Salon owners often ask their insurance agents, “Why are the Property (Contents) limits so high on my insurance policy? I want to lower them to reduce my premium.” Typically when you speak with your specialized insurance agent regarding your salon insurance, they can help you review everything that needs to be included in your Business Personal Property limits. When reviewing these limits, there are many factors to keep in mind.
Your salon is an investment that should be protected with a variety of types of insurance – one of which is your Business Personal Property Coverage (which should include Tenant Improvements). Most salons are in a strip-malls or retail centers of some sort. Even if you don’t own the building, you are most likely responsible for the property inside the walls you are renting/leasing. This property inside is called Business Personal Property (also referred to as Contents). When determining the amount of coverage needed, take into consideration more than just your equipment.
When you are purchasing a business, adding new equipment or remodeling, remember to keep records of your inventory, costs of construction and pricing of purchased items. Some items to remember to include are: retail items, front desk, furniture, TVs, security systems, surveillance cameras, HVAC units (if you’re responsible for that in your lease), front doors, awnings and more. Adjustments may need to be incorporated for inflation, materials and labor.
When getting your insurance in place, look for a company that offers Replacement Cost. This refers to the amount needed to replace the damaged or destroyed property, without depreciation. Replacement Cost is different from the Market Value and Actual Cash Value. Market Value of your property means the price you paid for your equipment (for example), and it depends on factors such as market conditions, age and use. On the other hand, Replacement Cost is only affected by changes in the price of the materials and labor needed to rebuild the salon in the same or like spot, size and quality. Try to stay away from policies that use Actual Cash Value (ACV), as depreciation is deducted from the Replacement Cost to determine the limit. While this might seem attractive (one might think lower limits must mean reduced premiums), keep in mind that an adjuster will also deduct depreciation when a claim occurs. Typically property is not expensive, so you aren’t even looking at a huge cost savings, but you would be looking at a considerable reduction in coverage in the event of a loss.
Another factor to keep in mind is Coinsurance, which is commonly seen on business insurance policies. Coinsurance is added-on to help an insured maintain adequate insurance to value. The Coinsurance you carry can help dictate the replacement cost you need to carry for your property limit. The tricky part of Coinsurance is that the higher the Coinsurance percentage, the higher the property limit you need to make sure you are insured to value. Simply stated, 80 percent Coinsurance means you can carry 80 percent of the replacement cost and not suffer a penalty – while if you have 100 percent Coinsurance, you must carry the full replacement cost.
Remember, you specialize in the indoor tanning industry, you know the ins and outs of your salon. It’s important to get an insurance agent that specializes in the tanning industry as well. That way they can walk you through these special types of coverage questions and more.
Jenny Bortman is an account executive for Universal Insurance, which has been serving professionals in the indoor tanning industry since 1993. For a competitive, personalized quote or additional information about Universal’s exclusive Tanning Salon program, call 800.844.2101 or visit www.uitanning.com.
