Today, a healthy mix of independent salons, larger chains and franchises are available to serve approximately 30 million tanners—and, regardless of size, those salons are subject to unique risks due to the presence of ultraviolet tanning equipment, as well as many of the other new and innovative services today’s indoor tanning salons offer.
As a business owner, you should never consider going uninsured. As a salon owner, you should consider tanning salon-specific insurance a necessity of running your business; without it, the risks to your salon—and you individually—are considerable. A light should go off when your landlord asks you for proof of insurance and you don’t have it.
Many new salon owners are not aware that insurance on a tanning salon is not as easy to procure as other small businesses, and insurance decisions can be overwhelming for those new to the industry or unfamiliar with the exposures unique to indoor tanning. Fortunately, there are a handful of excellent insurance programs specifically designed for tanning salons—this is the way to go. You will be guided through a series of questions and be provided with insurance protection that is tailor-made for you. The best part is that you may be surprised at how affordable a well-rounded insurance portfolio can be, especially when it gives you peace of mind regarding adequate insurance protection.
When applying for insurance, make sure that your policy has at least three basic coverages—professional liability, business liability and property coverage. Of course, there are many other coverages available, but these three are the basic minimums that you should procure before you even open your doors.
Liability Insurance
One of the most essential types of coverage is liability insurance. Liability can be defined broadly as the responsibility society confers on businesses and individuals to compensate those injured by their activities. Liability risks come in more forms that one might expect, from injuries that occur while someone is tanning (such as overexposure, skin damage, etc.) to problems with business relations and transactions (including those with customers, suppliers, competitors and landlords). Liabilities also can stem from the maintenance of salon premises. As you can see, some sources of liability are unique to the tanning and beauty industry, while others are risks for all businesses. As an owner, you must be aware of all these potential exposures when setting up and operating your business.
The two major types of liability coverage that relate to the tanning industry are professional liability and business liability.
Professional Liability. Professional liability protects you from accidents or negligent acts that might arise out of professional services offered at the salon. At first glance many owners—and sometimes even agents—think that professional liability coverage is an option for the tanning industry, but it actually is one of the most important types of insurance to have because it protects you, as an owner, in regard to your professional services. You should consider this coverage essential and the foundation of your insurance portfolio.
Normally, a professional liability policy is written as a separate policy from your property and general liability coverage. Professional liability limits usually range from $300,000 to more than $1 million depending on the salon—and due to skyrocketing court settlements, higher limits should be explored. Higher limits are available with some programs as part of the professional liability policy or as an umbrella policy, and the good news is that the cost difference between those two figures usually is quite affordable. To determine how much liability coverage is adequate for you, ask your insurance professional about the available options. If you are on a tight budget, you should carefully evaluate the amount you can afford to lose (if any) and make sure your coverage protects you to at least that point.
Professional liability policies can be written on a claims-made basis or an occurrence basis. On a claims-made policy, the insurance carrier that carries the current coverage is liable for the claim when the claim is reported. The claim must be “made,” which means it has to occur and be reported during the policy period. This policy form is very restrictive, and gaps in policy terms or changing insurance carriers can leave you vulnerable.
On an occurrence policy, the insurance carrier that was on the risk at the time the losses occurred would be liable for the claim. Occurrence policies offer the advantage of extended protection—if a claim is made against you after your policy expires, you may still have liability protection up to the limits of insurance that was in effect at the time the negligent event. This is true even if you do not currently have insurance protection. While it is not recommended ever to have a gap in coverage or to be uninsured, this form of coverage might give you protection for a claim that occurred years ago when an occurrence policy was in force, even if the claim was reported much later.
The difference in these forms is rather confusing and it is recommended that you discuss them with your insurance specialist.
Business Liability. Business liability (also known as general liability) protects you against bodily injury lawsuits, such as those claiming that a customer or visitor was injured while on your premises. Trips and falls would fall under this category. Business liability also provides protection against property damage claims, personal injury lawsuits involving libel or slander, claims arising from false advertising and claims arising from the physical eviction of a person while on your premises and/or claims of false arrest.
Millions of civil cases are filed every year, which result in juries awarding hundreds of millions of dollars due to product liability and personal injury lawsuits. As a result, liability limits of $1 million to $5 million have become the standard. Often, landlords and leasing companies will require a minimum of $1 million, but you should weigh and evaluate the cost to increase beyond that because the limits you choose can spell the difference between solvency and bankruptcy later on.
Also remember the importance of the lease agreement. It is a legal document and needs to be read in its entirety. Before signing a lease, review what party is responsible for what certain items and conditions. For example, some salon owners are responsible for glass and all improvements while others are not—this is an important factor to consider when deciding on limits. Your insurance agent may be able to help with appropriate limits, but they are not an attorney and therefore cannot give you legal advice. As a salon owner, it is up to you (and a lawyer if necessary) to review your lease and adequately insure your salon. Keep in mind that landlords and leasing companies often ask to be added to insurance policies as an additional insured. It protects their interest and gives them a position on your policy.
If you are a tenant in a building, make sure to include a coverage called Fire Damage Legal Liability. This coverage relates to a liability exposure in which the salon owner is responsible for damages to the building due to his negligence. This does not cover damages to the salon’s equipment.
Property Coverage
This is a broad term and can include the building, business personal property (contents) and many forms of business income coverage. Many salons are tenants—not building owners—however, if you do own the building, make sure to adequately insure it. Buildings should be insured for replacement cost to avoid a potential coinsurance penalty. Buildings should be well-maintained and kept clean of debris. All buildings, particularly the older ones, should have a scheduled maintenance plan that includes an annual visit from a roofing contractor, and regular troubleshooting for electric and plumbing issues.
Business personal property (contents) can include beds, lotions, products, improvements and betterments, etc. As mentioned in the liability section, you need to be aware of what your lease makes you responsible for. Oftentimes, a tenant is responsible for glass, roof and even air conditioning units.
A salon’s construction establishes a basis for its insurance rates. Construction refers to the type of building materials used for the building, i.e., wood, frame, steel, brick, concrete or cinderblock. Fire-resistant materials may reduce the amount of loss during a fire; therefore, using fire-resistant materials throughout a structure makes a considerable difference in insurance premiums. Salons that have sprinkler systems, fire extinguishers and alarms also have reduced risk of fire and are potentially able to receive a discount on their premium.
Additionally, business property coverage can include anything considered to be part of the salon construction. Since your lease agreement dictates what you are responsible for, it is the best place to start your assessment. Replacement cost coverage ensures you can replace damaged property with comparable items. Many business owners are misinformed about replacement cost, but it is important that you understand these benefits and options in order to be prepared in the event of a loss.
Actual cash value (ACV) coverage is replacement cost minus depreciation since the date of purchase. Whenever possible, you should get replacement cost coverage so you won’t be hit with depreciation at time of loss. Business property can actually appreciate, unlike personal property that depreciates with time. You can expect a slight increase in your premium—this does not mean your carrier is trying to overinsure your business, rather, the company’s aim is to give you proper coverage.
While insurance companies encourage owners to insure their properties for full value, be aware that some policies may contain a coinsurance clause. This provision only requires the policyholder to maintain coverage equal to at least 80 percent of the actual replacement cost. If your policy has a coinsurance clause, it is particularly important to insure to value so as to avoid a coinsurance penalty.
Consider creating an inventory of the items you need to insure, and be sure to update the list every year. Remember to include the total annual wholesale value of retail items in your inventory. If you stock replacement lamps, include these as well. This inventory will assist you in determining the correct amount of insurance you will need and will be a valuable source of information in the event of a claim. Therefore, it’s important that you keep the inventory in a secure place, preferably somewhere other than the salon.
Location determines many things in life, including insurance rates. Insurance companies evaluate exposures based on the unique characteristics of each location. Businesses that are in higher-risk areas probably will pay more for insurance coverage and sometimes can have difficulty finding appropriate coverage. Conversely, lower-risk areas generally have lower rates and may find insurance easier to obtain.
With location comes weather, which also can affect insurance rates. Locations exposed to extreme weather conditions may be considered high risk. Various weather “dividers” have been created regarding windstorms, hail, tornadoes and hurricanes. Businesses found in high-risk weather zones will have increased rates compared to those in lower-risk regions.
Salon owners in coastal states should expect higher premiums and higher deductibles than others, and the closer you are to the coast, the more difficult it will be for you to obtain reasonable insurance premiums. Often, a percentage deductible is used by the insurance company for coastal properties. Make sure you understand how this deductible works—it is often a percentage of the total value insured. For example, if you have $400,000 contents coverage and a two-percent wind and hail deductible, the deductible on any wind and hail claim will be $8,000, regardless of the amount of the claim.
If you are unable to obtain wind coverage, there may be options available through a “wind pool” association or specialty carrier. Discuss these options with your insurance professional.
In addition to those three coverages, there are many other types of insurance that you should discuss with your agent when purchasing or renewing your salon policy. The following is a list of some of the more common types of coverage.
Business Income Coverage
Business income coverage, or business interruption coverage, is designed to minimize your risk in the event of a loss. It can protect your business against reduced income (and extra expenses) that result from a covered cause of loss to buildings or business personal property. It also allows the salon to retain key employees by maintaining salaries and benefits, encourages prompt settlement of building and business personal property losses, helps the salon owner retain customers and can help restore the salon to the same position it was in before the loss occurred.
“Loss of income” refers to the suspension of your operations by direct loss or damage. “Extra expense” refers to any extraordinary expenses you incur during the period of restoration, which begins with the date of the loss resulting from any coverage cause. There are many forms of business income coverage and this should be considered a must-have in your insurance portfolio. Your insurance agent can recommend the best way to protect your income after a covered cause of loss.
Employee Dishonesty Coverage
As an owner it is crucial for you to protect your business, but many times employee dishonesty can be hard to detect. As a business owner, you need to be able to rely on your employees to be loyal, trustworthy, honest and dedicated; however, temptation, greed, social and financial pressure can drive many to do dishonest acts. Forging and hiding receipts, pocketing money and stealing merchandise are common occurrences. It is paramount for you to pay attention to irregular behaviors, such as working unusual hours, poor performance, constant complaining and defensive behavior. If you aren’t managing the salon yourself, you might want to drop by unannounced at various hours, and keep track of merchandise and receipts.
Salon owners need to be aware of the risks and understand the benefits of appropriate insurance coverage. Know who you are hiring; spend the extra time to do background checks and verify job references. In addition, you can add employee dishonesty insurance to your current policy, if not already included. This coverage protects you from employees that act unethically for the purpose of personal gain. However, remember that employee dishonesty claims must be committed with manifest intent—basically, the loss must be the result of an unethical act the employee knowingly committed in order to gain something. Be aware that if you cannot prove manifest intent, your claim may not be covered.
Money And Securities Coverage
Money and securities coverage can protect your cash and securities, up to the limits you purchase, at your covered location, and also can provide coverage while you are on the way to make a bank deposit.
Glass and Sign Coverage
Often, a salon owner is responsible for damages to the building. Be sure to refer to your lease for your responsibilities towards damage to glass and signs. Also make sure that your sign is covered to avoid the peril of wind damage—wind is the most common cause of loss—and be aware of the deductibles on this coverage.
Workers Compensation
According to law, an employee is someone hired to perform services under the direction and control of another person or company, known as the employer. Each state has its own definition of what constitutes an employee, so check with your state to be sure of any specifics. Workers compensation is designed to ensure that employees who are injured or disabled on the job are compensated properly, negating the need for related lawsuits. It also provides benefits for dependents of workers killed by work-related accidents or illness. Some laws limit the amount an injured employee can recover and eliminate co-worker liability in most cases.
Flood Insurance
Flooding is a common natural disaster that occurs when water pours over dry land that is unable to absorb it. This often occurs as the result of heavy rain or rain that falls very fast. Flooding also can result from drainage system failure, inadequate dams and tropical storms such as tornadoes and hurricanes. The worst floods occur near flat and low-lying areas know as floodplains.
Most insurance policies do not cover the peril of flood; however, many salon owners don’t realize their standard business policy doesn’t protect them until it’s too late. As a result, only a small portion of businesses exposed to the risk of flood damage are insured. Fortunately, it is easy and fairly inexpensive to protect yourself through the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. You can get good and affordable flood coverage even if your salon is located in the boundaries of a flood plain. There is a 30-day waiting period from the date of your application before coverage goes into effect. It is essential to plan ahead and get coverage from your agent before flooding occurs to ensure you will be covered if disaster strikes.
There are many other types of coverage to consider. This section is a brief outline and description of some of the insurance issues to discuss with your insurance professional. It is not intended to be a complete listing. Please contact your insurance agent for specific advice regarding your salon.
