WESTBURY, N.Y. — Most Laundromat owners I know (I know more than 1,000 of them) really don’t spend much time thinking about their Laundromat business insurance. After all, the renewal is only once a year, and they shopped it when they bought the insurance. Within a few dollars, you are probably getting the best deal, right?
Sadly, when I look at a current insurance policy of someone, I almost always see major gaps in coverage that would put in jeopardy their Laundromat if they had a claim. The business could permanently close!
With that in mind, here are my “Top 5 Things to Consider When Purchasing Laundromat Insurance”:
1. WHEN YOU BOUGHT THE LAUNDROMAT, DID YOU BUY AN EXISTING LAUNDRY OR BUILD ONE FROM SCRATCH?
This is the most overlooked coverage I see when reviewing policies. Many Laundromat owners do some kind of buildout. Whether they do a renovation or build a Laundromat from scratch, the cost of this must be protected. In almost every lease, you are responsible for your buildout. In insurance terms, this is called ‘tenant improvements.’ I always ask how much renovations you put into the space during the time you have owned it.
2. AVOID THE ‘WASHER/DRYER INSURANCE TRAP’
This is a phrase I coined many years ago. Here’s how it works: You buy a Laundromat costing $500,000. You put $100,000 down and borrow $400,000 from a lender. In addition, you put another $150,000 in renovations into the space. Total cost is $650,000. Since you borrowed only $400,000 from the lender, they require only $400,000 in insurance. What if the place burns to the ground? Would you be able to reopen after the $400,000 was paid? Who is going to pay the difference? Make sure you are protected for the full replacement cost of the business, not just the cost of the loan.
3. WORKERS’ COMPENSATION
I know this is a “cash” business, but the reality is the IRS is really cracking down. They want their money and are going after small-business owners to get it. Laundromat attendants do not qualify as 1099 contractors. They are employees and therefore must have workers’ compensation insurance.
4. DO YOU DO WASH, DRY AND FOLD SERVICE?
If you do, what happens to your customers’ goods if there is a fire or some other calamity? Make sure you have some sort of “bailee’s” coverage on the policy. This would cover your customers’ clothing that you are liable to pay [for] if they are damaged or destroyed. At any one time, you could have $10,000 worth of customers’ goods in your store.
5. READ YOUR LEASE LATELY?
I read leases from business owners almost every day. It amazes me what the “insurance requirements” are. Landlords and their lawyers are requesting things that would be either very expensive or impossible to get. Some of these requirements simply don’t exist. For example, I once saw a lease (that was signed by both parties) that required the Laundromat owner to name the landlord as “loss payee” for any damage to the business owner’s washer/dryers! Not only is this illegal, but it simply makes no sense to require this. Why should a landlord get paid for damage to somebody else’s property? Bottom line here is to read your lease before you sign it or have a qualified person help you.
Editor's Note: This originally appeared as a blog post on the Brooks-Waterburn Corp. website.