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: Are there any small-business insurance “myths” that have mistakenly come to be accepted as fact?
Jodie Millino, vice president, Commercial Lines-Producer, HUB International Insurance Services: “Myths” might include that there is no deductible on business income coverage when there is normally a “waiting period.” This can be anywhere from 24 to 72 hours. Also, another “myth” is “I only need to insure my equipment for a certain amount since it is older.” This is not true, as most small-business insurance policies are written on a “replacement cost” basis and that would mean that the equipment would be replaced with new, comparable equipment. Also, coverage is triggered by a covered cause of loss, so not all losses are covered.
Larry Trapani, president, Brooks-Waterburn Corp.: One of the biggest “myths” that many Laundromat owners believe is that their workers can be classified as a contractor or “1099” status. By any standard, your employees are just that, employees. They do not fit the IRS definition of 1099 and therefore are subject to workers’ compensation benefits.
Adam Weber, president, Irving Weber Associates (IWA): A common myth held by the majority of policyholders is believing that “everything is covered,” that their property, their liability, and perhaps even their customers’ property, are all covered by their business policy. The fact is, coverage can only be “triggered” by a covered cause of loss, and the included and excluded triggers are spelled out in the policy. Policyholders should carefully review their policies to ensure that their exposures are adequately insured.
Another myth is that property limits remain adequate from year to year. These limits should be reviewed every year (at renewal or when adding/replacing property) to ensure they represent adequate values per the policy provisions. For example, if your policy includes a “replacement cost” provision, the property limits should represent the cost to replace the property in the event of a total loss. If the policy includes a 90% co-insurance clause, the property limits should represent a minimum of 90% of replacement cost value to satisfy the policy provision. Property limits deemed inadequate at the time of loss will likely affect how the loss will be settled, and penalties will be applied.
Yet another myth that becomes reality would be that small-business owners are receiving adequate attention from their insurance reps (brokers or carriers). Often, due to premium size, small businesses are neglected for larger, higher-premium customers who garner more of the broker’s time and expertise.
Ann Hawkins, vice president, Underwriting & Sales, NIE: One small-business insurance myth is that all insurance companies give credits for burglar alarms and video surveillance. I find that not to be the case because when a loss occurs, often the surveillance and/or alarms were not on at that particular time.
Larry Larsen, agent for Crusader Insurance Co.: A lot of people have the concept that when they get an ADA [Americans with Disabilities Act] lawsuit that the insurance company is going to pay for that, and they’re not. They’re not going to pay for the legal defense and they’re not going to pay for any claims against you on that. That one, along with the idea that the money inside your boxes and your changer are covered in the event of theft.
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?
Trapani: 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 I always make to reduce the price 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.
Weber: 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.
Hawkins: 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.
Larsen: Liability is generally available in $100,000, $500,000 and $1 million coverages. It’s my recommendation that people always choose the $1 million coverage, because it doesn’t cost that much more. For personal property, I recommend a $1,000 deductible.
Millino: The answer to this question is quite simple: Make sure you seek an insurance professional who specializes in this class of business for your insurance needs. They will know the carriers that are the most competitive and the coverages that are needed.
Q: Where are the greatest areas of risk in and around the average vended laundry?
Weber: When looking at the risks involved in operating a coin laundry, probably the biggest risk would come from liability, meaning someone getting hurt on the premises due to negligence, such as someone slipping on water on the floor, or mats causing tripping, etc.
Also, large storms can be a problem, causing damage to the premises, glass and signs as well as causing the business to be closed for a time, with loss of income.
Hawkins: The greatest areas of risk in and around a vended laundry are, of course, slip-and-fall or trip-and-fall, and dryer fires. The former can be minimized by keeping all floors clean and free of water, debris, broken floor tiles and crinkled rugs or mats. Also, keep the sidewalk and parking lots free of debris and potholes. Dryer fires can be minimized by removing lint on a daily basis and cleaning vents and the area behind dryers weekly. Also, post warnings about not drying oily rags or uniforms, and cleaning pockets before drying.
Larsen: It is poorly maintained equipment or improperly repaired equipment, in addition to slip-and-falls and lint buildup and fires.
Millino: Greatest areas of risk in and around the average vended laundry are being sued if a customer were to get injured in the store, and being underinsured for business personal property. The limit for business personal property should include all equipment (new), and tenant improvements (including floors, walls, tables, plumbing, wiring, vending equipment, etc.). Store owners really need to read their lease!
Trapani: In the Laundromat industry, there are two major types of claims:
- Dryer Fires — Almost every property claim we have is a result of dryer fires. They occur for two main reasons. The first is customers putting flammable items in the dryer. For example, greasy towels or rags catch fire, especially in the heat of a dryer. The second reason is poor maintenance on the dryer ducts. With a buildup of lint over time, it doesn’t take much heat to cause a fire.
- Slip-and-Fall Liability — Almost every Laundromat owner has had a customer slip and fall while in their store. These can be either a minor situation or they could be injured more severely. Either way, in most cases, it involves making a claim to the insurance company. Too many of these claims will result in a higher premium or, worse, a non-renewal of your policy.
The conclusion on Wednesday: The single biggest mistake vended laundry owners make when it comes to insurance
If you missed Part 1, you can read it HERE