How much do you really know about your insurance coverage? American Coin-Op has invited Jodie Millino of Wells Fargo Insurance Services and Ann Hawkins, vice president of NIE Insurance, to answer some questions.Q: What coverages do operators pass on that they shouldn’t?Millino: Owners continually try to say that attendants are independent contractors and that workers’ compensation is not needed. We stress that just because a CPA considers employees outside contract help, at the time of injury, that might not be the case. Workers’ compensation should be a must for every store with an attendant or fluff-and-fold, even if they report no payroll and an audit determines same. This is a precautionary measure that should be discussed with your agent.Hawkins: The most important thing that operators pass on is replacement-cost coverage. Often, to save premium dollars, the insured will opt to buy an Actual Cash Value policy, which means that any loss will be depreciated according to the age of the item(s) claimed. In a total loss, there would not be enough coverage to rebuild, and the insured would be out-of-pocket for everything over the depreciated cost. Replacement cost is a limit high enough to replace and rebuild with like kind and quality with no depreciation for age.Q: Are there are myths/fallacies about laundry insurance?Hawkins: One myth about all insurance is that credit is always given for alarm systems and surveillance cameras. TV ads often make this claim. The problem is that alarms are often not turned on when the store is closed. They are either forgotten, or they go off too often, so the owner stops setting them. Surveillance cameras are nice, but they don’t help the insurance company see a slip-and-fall if the tapes are recorded over time and time again. Often a lawsuit is filed up to two years after an incident occurs, and the owner may never have been aware of it. By then the tape is gone and doesn’t help the insurance company with settling claims.Q: Does any confusion ever arise about who is responsible for the insurance: the landlord or the tenant?Millino: When you have a sole-occupancy building (stand-alone), many owners require the tenant to insure the building and name the owner as the named insured. This differs from a laundry in a retail center where the store owner is one of the many occupants, and it would not make sense to have each tenant carry his/her respective share of a building insurance value. Carefully review the lease with your attorney and make certain you do not pick up this risk and fail to insure it. This is especially true with single-occupancy buildings. This is sometimes referred to as a “Triple Net Lease” (usually referring to the tenant paying for and carrying insurance, taxes and all expenses).Hawkins: Sometimes there is confusion on the part of the tenant regarding his lease requirements. A lease may require the tenant to buy building insurance. In this case, the named insured can include the actual building owner and the business owner, and both the building and the business will be insured on one policy. This is not common, however, if the tenant is located in a shopping center. It would not be efficient for each part in the center to cover the building, so the landlord will include the cost of building insurance in each party’s rent. Please read your lease thoroughly and, if you have questions, contact your attorney or your agent.Q: How often should an owner evaluate his/her coverage?Hawkins: Owners should evaluate their coverage needs when first purchasing a policy, and then three months prior to each annual renewal. If new equipment is purchased or a new operation is started, your needs may change and you should not wait until renewal to call your agent. And don’t forget to contact your agent if you close or sell a location. Many customers completely forget to let the insurance company know, and they may be entitled to a credit when the location is deleted. Also, let the agent know about any new locations immediately.Millino: We would recommend that owners review their personal property values and income exposure to loss annually. Check with your distributor to see what it would cost to totally replace your store, including improvements, equipment, vending, etc. Then discuss your income loss with the CPA, reminding him or her that it is based on standard accounting principles, and is also based on “net income plus continuing (ongoing) expenses” normally.Q: Are multiple-store discounts available?Millino: This is possible based on the rating methodology of the carriers. Also, when you have multiple stores, we sometimes blanket coverage, increase deductibles, and with larger accounts, write a “loss-limit” form.Hawkins: Multiple stores do not usually create an automatic discount. However, if you have multiple stores, you may save some premium dollars if you put them on one policy as opposed to writing each one on a separate policy.Q: Are more owners shopping for coverage?Hawkins: Most main-street businesses, including laundries, shop for coverage at renewal because they are contacted by so many insurance agents. This seems to be the case regardless of the economy. But once an owner finds the company that can give him what he needs at a fair and competitive price, and he has trust in the company’s reputation, representatives and service, he is likely to stay with that company for many years.Millino: This is not really the case with us. People are more interested in trying to better control their costs by discussing available options to reduce their expenses. We have several items we use that are proprietary in nature. We do not recommend reducing limits to save pennies. We approach things on a bigger scale, which makes sense, but does not materially affect limits.Q: What insurance advice can you offer?Millino: Buy the coverage from a solid agency that specializes in the class. Many agents today will say they insure coin laundries, yet might only have one or two on the books, and do not understand the difference between a front loader and top loader. Select someone who deals daily with the lenders in the field. In these times, it might be prudent to deal with an agency/broker that can also lead you to the new lending available to coin laundries (Small Business Administration (SBA) programs, etc.). We have a dedicated team of SBA and small-business finance experts who can assist and discuss those processes on a referral basis.Hawkins: My advice to coin laundry owners is:
- Do what you can to reduce risk.
- Do walk-around inspections, both inside and outside on a regular basis.
- Clean lint on a daily basis.
- Put emergency phone numbers in a prominent place.
- Do a yearly review with your insurance agent on coverage needs.
- Remember to include all costs in choosing your insurance limit.
- Promptly report all claims and incidents that could result in a claim promptly.
If you have any questions or comments about this article, contact NIE Insurance at 800-325-9522 or visit nie.biz; or contact Wells Fargo Insurance at 800-829-1330 (ext. 210 or 209) or visit laundryinsurance.com.Click here for Part 1 of this story!