CHICAGO — Adequate insurance coverage is a must for every small business, but just how much do you know about it? Do you understand the difference between property and liability coverage? Know where your vended laundry is most at risk for a claim? Have you come to accept some things as fact when they may actually be myths?
To help you navigate the maze of risks, American Coin-Op invited representatives from some of the industry’s major insurance providers to answer basic insurance questions that an average self-service laundry owner might have.
Q: What would you consider to be the minimum insurance coverage a vended laundry should have, and why?
Larry Larsen, agent for Crusader Insurance Co.: This is the guideline: What did you pay for it? What have you got receipts for, for improvements that you’ve made to it? That should be the coverage you carry on the property. At a minimum, you want to cover at least what your loan is on the property.
Jodie Millino, vice president, Commercial Lines-Producer, HUB International Insurance Services: This is a difficult question to answer as it really depends on the size of the store, equipment mix, etc. The store owner needs to make sure that the insurance policy meets the requirements of the lease but also that the limits on the policy would replace the store should there be a covered loss.
Larry Trapani, president, Brooks-Waterburn Corp.: 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 on 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 my store? (liability coverage; most Laundromats have $1 million coverage, but occasionally the landlord requires a higher amount)
Adam Weber, president, Irving Weber Associates (IWA): 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.
Q: What is the single biggest mistake that vended laundry owners make when it comes to insurance?
Ann Hawkins, vice president, Underwriting & Sales, NIE: 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.
Millino: The single biggest mistake that a vended laundry owner makes is to not read the lease before buying the store. The lease should be reviewed by their attorney to make sure that the insurance policy meets all of the requirements of the lease agreement.
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.
Larsen: They don’t read their policy. When they encounter a loss, they never read it the first time and at that point they want to blame the insurance agent. A sophisticated business owner understands what his policy covers and what it doesn’t.
Q: Do you have any other comments regarding small-business insurance and vended laundry coverage that you’d like to share?
Millino: Insurance is one of those things that people feel they have to have but it is intended to protect a small-business owner from catastrophes and also put them back in business should there be a loss. Not every loss is covered, but it is very important to ask questions! An experienced insurance professional who specializes in vended laundry coverage is where they should start.
Trapani: Read your lease. It will clearly state what you are and are not responsible for. If you are responsible for tenant improvement, make sure you have the right coverage. Even if you didn’t make the improvements yourself but assumed a lease from a prior owner, you may still be responsible.
Be careful of how many claims you report. Insurance companies are getting picky about the types of risks they write. They will not hesitate to cancel your coverage if they feel the risks outweigh the costs. Today, there are far fewer companies out there willing to write Laundromats than even 10 years ago. With less competition out there, prices are bound to go up. Don’t give the insurance company an excuse to raise your rates for a few small claims.
Take control of your own protection. Do what you need to do to prevent a loss. For example, have a maintenance checklist and clean the vents to prevent fires. Another suggestion is to install cameras to record those “slip-and-fall” claims; many are legitimate, but some are quite exaggerated. These types of preventative measures can go a long way to reducing claims and keeping your insurance rates reasonable.
Hawkins: Be sure to let your carrier know all of the exposures you have, such as subleasing to another small business, UPS drop-off, lottery sales, etc. These are important bits of information that may require certificates of insurance.