Risk Management: Defining Contents Coverage

Most salon owners know they need insurance, but how many know the specific coverages necessary to our unique and innovative industry? Commercial insurance is entirely different from homeowners insurance and auto policies. As a busy salon owner or manager, you probably do not have time to spend endless hours researching the Internet and other sources for these specialized insurance programs. What’s a salon owner to do?

The great news is that there are several companies that specialize in this unique market that should be able to guide you through the entire process. Of course, that doesn’t mean you should just leave it up to someone else— each company has different policies and, as an owner, it’s up to you to make sure that the coverage you choose is appropriate for and tailored to your salon.

The basics you should look at include business and professional liability coverage—for a refresher, look back to the Risk Management article in the Feb. 15 Top 250 Salons issue—and property coverage.

Let’s take an in-depth look at what property coverage entails. Business personal property, also known as contents, can include anything that is considered part of your salon’s construction. Contents also refer to anything used for daily operations, such as beds, computers, products, maintenance, equipment and office furniture. Be aware that when you sign a lease, you are contractually agreeing to responsibility for the property—many times this includes windows/glass, air conditioning units and roofing. In addition, many leases require you to insure all betterments and improvements that are done to your salon. This means you are responsible for insuring the cost to construct tanning rooms and front reception areas, including flooring and electrical wiring.

Many insurance companies determine contents coverage based on replacement-cost value. To establish the replacement cost of your contents, consider creating an inventory of the items you need to insure, and don’t forget to note the total annual value of retail items such as clothing, lotions and lamps. This inventory list not only will help you determine the correct amount of insurance, but also will be a valuable resource in the event of a claim.

Remember to keep your list up to date—don’t wait until your renewal to make changes that can be made throughout the year. As you enter the busy season, you will be able to rest easier knowing that your salon is properly insured.

Keep in mind that, while insurance companies encourage owners to insure their properties for full value, many policies may contain a coinsurance clause. This provision requires the policyholder to maintain coverage equal to a certain percentage of the property’s actual replacement cost. Reducing your contents will reduce your premium, but penalties may apply if you are underinsured; in the event of a loss, a settlement only may pay a percentage of full-contract reimbursement. That being said, partial losses are much more common than total losses, so don’t be the owner that gambles on being underinsured. When choosing an insurance provider, remember that insurance policies and coverages vary from carrier to carrier; ask how your insurance professional can best meet your salon’s needs.