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Ways to Manage Insurance Costs

Paul Partyka |

Pardon the cliché, but Larry Larsen has worn many hats in the self-service laundry industry. Larsen has more than 30 years of experience in the ownership, management and construction of self-service laundries.More specifically, Larsen has been owner/operator of more than 50 stores, has extensive consulting experience, has taught a self-serve laundry investment class, and even serves as an insurance agent for Crusader Insurance Co. in Woodland Hills, Calif.A GOOD DEAL?While Larsen has found the self-serve laundry business to be a good investment, he admits that insurance companies don’t consider coin laundries a prime business to pursue.“[Insurance] companies that previously went after laundry business are not actively marketing to laundries today,” Larsen says. “With some of the risks, companies have a difficult time accessing exposure.” Laundromat risks include unattended stores, amateur repair people, changing equipment, moving equipment, gas, heat, electricity, and nonprofessional ownership, he says.Self-service laundry operators need to understand the reality of the insurers’ concerns. “Operators expect far too much for what are usually low premiums.” As for insurance costs, he says a good rule of thumb is $1 per square foot, plus costs, inspection, policy fees, etc. “This can also be adjusted when you factor in several things such as new equipment vs. old equipment, etc.”DOING YOUR PARTGetting a total grasp of insurance issues can be a challenge, even for veteran operators, Larsen believes. For example, some operators may be confused about additional coverages — coverages that won’t pay out, he says. “The biggest concern should be fires. Another concern is allowing water on the floor. This can be a dangerous occurrence; and then some person slips. Slips-and-falls in a laundry are common. Fire and liability are the two major concerns.”Operators also need to be aware that some companies won’t insure 24-hour stores because of vandalism concerns. “If the store is busy all the time, it’s not a risk. However, when there are only one or two people in the store late at night, that’s your highest level of vandalism threat. Leaving your store open when it’s not in demand is an invitation to vandalism.”Does having an attendant lessen the insurance risk? That’s a tricky question, Larsen says. “The trick is thinking that you’re an attended store. This may not be the case.” For example, if your attendant closes the store when he/she is called away for some reason, that’s an “attended” store.“Coin laundries are, at best, partially attended by definition. If an emergency occurs, and the attendant leaves for any reason [and doesn’t lock up], and loss occurs, you’re in an exposure position.”CLAIM CONSIDERATIONSWhen you make a claim, keep in mind that other insurance companies have access to this information, Larsen says. “Claims count the same whether they are for $15,000 or $150. I had 14 California customers who couldn’t get insurance because they made two claims in a three-year period. They were uninsurable. Two claims are more than a red flag! Think about having a Corvette and getting two speeding tickets. If you can get insurance, you’re going to pay a lot for it.”Avoid making two claims in a three-year period; instead, absorb any small loss, he advises. Avoiding claims also helps operators keep their loss-free discount.A BIT OF ADVICELarsen estimates that 60% of the laundry owners he knows are not carrying the right type of insurance. He urges operators to think about the following things:

  • “If you don’t own the building, why in the world would you buy replacement cost insurance? Replacing the business is the key here. There’s no benefit if you don’t own the building and don’t have the right to rebuild it. If you can’t rebuild a store after a fire, and the insurance company knows this, the company will wait until you can replace it. The landlord may be able to cancel your lease, or you won’t have a right to replace things.”
  • In a replacement situation, the reality is that an operator may be given a partial settlement, with the balance based upon him or her buying another laundry, he explains. “I don’t think people understand this. Don’t insure your equipment unless you’re sure how the procedure will work when it comes time to recover funds in case of a catastrophic loss.”
  • Paperwork is crucial. “Don’t lie on applications or leave something off. Make sure the application is accurate. In the event of a catastrophic loss, every document will be looked at in an effort to find out if you made any attempt to deceive or mislead.”
  • Never remove/leave off safety items on equipment.
  • People are now going to a $5,000 deductible in order to cut costs.
  • It’s a major mistake to drastically cut insurance coverage or even “go naked” (drop your insurance). “Try negotiating to reduce your costs; to [drop all coverage] in any market is unacceptable in terms of being a moral human being. It’s also bad business. I’ve seen some of this with coin laundries. People are not renewing, not buying. If people start dropping insurance, certain markets will lack the resources for insurance. Just call your agent and cut out unnecessary coverages.”
  • Catastrophic coverage is key, but there are other regional considerations. If you’re in a northern climate, think about your roof collapsing under heavy snow. Wind damage to signs is prevalent in certain areas.
  • Read your policy and understand what you’re getting. Develop a bond of confidence with your agent, so that he/she will explain things to you. Your coverage and your understanding of it are more important than the premium itself.

If you have any questions or comments about this article, contact Larry Larsen at laundromat123@aol.com or 714-630-9274. 

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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