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Insurance: Ensuring Your Success

Paul Partyka |

RANCHO CORDOVA, Calif. — “People hate insurance companies,” says Steve Brodie, senior vice president of Acordia Insurance/Coin-Op America. “They hate them until they have a loss, then they want to like them.”“Catastrophes like floods and hurricanes have affected reinsurance, which is passed down to primary carriers. This has had an unbelievable effect on all businesses. Right now, in the Gulf states, premiums for coin laundry owners are, in some cases, 10 times what they were before — if you can even get insurance. It’s tough.”Another current concern for laundries is fires. “Fires are making a huge impact. There are more total fire losses today then there were five or 10 years ago.” Brodie believes that some coin laundry carriers may even put severe warranties on coin laundry policies, making it mandatory for stores to get regular flue-cleaning service.THE BASICS   Brodie offers some insurance advice for operators. “If you’re a laundry owner, it’s essential to have liability insurance because landlords will require it and you want it to cover your net worth, plus hazard insurance, which is coverage on your equipment.“In some cases, lenders may require flood insurance if you’re in a flood zone. Katrina and the like may make this mandatory in the future.”Brodie says most people who write laundry policies know what laundries need. He strongly recommends using someone familiar with the industry. “If not, you may pay the wrong price, get an auditable policy (see next column) or not get the right coverage. Go to a laundry specialist and cut through all the baloney.”If there’s one area where owners fall short, it’s not having high enough liability coverage, Brodie believes. “Years ago, $300,000 was thought to be enough. Is a million dollars enough today? Think in terms of higher liability coverage. Once you get by that first million, the other layers are relatively inexpensive.”Another concern is the cost to replace your coin laundry. “Don’t just think in terms of replacing the equipment. There’s plumbing, electricity, tile, the drop ceiling, etc. A distributor is the best source to tell operators what the true replacement cost of a business is.”Brodie stresses that the two coin laundry-related things that “kill” insurance companies are fire and liability. “The average operator should have enough insurance if he/she is using the right agent and the right company. You’re never going to be covered 100 percent. The key is to increase your liability limits. Ask your agent about this, and rely on distributors for updates on what it would cost to replace your store.”Common sense can be applied to insurance matters. “Pay attention to your lease; don’t just throw something together yourself. Don’t be your own lawyer. Don’t be your own insurance agent. “Also, look for an admitted insurance company.” This means, he says, that the state has approved them to do business; their rates are controlled. In most states, he adds, the admitted insurance company is covered by a guaranteed fund (similar to how the FDIC works) established by the state. The states will pay out a percentage of what you’re owed if the company becomes insolvent.A non-admitted company is a freelance company, which may not be bad, he says. You may, for example, get them to write something at a lower rate. However, Brodie says to check your lease. “Some leases may say you can’t use a non-admitted carrier.”ASK SOME QUESTIONSWhen shopping for insurance, ask the agent if the company writes laundries and is familiar with the laundry risks. Does the carrier specialize in this area? “You don’t want an auditable policy. That’s critical.” An auditable policy means the carrier has the right to audit your receipts every year, and raise your premium.“I want a carrier with a Best (AM Best Company) rating of at least B++. Check out their ratings (www.ambest.com). I want a financial size of no less than ‘X’ (10). If you use a non-admitted carrier, look for at least a rating of B++. Periodically, ask your agent about the company. Things can change.”OTHER FACTORSWhile having an attendant or security equipment may not directly influence your insurance rates, both still are advantageous to the operator, Brodie says. “Most carriers don’t want to write an unattended store. If you’re unattended, make sure to check in at times. Twenty-four-stores are also a problem, even if attended.”Security equipment can help with liability cases such as customer falls. “It’s amazing how these high-tech cameras let you watch the store 24/7 over the Internet. [The cameras] have saved our bacon.”If you offer extra profit centers, let your agent know. For example, adding tanning booths or exercise equipment is a concern. There are companies that specialize in underwriting these things, he says. Even something like a kiddie ride, he adds, can be an insurance concern. “There’s even a company that just writes kiddie rides.”“We can’t control how operators do business, just keep us informed.”GOOD JUDGMENTWhen is it time to make a claim? Brodie suggests not calling an agent unless there’s a huge loss. “Sometimes it’s not smart to file a claim. The coin laundry industry has a bad reputation with insurance.“Think in terms of the policy: buy it for a big loss, not nickel and dime claims. Insurance companies would rather pay a big loss and get it over with than 10 little losses. With 10 little losses, they will jack up your premium substantially every year and add a deductible that will knock your socks off. Eat that small claim. Hide that small property loss or crime.”Brodie cautions that a liability situation is a different matter and advises checking with the agent.If you’re unsure of what to do when it comes to any claim, Brodie suggests simply calling your agent and getting some advice. “Give them an idea of what happened.”Brodie sums up the claim situation. “With a frequency of claims, statistically that means you will have a big one.” 

About the author

Paul Partyka

American Coin-Op

Paul Partyka was editor of American Coin-Op from 1997 through May 2011.

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