Chapter 11. Risk Management and Legal Liability
11.4 Insurance
Obtaining and maintaining appropriate insurance coverage is an important part of the risk management process. Insurance transfers the financial risks to a third party — the insurance company. Operators pay premiums that are established by the insurer based on the risk of the coverage. If the likelihood or the uncertainty of claims is high, the premiums will be higher. There are a variety of reasons why a tourism company requires insurance: to control the risk of offered activities, to meet statutory requirements, because industry partners require it, to protect business and assets, and to protect employees (DC, 2003b, p. 3). Insurance does not prevent accidents from happening, nor does it make an operation safer. It does, however, provide a reasonable amount of financial protection if an accident does happen.
Common types of insurance policies required by tourism operators include commercial general liability (CGL), property insurance, and accounts receivable insurance. CGL insurance can be one of the most important coverages, but unfortunately it can also be one of the most difficult and expensive to obtain. CGL policies cover operators for liability if an accident occurs, including bodily injury, medical payments, and personal injury. Property insurance provides coverage for the financial risks associated with loss of assets such as buildings, equipment, and merchandise. Accounts receivable insurance can cover a large proportion of account receivables if a customer fails to pay due to default or insolvency, thus providing a considerable safeguard to any tourism operation (DC, 2003a; DC, 2003b; Destination BC, 2013).
Some insurance coverage is optional, and operators may decide to self-insure on assets such as property and accounts receivable. Self insuring is the practice of an operation retaining the risk rather than transferring through insurance; it may be a conscious choice or a necessity based on lack of available coverage. Other insurance coverage may be required, such as motor vehicle insurance or liability insurance (required by most industry partners and some statutory requirements). In the end, the tourism operator must determine what coverage is required and what optional additional coverage is desired.
Spotlight On: go2HR Certificate of Recognition (COR)
As part of its mandate to support human resources best practice in BC’s tourism and hospitality industry, go2HR works in the field of occupational health and safety. In partnership with WorkSafeBC, it offers the Certificate of Recognition (COR) in safety. For more information, visit Certificate of Recognition (COR) Program.
The most common type of liability insurance that provides coverage for litigation; generally legal costs and personal injury settlements arising from a lawsuit are covered.
The practice of an operation retaining the risk rather than transferring through insurance; may be a conscious choice or a necessity based on lack of available coverage.