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: What are the basic components of a small-business insurance policy?
Ann Hawkins, vice president, NIE Insurance: The basic components of a small business insurance policy are commercial property (building and/or contents), commercial general liability, loss of business income and equipment breakdown. Separate policies may be purchased for commercial auto and workers’ compensation.
Larry Larsen, California Laundromat insurance broker: The two typical or basic parts of Laundromat insurance are liability and property coverage. Insurance companies name the perils that are covered in their policies. Particular risks are specifically excluded, but a Laundromat owner should be aware of the risks that are, and are not, insured against. If a loss or liability is not named, it’s probably not covered. Any claim made by a customer relating to voluntary acts and behaviors relating to the coronavirus is likely to be excluded.
Larry Trapani, president, Brooks-Waterburn Corp.: A Business Owner’s Policy (BOP) combines protection from most major property and liability risks in one package. These policies are created for small businesses that generally face the same kind and degree of risk.
- Property Insurance, for building and contents owned by the company.
- Business Interruption Insurance, which covers the loss of reported income resulting from a fire or other covered causes of loss that disrupts the operation of the business.
- Liability Insurance, which covers your company’s legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do, or fail to do, in your business operations that may cause bodily injury or property damage due to defective products, faulty installations, and trip/falls that may occur due to slippery floors or uneven sidewalks.
Adam Weber, president, Irving Weber Associates: If you are starting a business, you’re going to need business insurance in order to protect you, your business and your assets in the event there is a claim. To simplify the business owner’s policy, there are two major parts.
First, there is property coverage, which covers costs of damage to the business’ personal property (contents) or the building if you own or are required to insure it. Secondly, there is liability coverage, which covers costs to the owner in the event that someone’s person and/or property is damaged due to the business’ negligence (including defense costs).
Q: What types of coverage are typical of a small-business insurance policy, and what special coverages might the average vended laundry owner want to explore?
Larsen: In addition to the basic coverage of liability and property, some customers elect to ensure for extended theft, money from bill changers, loss of income and a variety of optional and site-specific risks. In balancing between sufficient coverage and being “insurance poor,” many owners elect the basic coverage and mediate any potential losses by selecting a higher deductible.
Some Laundromat owners “insure” against losses by good management practices, including protecting bill changers with guards, alarms, cameras and well-trained attendants.
Trapani: Laundromat owners have some unique coverage needs. Here are the main ones to consider:
Tenant Improvements — When you bought the Laundromat, did you buy an existing one or build one from scratch? If you are a tenant in the building and do renovations to the space or a “build-out,” you are responsible for those improvements you make. Imagine if you do a $100,000 build-out and have a fire that destroys your Laundromat. If you don’t have the Tenant Improvements coverage, it would be a major gap in your protection.
Bailee Coverage, aka Customer Property — You do a fair amount of wash-and-fold service. If something happens to those clothes, you are responsible for them. Most Laundromats we protect have a minimum of $10,000 Bailee Coverage. There are many types of coverage forms that insurance companies use, so it is important to understand what is covered and what is not.
Hired & Non-Owned Auto Coverage — Do you do deliveries or make deposits at the bank? If you do, is it with your personal vehicle or perhaps one of your employees’ vehicles? What if there is an accident and the business gets sued? Hired & Non-Owned coverage will protect your business in the event of this type of claim.
Money & Securities — Most Laundromats deal in cash. Make sure your policy has sufficient “Money & Security” coverage for both inside the premises and outside.
Weber: Some of the more common coverages to review in your business owner’s policy are “Business Personal Property,” “Business Income,” “Extra Expense,” “Employee Dishonesty,” “Equipment Breakdown,” “Glass” and “Outdoor Signs.” And for the coin laundry, of course, “Water Backup” and possibly “Bailee” (or customers’ goods) coverage!
- Business Personal Property, or BPP, covers the furniture, machinery, equipment, stock and all personal property owned and used in the business, as well as the improvements and betterments that you may have made to the premises (such as dropped ceilings, lighting, flooring, etc.)
- Business Income is coverage for loss of income due to a slowdown or temporary suspension of normal operations which stem from damage to the business’ physical property.
- Extra Expense is coverage for the additional costs you incur to continue running your business.
- Employee Dishonesty coverage protects the business from financial loss due to fraudulent activities of employees. It can also be employee theft of money or property.
- Equipment Breakdown coverage protects against loss due to mechanical breakdown of nearly all equipment in the business. It applies to cost to repair or replace the equipment or property damage caused by equipment breakdown.
- Water Backup coverage addresses water that backs up through sewers and/or drains. This is vital coverage for the laundry industry. Most business policies do not cover sewer and drain backups, so it’s important that coin laundry owners check to be sure this is included in their policies.
Hawkins: [The types of coverage I described in response to the first question] are typical of small-business insurance policies but the average vended laundry owner might also want to purchase bailee (coverage) to cover the clothing since so many laundries now do wash-dry-fold, commercial laundry and drop-off drycleaning. They may also want to explore utility services coverage for loss of power to their machines due to a covered cause of loss that happens away from the premises, such as a lightning strike down the block.
Check back Thursday for Part 2!