CHICAGO — A self-service laundry faces risk—fire, liability, a worker injury and more—every day. Without the proper insurance protection in place, an owner might have a tough time recovering from an incident. A worst-case scenario could close the doors for good.
American Coin-Op invited four insurance providers with laundry industry experience to answer some questions the average store owner might have about protecting their investment.
Q: Taking deductibles and insurance premiums into consideration, how can one ensure his/her small business is adequately covered while choosing a plan that’s affordable?
Ann Hawkins, vice president, NIE Insurance: The best way to know that your business is adequately covered is to know and trust your insurance company or agent. Try to choose a company or agent who deals with many businesses like yours. This representative will be able to make suggestions and run various numbers to make sure you are covered correctly without buying coverage you don’t need.
Larry Larsen, California Laundromat insurance broker: It’s impossible to insure against any and all potential losses or claims that could be made against a Laundromat owner or every loss that a Laundromat owner could experience. Most Laundromat owners have liability coverage in the amount of $1 million per loss/$2 million aggregate for any policy term.
Property coverage should be carried in the amount of the purchase, plus any paid improvements made during ownership. Owner labor is not a basis for increasing property coverage. Neither underinsuring nor overinsuring provides affordable cost benefits.
Larry Trapani, president, Brooks-Waterburn Corp.: One of the best ways to ensure that your Laundromat is protected while not overpaying is to shop around. While many agents and brokers can write Laundromats, those that specialize in the industry can more often than not get you better deals, as they know the markets and which companies are more competitive than others.
Another suggestion … is to consider a higher deductible. This is much more preferable than lowering coverage. Most insurers take a dim view of small claims. I generally try to discourage my customers from putting in small claims because, in the long run, it will increase their rates.
Adam Weber, president, Irving Weber Associates: Insurance premiums vary based on many factors. One of these factors is the deductible chosen. Basically, the lower the deductible, the higher the premium. Therefore, it is important to weigh this in your choice of deductible.
For instance, if you save $500 on the premium by choosing $1,000 deductible, in two years (without a claim) you could have made back what the deductible would be in the event of a claim.
Q: What would you consider to be the minimum insurance coverage a vended laundry should have, and why?
Larsen: As for the property amount, at a minimum, you want to cover at least your loan balance on the Laundromat. Check your lease and loan documents to ensure your insurance coverage meets any requirements. Liability coverage is offered in amounts from $250,000, $500,000 and $1 million. Your lease documents likely have a provision about minimum coverage required.
Trapani: Every Laundromat is different and therefore requires different coverages. As a result, there would be no “minimum” coverage. I would suggest you answer the following questions when deciding how much protection you need:
- If a fire occurred today, how much would it cost to replace all the washers/dryers, hot water heaters, vending machines, etc.? (contents coverage)
- How much was your build-out cost? (tenant improvement coverage)
- How long would it take to rebuild? (business interruption coverage)
- How much would it cost if a customer were seriously hurt while in your store? (liability coverage; most Laundromats have $1 million coverage, but occasionally the landlord requires a higher amount)
Weber: The minimum liability coverage would be $1 million per occurrence and $2 million aggregate (over the term of the policy, usually one year). We also recommend getting an “Umbrella,” which will add to the coverage over and above the coverage of the regular policy. Umbrellas can be inexpensive; therefore we suggest as high an umbrella limit as you can get. As far as property coverages, that would depend on the cost of the building and equipment.
Hawkins: The minimum coverage a vended laundry should have is liability, business personal property and loss of business income. There are so many more but this is the minimum.
Q: What is the single biggest mistake that vended laundry owners make when it comes to insurance?
Trapani: The single biggest mistake Laundromat owners make when it comes to their protection is only carrying enough coverage to satisfy their loan. The lender may loan you $150,000 for the purchase of equipment. It wants to make sure you have enough coverage to pay it back in case of a fire. That’s all well and good, but what about the investment you made? Perhaps you put in another $100,000 of your own money. If you had a claim, you want enough coverage to be able to reopen the business, not just pay off the lender.
Weber: Business owners should be reviewing their insurance policies on an annual basis to be sure they have adequate coverage. They should keep in mind any changes made in the recent past with regard to equipment values and over limits that may need adjustments, as well as review the policy for any possible changes the carrier may have made to its policy offerings.
Hawkins: The biggest mistake is not insuring to value. You must think of the value of your equipment in terms of replacing it all with new equipment. If you had a total loss, you would need to buy new equipment and pay for delivery, installation and tax, and all of that is covered under the business personal property limit. Don’t assume you can replace current equipment with used equipment. That often does not work due to the difference in the current equipment and what’s on the market now.
Larsen: They overinsure or underinsure and fail to read and understand the provisions of the policy they purchase. They read the policy when they encounter a loss, and often opine, “What did I buy insurance for?” when they discover they have experienced a non-covered loss. All Laundromat owners should read their policies each and every time they renew and ask their agent what each covered risk and exclusion would mean to them.
Miss Parts 1 or 2? You can read them HERE and HERE.