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 your 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.
