Business-Interruption Policies Provide Key Protection
by Amy Brown
Small-business owners may unknowingly overlook one very important type of coverage when insuring their tanning salons. Business-interruption insurance is designed to pay for loss of income if a business is temporarily closed or if its income is reduced or compromised due to a covered loss. For example, if the salon were damaged by fire, rendering it temporarily unusable, business-interruption insurance would compensate the salon owner for income lost while the premises are repaired or rebuilt. The policy also covers fixed operating expenses such as electricity that continue regardless of whether the business is in operation.
How Does It Work?
Business-interruption insurance— specifically business-income insurance and extra-expense insurance—is designed to minimize the policyholder’s risk in the event of a covered loss. It can be added easily to an existing policy and provides several important benefits: It protects the business against reduced income (and increased expenses) that result from a covered cause of loss to buildings or business personal property; it allows the salon to retain key employees by maintaining their salaries and benefits; it encourages prompt settlement of building and business personal property losses; it helps the salon owner to retain customers; and it can restore the salon to the same position it was in before the loss occurred.
Other hazards that can cause disruption in business also fall under the business-interruption protection umbrella. Wind damage and damage caused by the weight of ice and snow can spell trouble if the salon falls prey to the forces of nature.
Remember, tanning-salon insurance policies—like most commercial policies—do not include flood insurance. Flood insurance can be purchased at any time, but there is a 30-day waiting period from the date of your application before coverage goes into effect.
When considering that business-interruption losses may far exceed direct damage losses, the importance of this coverage becomes clear. Loss is adjusted based on past records, factoring in such items as number of beds, frequency of use, etc. Thus, good record-keeping is vital, and a complete copy of all records should be kept off-site in case the salon is completely destroyed.
How Much Coverage Is Enough?
Many insurers will recommend that salon owners secure a full 12 months of loss-of-income coverage for adequate protection. While it may take only three months to rebuild the business after sustaining a covered loss, other obstacles—removing debris, obtaining bids and building permits, ordinance and zoning requirements—may have to be addressed before restoration can begin.
When shopping for business-interruption insurance, salon owners may want to choose coverage that does not have a monthly limitation. This is the best fit for salons, which have seasonal fluctuation. If an owner chooses monthly limitation, he or she must remember to base the estimate off the salon’s busiest season.
Business-interruption insurance is not required by most lending institutions. However, when the value of the insurance and its nominal cost is weighed against the ramifications of being caught without it, the choice seems obvious. We can’t predict the future, but we can safeguard ourselves with financial security in the event of calamity.
Universal Insurance Facilities, Ltd. offers a variety of flexible and affordable coverages for every size salon. To get more information about Universal’s specialized tanning salon coverages, write P.O. Box 33409, Phoenix, AZ 85067-3409; phone (800) 844-2101; fax (480) 970-6240; or visit www.universalinsuranceltd.com.
