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Written By: Susan Etter
Q1. Where is your business owners’ policy?
Wait, don’t tell me! Let me guess. It’s in a file folder in a slightly dusty cabinet at the back of your office in the original envelope it came in.
Q2. Do you have any idea what is covered?
If you’re like most people, you aren’t really sure what is included. You simply answered some questions for your insurance agent and then bought the policy you were offered.
If either of the answers to the above questions were “I don’t know” or “I’m not sure,” keep reading! As you get ready to start the year off fresh, taking inventory to restock and upgrading equipment to venture forward, consider taking another 30 minutes to do your own property insurance checkup.
1. Business personal property
Let’s start with business personal property. The simplest way to define this is anything you can pick up and carry out of the spa. Most policies use replacement costs as the basis to insure your contents. This means that if you are going to total up everything—from your furniture, equipment/ machines, treatment tables and décor, all the way down to the brochures sitting on the countertop, you want to think about the cost to purchase items of like kind and quality new from the store. This is treated a bit differently for your retail stock on hand and your products used for services. These types of items are classified based on your wholesale cost to purchase them. While you are doing your inventory, be sure to itemize everything and then add it all up—it is going to come to more than you think!
2. Loss of business income
Business income is an often overlooked coverage. In the event of a covered loss such as fire, theft and vandalism, you will receive money to cover your ongoing expenses like rent, utilities and payroll during the time you are shut down. This also covers your lost profit based on your actual historical results. Be sure you are keeping accurate, up to date records of your profit/loss information on hand. If you have grown over the last year, make sure you update your policy with that information. This coverage is based on gross
3. Tenant improvements and betterments
Many times, to get your spa set up, you will have made improvements to the space you are renting. This could include putting up walls around your treatment rooms, installment cabinets in the stock room, or replacing harsh fluorescent light fixtures with something more suitable to promote a calming atmosphere. Generally these are not items you would take with you if you move. Most times the landlord does not take responsibility for covering these items, especially if they didn’t pay to have the work done. Your lease will typically spell out who is responsible for insuring these items. Think back to how much the build-out cost before you opened, and make sure you include that under “Tenant Improvements” and “Betterments” coverage.
4. Inland marine
In this entrepreneurial society, many spas are opening more than one location or offering their services on a mobile basis for easier access to clientele. Most standard property policies cover your property at one scheduled location, with only very minimal limits for any property off premises. If you have equipment/machines that are going back and forth from the West side of town to the East side, ask your agent for “Inland Marine” coverage. Think of this as an on land mobile equipment policy. The coverage is typically a bit more expensive than property at a fixed location, but will cover the property wherever it goes. Depending upon your circumstances, your agent may also be able to offer this under “Property-in-Transit.”
That covers the biggest items in your spa, but now what about the little things you don’t think about until a crisis strikes?
5. Employee dishonesty
The sad truth is that spas are frequently affected by this issue. If you discover that items are missing or that cash totals do not add up to the sales receipts, it is possible that theft from the inside has taken place. Most policies provide limited coverage for this type of occurrence, so long as it is not performed by any owners of the company.
6. Property of others
It can be difficult to determine if you need additional coverage for this. If you have independent contractors working at your premises, read your policy carefully. Some policies will include coverage for the personal property of any of your employees—as if it was your own. Sometimes this is excluded and your independent contractor may have to provide their own insurance. Finally, this line item will cover limited property of your clients while they are at your facility. Even if you post that you are not responsible for lost or stolen items, it can be hard to get out of that when push comes to shove.
7. Electronic data and computer media
In the modern world, this is a very important coverage— so be sure it is included! If there is a fire and you lose everything, your business computer itself will likely be replaced under the business’ personal property coverage item. However, the information on the computer and the programs used for your business are not included in this. That is a separate limited coverage that will help pay for the replacement or restoration of the electronic data that has been lost due to a covered property loss. This could include your client database, pulling in your financial records or inventory program. As every business strives to save more information in a digital format and use less paper, this becomes more critical. It is imperative that you have good procedures in place to be able to back up the information you have and keep it in a secure place off premises to mitigate any loss for this.
Congratulations! You have now completed your property insurance check-up. Be sure to discuss any discrepancies between your current policy to the information provided here with your insurance agent. It is recommended that you review this a minimum of one time per year. Being properly covered may cost a bit more than what you are currently paying, but in the event of a claim—you will definitely be thankful!
Susan Etter joined the underwriting team at Professional Program Insurance in 2010. With 16 years of experience in insurance, she has a strong knowledge of the issues that face medispa, beauty and body art businesses. Etter is becoming a well-known speaker and writer, providing advice on how to develop a successful business and implement procedures for loss prevention. Previously, Etter managed a number of independent retail insurance agencies, focusing on personal and commercial lines.