While some bed and breakfasts can be closer to hotel risks, others can be more of a “mom and pop” operation, she noted. Others may be more akin to a person who needs money renting out a basement as a B&B, she said–adding that Gillingham & Associates avoids those types of risks.

From an insurance standpoint, Ms. Heide confirmed that bed and breakfasts represent a smaller but potentially profitable niche.

Ms. Santonastaso said it is a competitive niche, but there are few players. She put the number of companies writing such business at “less than six.”

Because of the unique nature of the properties, Brian Gerritsen, senior director of hospitality in commercial insurance at Fireman's Fund said the risks have typically been written by surplus lines companies, although he noted that admitted carriers have moved into this niche space during the soft market.

Ms. Heide said because the definition of “bed and breakfast” varies, different markets have appetites for different risks.

The standard market, she said, usually will not write an operation run out of a person's home. But some of the risks that are closer to hotels with a “homey feel” will attract admitted carriers, she added.

Soft market aside, Ms. Heide said competition for these risks depends on the track record of the establishment and the size of the risk.

Smaller risks with no losses attract a lot of attention, and Ms. Heide said insurers will slash rates to get that business, just as with any other line.

Larger risks with amenities like a pool are not as favorable, she noted.

Of course, in a soft market, more risks become attractive to more carriers. Ms. Santonastaso said she has seen some insurers writing bed and breakfasts at standard property rates for hotels, which are lower rates than these establishments usually can get.

Mr. Gerritsen said the market for bed and breakfasts is not as soft as what is being seen in the market for hotels, but he said some properties are “severely underinsured.”

As an example, he said Fireman's Fund may value a bed and breakfast property at $8 million, while a competitor could put a $4 million limit on the same property. Even if the rates are comparable, the property premium would be half as much for the lower valuation, Mr. Gerritsen noted.

He said bed and breakfasts could have unique building valuations because many of them are historic properties with unique construction materials that may not be in use anymore, and which are difficult to replicate.

Despite the low property valuations seen from some competitors, Mr. Gerritsen said behavior–particularly among newer entrants–has not been too bad. “I'd say we're in good company with good underwriting,” Mr. Gerritsen said.

Complicating the market is the recession. All experts spoke about how the struggling economy has hit the hospitality sector, including bed and breakfast establishments.

“People don't have money to travel,” Ms. Heide said.

Mr. Gerritsen agreed, noting that “lodging overall has been hit so hard by reductions in corporate spending and disposable discretionary spending by individuals.”

Ms. Santonastaso added that with booking down for these establishments, revenue is also down, and that impacts the amount of premium insurers see.

If there's a silver lining for bed and breakfasts these days, Mr. Gerritsen said it is that with individual budgets down, people are choosing to travel locally for long-weekend vacations rather than spending a week traveling to locations across the country or around the world.

“That in some cases has actually been a boom for local lodging, [like] bed and breakfasts,” he noted.

Speaking about which coverages are in play for bed and breakfast exposures, Ms. Heide said the main ones are general liability and property.

Ms. Santonastaso said there is a need for personal liability when owners are living onsite and do not have a separate homeowners policy.

Mr. Gerritsen said Fireman's Fund offers a commercial package that is extended to address most personal lines concerns in cases where the innkeeper is also a resident.

Typical factors examined when underwriting, according to Ms. Heide, include loss history, years in business, the size of the establishment, and whether the owners cook their own food.

She said while smaller hotels will typically serve bagels and orange juice in the morning, bed and breakfasts tend to have big home-cooked meals in the morning, which means more exposure for insurers–such as potentially undercooked meat.

But she noted that bed and breakfasts do not face some risky factors that hotels have, such as gyms, pools, and buildings with significant height.

Mr. Gerritsen said these establishments could have fringe recreation activities, which must be examined carefully by insurers. Such activities, he said, could include bike rentals, equestrian rides, hiking trails if the property is large enough, fishing in ponds, and boat and kayak rentals.

He said Fireman's Fund looks closely at moral hazards associated with bed and breakfasts–particularly whether the owner is investing in the property, and whether the establishment is properly staffed to ensure safety and satisfaction.

Even with the economy and soft market affecting the bed and breakfast niche, Mr. Gerritsen said he does not expect to see too many changes on the insurance end, with respect to products and services offered.

He qualified that assessment, however, by stating: “But things can change on a dime.”