Insurance: How Much Coverage is Enough? (Conclusion)

CHICAGO — Trapeze artists, balancing acts and tightrope walkers thrill circus audiences with their daring acts high above the arena floor. But you can bet that before each show, these performers test that a safety net will catch them should they fall.

Self-service laundry operators don’t share the same risks as death-defying acrobats but they do share the same need for protection in the event of catastrophe. For these small businesses, their “safety net” is having the proper insurance coverage to protect against losses from personal injury, fire, theft and other events.

American Coin-Op invited four insurance providers with laundry industry experience to answer some questions about the options that’ll allow operators to best utilize their money while also avoiding heartache when the unexpected happens.

(Editor’s note: The information provided here is for educational purposes only. Readers should consult an insurance services professional regarding their specific situation.)

Q: Should a laundry business adjust its insurance coverage as it grows or changes over time? If so, how?

Lawrence Larsen, owner, Lawrence Larsen Laundry Insurance: In order to reduce insurance premiums, many laundromat owners lower the amount of their personal property coverage as they realize the value of their insurable interest in their laundromat reduces because of equipment age. It’s important to remember that you can’t insure your opinion of value or the profitability of your laundromat.

If you build a new laundromat for $500,000 and its income greatly increases to a level where you now believe you could sell your business for $1 million, increasing your coverage provides no benefit. If it costs $500,000 to rebuild your laundromat, that is the maximum you can collect under normal laundromat policies. Insurance policies insure the assets, not the cash flow. One area in which you might consider increasing coverage is if equipment prices have increased and you no longer have enough coverage for a full-replacement cost of equipment.

Jodie Millino, vice president commercial lines-producer, HUB International Insurance Services: It is important that each year when the policy comes up for renewal that the customer talk with their insurance agent to make any adjustments to the gross sales, replacement cost of the equipment, etc. Some business owner policies have a built-in inflation guard that will increase the building/business personal property limit 4-5% but not all carriers have this built into their policies.

Larry Trapani, president, Brooks-Waterburn Corp.: Yes, a laundromat owner should regularly review and adjust its insurance coverage as it grows or changes over time. Insurance needs can evolve along with your business, and it’s essential to ensure that your coverage adequately addresses your current risks and exposures.

Here’s how you can approach adjusting your insurance coverage as your business changes:

Regular Insurance Reviews — Schedule regular insurance reviews with your insurance agent or broker, ideally at least annually. These reviews allow you to discuss any changes in your business and assess whether your existing coverage is still sufficient.
Business Growth — If your laundry business is expanding, whether by adding new locations, increasing the number of employees, or offering additional services like dry cleaning or pickup/delivery, you may need to adjust your coverage to account for the increased risks and liabilities associated with growth.
Property Changes — If you make significant changes to your laundromat’s property, such as renovations, upgrades or expansions, it’s crucial to update your property insurance coverage to reflect these changes. This ensures that your property is adequately protected.
Equipment Updates — Laundromats rely on specialized equipment, and if you upgrade or replace machinery, you should update your equipment breakdown insurance to cover the new equipment adequately.
Claims History— If you’ve had claims in the past, they can affect your insurance premiums. Work with your insurance agent to manage risk and potentially reduce your insurance costs over time.
Policy Shopping — As your business grows, periodically shop around for insurance quotes. Different insurers may offer competitive rates or better coverage options for your evolving needs.

Anne Cobb, customer service representative and sales, NIE: A laundry should absolutely adjust its insurance coverage as it grows or changes over time. When your business grows, your exposure becomes greater and coverages need to be reviewed/adjusted accordingly. Review your coverages and limits with your insurance agent every year. When your business changes, make sure you tell your agent what’s going on. Spend time with your agent to make sure your coverages and limits match the needs of your business.

Q: Anything else you’d like to add about insuring laundromats and laundry services businesses?

Millino: It is extremely important that the (laundry owner) customer reviews their policy carefully and goes over all questions they have with their insurance agent. Going with an agent that specializes in this class of business is important rather than to go strictly on price. It is also important that all customers ask their insurance agent to provide them with the A.M. Best Rating of the insurance carrier they have been placed with. This gives the customer the financial status of the carrier and the rating as well.

Many new insurance companies coming into the marketplace are not financially strong and may end up going out of business very quickly because they are “buying up the business” with extremely cheap rates that will not withstand the potential losses that happen with this class of business.

Trapani: One of the most overlooked coverages for laundromats is called tenant improvements. (This) coverage is important to a laundromat owner because it helps protect the investments made in customizing and improving the rented space for their business.

Laundromat owners often need to customize or renovate the leased space to accommodate their specific equipment, layout and design requirements. This can include installing plumbing and electrical systems; adding flooring, walls or partitions; and making other modifications. These improvements can be a substantial financial investment.

If the leased space experiences damage from covered perils such as fire, water damage or vandalism, tenant improvements coverage can help cover the cost of repairing or replacing the customized improvements. Without this coverage, the laundromat owner could be left with significant out-of-pocket expenses.

Tenant improvements coverage is a valuable component of a comprehensive insurance strategy for laundromat owners, as it safeguards their investments in customized improvements and helps maintain positive relationships with landlords.

Cobb: Do what you can to reduce your risk. Do walk-around inspections both inside and outside on a regular basis. Make sure you have working video cameras inside and outside. Clean dryer lint traps on a daily basis. Post emergency (phone) numbers in a prominent place. Do a yearly review with your insurance agent on all your coverage needs. Remember to include all costs in choosing your insurance limits. Promptly report all claims and incidents that could result in a claim.

Larsen: The most important thing that laundromat owners should do is to read their leases and ensure they are in compliance with all the provisions on insurance. I’m surprised at the number of owners who have never actually read and understood the provisions of their lease. Don’t wait for a loss to discover you didn’t properly cover you business.

Be certain to read the section of your policy that lists the items not covered by policies. An often overlooked provision relates to gun possession on the premises, trained attack dogs, and certain activity by the laundromat owner on the premises.

The second most important thing is to ensure you regularly search your business for risks and hazards, that you’ve posted appropriate signage, and you are in compliance with hiring legal employees.