Insurance: How Much Coverage is Enough? (Part 3)

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: Is property insurance needed to cover damage to the laundromat building and equipment in the event of fire, theft or natural disaster?

Anne Cobb, customer service representative and sales, NIE: Yes, all laundromats need property insurance to cover the building, equipment and other business personal property that they own, and any portion of the building that their landlord holds them responsible for (glass, doors, windows, HVAC equipment, drywall, plumbing, pipes, etc.).

Lawrence Larsen, owner, Lawrence Larsen Laundry Insurance: If you own your building, you obviously need to cover against risks to your property, but the less obvious issue is ensuring that laundromat owners who rent are following the requirements contained in their leases. Landlords can use improper adherence to lease provisions to cancel leases or options even without experiencing a loss.

Jodie Millino, vice president commercial lines-producer, HUB International Insurance Services: Building insurance is needed if the customer owns the building or if the lease requires the tenant carry the building. This will happen on sole occupancy buildings, but it will be spelled out in the lease. Tenants need to cover the replacement cost of the equipment and tenant improvements under the business personal property coverage for replacement value and not what the equipment may be worth at the time of a loss. Natural disaster coverage (earthquake, flood, etc.) is not covered under the standard business owner policy but can be purchased separately.

Larry Trapani, president, Brooks-Waterburn Corp.: Yes, property insurance is needed to cover damage to the laundromat building and equipment in the event of fire, theft, natural disasters or other covered perils. Property insurance is a fundamental component of a laundromat owner's insurance portfolio and provides essential protection for your physical assets.

Here’s what property insurance for a laundromat typically covers:

Building Coverage — Ensures the physical structure of your laundromat, including walls, floors, ceilings and fixtures. It provides protection against perils such as fire, smoke damage, vandalism, theft and certain natural disasters.
Business Personal Property Coverage — Covers the equipment and machinery used in your laundromat, including washing machines, dryers, folding tables, and any other property that is essential for your business operations. It protects against the same perils already mentioned.
Inventory and Supplies — Can also cover your laundry supplies and inventory, such as detergents, fabric softeners, big-screen TVs, and other items used in your business.
Equipment Breakdown — Protects against damage to machinery and equipment due to mechanical or electrical breakdown.

Keep in mind that property insurance policies may have deductibles, limits, and coverage exclusions.

Q: Are there insurance options that cover loss of income in case a laundromat has to temporarily close?

Larsen: Most package insurance policies provide a payment if your laundromat is forced to close for a specific period of time. There is usually a waiting period before your benefits can be used. More frequently, laundromats are better served to return their business to operation as opposed to waiting and relying on any insurance coverage. Extended periods of closing means you can lose your customers and insurance policies are not designed to pay for a decline in income based on customer loss.

Millino: Under a business owner policy, there is coverage for business income coverage generally written on an actual loss sustained basis for 12-24 months. If the coverage is written on any other insurance product, the customer needs to make sure there is coverage for this and ask what type of form it is written on. On a “package” policy or a “property” policy, there could be limitations under this coverage.

Trapani: Yes, there are insurance options that cover loss of income in case a laundromat has to temporarily close due to a covered loss. This type of coverage is typically referred to as business interruption insurance. It is designed to help businesses recover lost income and cover ongoing expenses when they are forced to cease operations temporarily due to an event covered by the insurance policy.

Business interruption insurance is a valuable tool for laundromat owners to protect their income and maintain financial stability during unexpected disruptions. It allows them to focus on getting their business back on track without suffering severe financial losses.

Cobb: Coverage for loss of business income is also dependent upon the cause of loss. Covered causes of loss include damage from break-ins and fire (deductible would apply). Flood and unfavorable economy are excluded causes of loss.

Every business should carry loss of business income coverage. Without it, some businesses might find it hard to ever reopen after a fire.

Coming in Tuesday’s conclusion: Understanding workers’ compensation, and how a laundry may need to adjust its insurance coverage as the business grows and matures