and hail coverage.
Buildings built, altered, repaired or added to on or after January 1, 1988 need a windstorm certificate of compliance for TWIA. Commercial buildings generally can't use the residential surcharge option instead (TWIA).
Coastal wind coverage often carries a percentage deductible, such as a named storm deductible, figured on the insured value.
Ask each quote how business income responds after wind damage, so revenue isn't left out.

Flood is separate. The NFIP covers up to $500,000 for a non-residential building and $500,000 for contents, pays at actual cash value and doesn't pay lost income (FEMA). Larger coastal hotels often add excess flood coverage. Our guides to TWIA for commercial property and commercial flood insurance go deeper.

How Do You Get Organized for a Hotel Insurance Quote?

Put one person in charge of the insurance file, then gather the documents below. A complete submission helps underwriters price the hotel as it really runs.

Keep the Basics in Order

Many hotels are owned by families or small groups of partners, and small paperwork gaps can cause big claim problems.

Names. The named insured should match every company that owns the land, the building or the operating business.
One calendar. Track renewal dates, franchise certificate deadlines and lender deadlines together.
Incident reports. Train the front desk to write down every guest injury or complaint the same day, with photos.
Changes. Tell your agent before renovations, a new bar, a shuttle, or a change in brand or manager.
More than one hotel. Several properties can sometimes share one program. See commercial real estate portfolios.

What to Gather

Number of rooms, stories, year built and construction type.
Brand or flag, and the franchise agreement's insurance section.
Twelve months of occupancy, ADR and other revenue.
Amenities: pool, fitness room, bar, restaurant, meeting space, shuttle.
Sprinklers, fire alarms, cameras, key-card system and security staffing.
Roof age and recent renovation details.
Five years of loss runs.
Your lender's insurance requirements.
Number of employees and payroll, for workers' comp and EPLI.

When you're ready, request a quote or contact us. Send what you have; we can help you gather the rest.

Questions Owners Ask

How much business income coverage does a hotel need?

Enough to replace your lost revenue, minus costs that would stop, for as long as a realistic rebuild and reopening would take. Base it on rooms, occupancy and ADR from a full year, not a slow month.

Does my brand set my insurance requirements?

Usually yes. Franchise agreements typically set minimum liability and umbrella limits, additional insured wording and insurer ratings, so share that section with your agent before you shop.

Are guests' belongings my responsibility?

It depends on the facts, the notices you post and whether you offer safes. Innkeepers liability coverage can respond to guest property claims; check what your policy includes.

Does a hotel near Galveston need TWIA?

Often, because private policies in the TWIA area frequently exclude wind and hail. Generally you must be declined by a private insurer first, and the building needs a windstorm certificate of compliance if built or altered since 1988.

Do I need liquor liability if I only offer a free evening reception?

Tell your agent about it. Providing alcohol, even without charging for it, can create liability, and coverage depends on how your general liability and any liquor policy are worded.

Sources

TWIA: Eligibility and designated catastrophe area
TWIA: Windstorm certification
FEMA NFIP Summary of Coverage: Commercial Property
Texas Alcoholic Beverage Code §2.02 and §106.14
U.S. Court of Appeals for the Fifth Circuit, Jenkins v. C.R.E.S. Management, No. 14-20609 (2016) — Summarizes Texas law on owner duty and foreseeable criminal acts
Texas Department of Insurance: February 2021 winter weather data call summary
Texas Department of Insurance: Non-subscribers

How Do You Insure a Hotel or Motel in Texas?