As Carriers Adjust Their Underwriting Guideline Requirements, Now is the Perfect Time to Review Your Business Coverage
As you know, inflation has been increasing at an unprecedented rate. As a result, insurance carriers are changing their underwriting guideline requirements, including insuring business personal property to a minimum of $250,000. Additionally, carriers are requiring a minimum of $250,000 in gross annual sales on any new business being written.
Furthermore, some companies are reducing coverages to actual cash value, or ACV, in lieu of replacement cost on buildings that are in excess of 50 years old. Replacement cost would provide the insured with a building reconstruction of like kind and quality materials, while actual cash value would deduct depreciation from the property based on its age, leaving the insured on the hook to pay the difference in the cost to rebuild.
Given that, here’s what laundromat owners need to consider when looking to insure their buildings and business personal property:
It is important to remember when insuring a building that your market value – the price at which you could sell your property on the open market – is not the same as the amount it would require to replace your building in the event of a complete loss. If you have an appraised value – insurable replacement cost/insurable value from the bank, a previous sale or an appraisal – this most likely is the best value.
If you’re unsure as to which value to be used, CLA Insurance would be happy to run a Marshall & Swift valuation on your property, and it can provide this report to you via email, prior to you agreeing on the value to be used.
Based on the fact that they own their buildings outright, some insureds are comfortable insuring their buildings at 80 percent of the properties’ replacement cost value – because (1) this keeps their premiums down, and (2) in the event of a partial loss (which represents at least 95 percent of all losses), they will not get hit with a co-insurance penalty.
With that said, at CLA Insurance, we recommend insuring your assets at full replacement cost.
Below is an example of a loss settlement that would leave the insureds with a gap to fill, due to that fact that they weren’t insured up to the 80 percent that is required:
- Property Value: $400,000
- Co-Insurance Requirement by Carrier: 80 percent
- Deductible Amount: $1,000
- Insurance Required: $320,000
- Insurance Carried: $280,000
- Loss Incurred: $130,000
Here is the settlement, as determined by applying the co-insurance formula:
$280,000 (amount of insurance carried), divided by $400,000 (property value), multiplied by $130,000 (loss amount), minus $1,000 (deductible) = $90,000 (settlement)
If the insured were covered up to 80 percent, or $320,000, the equation would have been as follows:
$320,000, divided by $400,000, multiplied by $130,000, minus $1,000 = $103,000
In this scenario, the difference in the settlement is $13,000.
It’s important to remember that, if your property experiences a catastrophic loss, your policy will only pay the limit specified in the declarations.
The above illustration applies to business personal property as well. If throughout the year you have upgraded any of your business’ equipment, it’s important to let your insurance professional know so that you can be properly and fully insured. Of course, this will increase your premiums, and in a tough economy where inflation is soaring, this is the last thing anyone wants to hear.
However, it’s critical that all laundromat owners assess their risk tolerance based on their financial wherewithal and have an understanding as to what they’re entitled to in the event of a covered cause of loss based on how their insurance policy is structured.
If you’re currently with a carrier and are having issues with renewal increases due to new underwriting guidelines – and if your laundromat offers wash-dry-fold services and is fully attended – CLA Insurance would be interested in trying to place you with one of its partners. We can almost guarantee a lower annual premium with better coverage to suit your laundry business’ needs.
If you own a fully attended laundry business that is strictly self-service, we also have options for you, but at a higher rate. After all, there are virtually no goods or services that have decreased in cost over the last year, so minor increases are to be expected.
With that being said, if we can assist in trying to combat those business insurance increases, we would love to make that attempt. We also can assist with insurance for unattended, 24-hour operations, but these policies, not surprisingly, will carry the highest rates of all.
In addition to laundromat insurance, we are a full-service insurance brokerage and have the ability to quote your home, auto, life and any other businesses you may have.
Please give us a call or send an email, we would be glad to try to help you. We represent one of the largest family-owned insurance brokerages in the Midwest and love to help out small-business owners in any way possible.
Alex Dolan is an account executive at CLA Insurance, which is the largest laundry insurance program in the United States. CLA Insurance offers comprehensive property and liability insurance tailored to the specific needs of your laundry facility. You can reach Alex at (847) 427-3471, or email [email protected].
In addition, Alex and CLA Insurance Account Manager Teddy Rosenberg both will be on hand at the Clean Show (Booth #836) in Atlanta. Be sure to stop by for a full insurance review and live quote, especially if your laundromat operation is fully attended and offers wash-dry-fold services.
