Replacement Cost

Many tanning salons owners are misinformed when it comes to the subject of replacement cost. This vital part of your insurance policy protects you in the event of a catastrophe; therefore, knowing the benefits and options makes for smart business.

Simply put, replacement cost coverage ensures you can replace damaged property with comparable items. Actual cash-value insurance, on the other hand, covers the replacement cost minus depreciation since the date of purchase. If premiums are reasonable and affordable, replacement cost coverage is the wiser choice.

Unlike personal property that depreciates with time, business property actually can appreciate. You can expect a slight increase in your premium, generally 4 percent to 6 percent per year, which reflects the increased value of your equipment. Your carrier is not trying to over-insure you; rather, the company’s aim is to give you coverage that would allow you to comparably rebuild in the event of a loss.

Business property coverage can include anything considered to be part of salon construction. Since your lease agreement dictates what you are responsible for, it is the best place to start your assessment. Some leases make the tenant responsible for glass, air conditioning units and even the roofing over the suite. In addition, most leases require the tenant to insure all betterments and improvements that are done to the suite. These types of build-outs can include the cost to construct the tanning rooms, front reception area, flooring and lighting.

Business personal property also is covered and includes anything used for daily operation, such as beds, computers, products, maintenance equipment and office furniture. To establish the replacement cost of your business personal property, 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 have a stock of replacement lamps you keep on hand, include these as well.

Not only will the inventory assist you in determining the correct amount of insurance you’ll need, it can be a valuable source of information if you ever have a claim. Therefore, it’s important that you keep the inventory in a secure place, preferably somewhere other than at the salon.

With the summer storm season in full force, you’ll rest easier if you know you have your salon insured adequately. You don’t need to wait until your current policy’s renewal date to update coverage and limits; in fact, most changes can be done by simply endorsing your policy.

Insurance policies and coverage varies from carrier to carrier, so ask how your insurance professional can best meet your needs. Many factors affect your premium. Some of these are: 

• Number of tanning units 
• Replacement-cost value of all equipment in the salon 
• Distance to the nearest fire station and hydrant 
• Construction type and age of the building where the salon is located 
• Neighboring exposures 
• Sprinkler systems 
• Alarm systems 
• Geographic location 

While insurance companies encourage owners to insure their properties for full value, some policies may contain a coinsurance clause. This provision only requires the policyholder to maintain coverage equal to at least 80 percent of the property’s actual replacement cost and, because partial losses are more common than total losses, some owners take the gamble. Unfortunately, while coinsurance can provide a reduction in premium, penalties may apply, and a settlement only will be a percentage of full-contract reimbursement.

A qualified company that specializes in tanning salon insurance is your best bet for obtaining the replacement coverage to satisfy your needs. It takes an agent familiar with the industry to truly help you protect your business. Salon owners invest vast amounts of time, money and hard work to make their tanning salons successful. Not taking the time to properly and adequately insure the business could result in monetary loss—and potentially loss of the business itself. 

For more information or to get a quick, no-obligation quote, call (800) 844-2101 or visit www.universalinsuranceltd.com.