Five Business Insurance Questions New Laundry Owners Must Ask
When thinking about purchasing a vended laundry, insurance very likely is not at the top of your to-do list. However, it’s probably more important than you think, as insurance coverage for your store is critical to protecting your investment and providing liability coverage.
Here are five key insurance questions that potential laundry investors should consider:
1. When should I contact an insurance agent?
- Typically, the best time to contact an agent for quotes is two to four weeks before you need to get coverage in place. This will give the agent time to finalize quotes and customize them to your needs. Carriers differ on how long it takes to get quotes, so I don’t recommend waiting any less than two weeks prior to coverage is required.
- If there are multiple locations requiring coverage or you need building coverage, this often needs to be approved by insurance underwriting, which can take longer. So, plan accordingly.
2. When do I need to get coverage in place?
- Timing for obtaining coverage varies, and it depends on a number of factors. For owners conducting buildouts, we typically recommend checking with the contractor and reviewing their coverage. For owners conducting buildouts for longer than about 30 days or if the contractor is unable to provide coverage, a builder’s risk policy is typically recommended. Then, you can get a business owner’s policy in place once the buildout is nearing completion and the equipment is arriving. Often, owners will need coverage in place and an evidence of property insurance (if you have a loan for the equipment) in order to get the equipment delivered.
- For an owner purchasing an existing location, we recommend coverage in place the day you are closing on the business or immediately after closing. Since you will be owning the business, there can be an exposure to your business if you wait to get coverage in place.
3. What impact do attended-versus-unattended and 24-hour operations have?
- When deciding on the type of business model for your laundromat, realize that there are insurance implications.
- CLA Insurance has the capability to insure any type of vended laundry operation, whether it’s fully attended or completely unattended, and/or open 24 hours. Most insurance companies will have underwriting guidelines as to the type of laundromat they will insure. Nearly all of the standard market carriers (Hartford, Chubb, Travelers, West Bend, etc.) have strict guidelines stating that they insure only fully attended or almost fully attended laundries. These companies view fully attended stores as the safest type of laundromat model – because there will always be an attendant on duty to clean up spills, to prevent small fires from becoming large losses, to warn customers against washing certain types of clothes with certain chemicals on them, and so on.
- If you decide to go the unattended or 24-hour route with your laundry business, be sure to tell your agent so that he or she can place you with the correct carrier. If the carrier doesn’t know that it’s insuring a 24-hour laundry, it can serve as a reason for them to deny a claim – and you definitely don’t want that to happen. If your vended laundry is unattended, there are carriers that will insure you, if coverage is declined by the standard market carriers (often at a higher cost, of course).
4. How do I know what coverages I need as a new investor?
- If you’re purchasing insurance for your business for the first time, it can be confusing to decide what coverages you need. I recommend speaking to your agent to make certain you have the correct coverage to protect your specific operations.
- One of the most important insurance coverages for a new investor is going to be business personal property, or BPP. This covers the business’s contents, including equipment. And the main consideration is to insure the BPP for replacement cost, not the cost at which you purchased the equipment. Clearly, BPP needs to include coverage for more than just your equipment; all of the store’s contents – such as electronics, furniture, card systems, etc. – should be included. One of the most common mistakes I see with new investors is insuring just their loan amount and not taking into consideration everything else within the store. Also, if you have an equipment loan, you need to assure that the finance company is included on the policy – because most finance companies will request specific language as to how they want to be listed.
- An equally important coverage is liability. Be sure you review your lease and let your agent know if you need to increase your liability limits. The minimum liability coverage should be $1 million each occurrence/$2 million for the general aggregate. It’s common for landlords to request an umbrella or to increase the limits to $2 million/$4 million. Also, review your lease to see if the landlord needs to be added as additional insured, and let your agent know. Nearly all landlords request to be added as additional insureds, so be sure to let your agent know at the policy’s inception if your landlord will need to be added onto the policy.
- Third, if you own the building, be sure to have this included on the policy and insured to replacement cost. We see a lot of companies that have coinsurance provisions on buildings – so, if your building is not insured to replacement value and you have a claim, you could end up paying a portion of the loss.
- The fourth coverage a new investor will need to consider involve leasehold improvements/tenants betterments and improvements. This will be for owners who rent and are upgrading or doing buildouts to their locations. Since this can be of significant value, you want to be sure that you have this coverage on your policy.
- There are other coverages – such as business interruption, backup of sewer, bailee, hired and non-owned – but I recommend that you speak to your agent regarding what you need to cover your specific laundry business to protect against a loss.
5. Do I need other coverages beyond property and liability?
- Workers’ compensation insurance coverage will be required if you have employees, since it protects your business and also will provide medical care and other compensation. If you hire “1099 employees,” or independent contractors, ask these workers for a certificate of insurance so that you can verify they have coverage. There can be many state restrictions for workers’ compensation, so do your research on your state’s specific requirements.
- If you offer pickup and delivery, understand that there are many gaps between personal auto and commercial coverage. As a result, it’s wise to protect your business with a commercial auto policy.
Insurance is meant to be a financial remedy. It’s designed to make you whole again, if there is a loss to the business. At the end of the day, we want to make sure your assets and investments in your laundry business are protected so that you can continue operations should you face a loss.