About seven years ago, Larry Trapani’s neighbor, a commercial lender specializing in the Laundromat industry, began giving him names of clients who needed insurance for closings. A new market opened up for Trapani.
Trapani is a senior partner with Brooks-Waterburn Corp., a New York independent agency that represents more than 15 insurance companies with clients throughout the United States.
“After we wrote a number of these [Laundromats], we developed a certain expertise in this line of business,” Trapani says. After visiting numerous laundries, and learning about the business, he says he became an expert in the industry.
In 2007, the Laundromat Success Program was developed, which included coverages that Laundromat owners need to protect their business, he says.
Trapani offers some advice to both newcomers and veterans shopping for laundry insurance.
ASKING THE RIGHT QUESTIONS
Looking for insurance information from trade associations is an option, but be careful, however, because certain associations also sell insurance, he says. “Their opinions may be a bit biased.”
Don’t be afraid to ask competitors who they use, and if they are happy with service, price and coverage, he says. “Word-of-mouth, sometimes, is the best resource.”
Use the Internet. “If you Google ‘Laundromat insurance,’ you will see a series of insurance companies and agencies that specialize in the Laundromat business.”
When shopping, he suggests the following questions:
Check the “health” of the insurer, he adds. “The rating of a company measures the company’s ability to pay claims.”
The best source of rating the financial health of an insurance company is A.M. Best, he says. “My suggestion is to do business only with a company that has a financial rating of A- or better. A+ is the highest rating.”
Check the rating at every renewal time, he adds. “Ratings can change constantly.”
Trapani emphasizes the importance of doing business with an insurer that has industry-specific experience. “What you need to understand is that this class of business is relatively easy to write. Most major insurance companies will write Laundromats, but are they qualified? They may not have the right product for you to adequately protect your business. More importantly, the agent who doesn’t have the expertise may not ask the right questions to tailor the right policy for you. Simply comparing prices and going with the lowest-cost quote could be disastrous.”
Think about the following special coverages:
“Ironically, the most knowledgeable people [about insurance] are those who have suffered a great loss, and perhaps were not adequately protected. I guess they learned from their mistakes.
“The biggest mistake I see is owners only purchasing insurance that lenders require. I call this the ‘washer/dryer insurance trap.’ Typically, a lender might lend them money for the purchase of washers and dryers. The lender insists on insurance to cover the loan. What owners fail to realize is that they have a significant investment in areas other than washers and dryers, such as buildout, inventory, vending machines and other contents. Sometimes this can amount to more than $100,000 in value per store.
“By just insuring the amount of the loan, this leaves the owner self-insuring for a significant amount of money. In the event of a major loss, they could lose the total investment and never reopen!”
COPING WITH THE TIMES
Trapani sees people shopping for better prices not only in insurance, but in everything else. “It pays to shop around every few years. Sometimes there are dramatic differences in rates that one insurance company will charge.”
More specifically, in these times Trapani sees owners shying away from workers’ compensation. “This could be a big mistake. An injured worker who is not protected by workers’ compensation can make a great deal of trouble for you.” This could mean reporting you to a number of governing agencies, fines, penalties, and even the threat of a shutdown, he says.
“Workers’ comp rates have gone down dramatically in most states, and are no longer a major expense. The average store can be insured for under $500 per year.”
If you’re looking to save money, consider a higher deductible, he advises. “The difference in price between a $500 and $2,500 deductible can be up to 20 percent. Besides, it is not in your best interest to put in a $500 claim. In the long run, the insurance company takes a dim view [on the $500 claim], and it could raise your rates.”
Proper security can also save you money. “Many companies give credits for alarm systems, sprinklers, and other security measures.”
THE BOTTOM LINE
“My best advice to laundry owners is to first fully understand their maximum probable loss. How much are the washers/dryers to replace new? How much is the buildout and other contents? If the place is burned to the ground, what would it cost to put your Laundromat back as it was, just before the loss?”
If you know the answers to these questions, you should know how much insurance you need, he says.
“Obviously, price is a consideration. To keep the price low, raise your deductible and ask what credits you qualify for.”