CHICAGO — While buying Laundromat insurance may be a less-than-glamorous task, few things are as important to your survival as a self-service laundry owner as protecting your business. Your investment must be looked after. For example, could you afford to rebuild after a disaster? Gambling is for Las Vegas, not the self-service laundry industry.
Have you changed insurance carriers lately? Have you looked for a better deal? Do you know what questions to ask when shopping for insurance?
Take a moment out of your busy business life, and think about the last time you reviewed your coverage. Are the limits adequate? Think about the laundry. Have you made any changes to the store? Have you added any washers or dryers? All of these things have an impact on your coverage.
There’s another way to look at your insurance coverage. Has your carrier contacted you lately? If not, maybe you should ask yourself why. It’s never a bad idea to give a new carrier a chance. The worst thing that can happen is you get to compare prices and coverages. A new deal may be beneficial for your operation.
Before you rethink your coverage, be prepared. Larry Trapani, an industry insurance veteran, offers tips on how best to shop for Laundromat insurance.
Look for a Specialist
When acquiring a store, you focus on the terms of the lease, cost of the washers and dryers, and the cost of the build-out, says Trapani, senior partner with New York-based Brooks-Waterburn Corp., an independent agency that represents more than 15 insurance companies with clients throughout the United States.
“Many lenders tell me that the potential owners use their home as collateral against the investment,” Trapani says. “Given that so much is at stake, wouldn’t it be prudent to make sure your business is properly protected?”
This is where the “friendly” neighborhood insurance writer usually enters the picture, Trapani notes. “[This] could be a local insurance agent who handles your home and car insurance, or a direct writer such as Allstate or State Farm. I’ve been in the insurance business for more than 25 years, and the truth is that insuring a Laundromat is relatively simple.
“Most insurance companies want to write this class of business, and are willing to do it at competitive prices. But are they really capable of analyzing your unique situation so that you are adequately protected?”
Just asking a few, basic questions can go a long way in determining if you have the right person or company behind you, he says. Trapani suggests posing the following questions before you request a quote:
How many Laundromats do you insure?
Unless the answer is more than 100, the company probably does not have much expertise in the field, he believes.
How will you cover the build-out?
The build-out is how much you invest in the leased space, and could include costs such as plumbing, carpentry, electrical, etc., he explains. “If the agent answers ‘Huh?’ to your build-out inquiry, it’s best to look somewhere else.”
What markets do you have that specialize in Laundromats, and is the policy you offer specifically designed with coverages for a Laundromat owner?
While this might seem obvious, many agents, and almost all direct writers, only represent one insurance company, he says. “What happens when [the company] stops writing Laundromats, or the price goes too high?”
Other than the basic coverage, what specialized coverages are included in your policy?
At the very least, you should have coverage dealing with customer goods, hired and non-owned auto and business-interruption problems, he explains. “All of these coverages mean the difference between reopening after a loss or not. They are not automatically included!”
Are water heaters and boilers covered?
These pressure vessels are generally excluded from a traditional-package policy, he cautions. “Some business-owner policies do include this coverage, but you need to ask.”
What about workers’ compensation?
“Given that this is a cash business, not all owners pay their employees on the books. The truth is that the IRS is cracking down on traditional cash businesses like restaurants and Laundromats. [The IRS] needs their tax revenue, and are going after easy targets.”
Workers’ compensation is relatively inexpensive, according to Trapani, and you also protect the worker if he or she is injured on the job.
He is often asked how to “stretch money” when it comes to buying insurance and protecting a store. “The easy answer is to buy as much insurance as you can afford. For example, for only a few hundred dollars a year, you can add an ‘umbrella’ liability policy. This is an additional million-dollar (or more) liability coverage above the basic liability policy you have on your Laundromat policy.”
If business picks up, another option is to include policies on you, such as disability income or life insurance, he suggests. “A disability policy would give you the money and, most importantly, peace of mind if you are partially or permanently disabled.”
Similarly, life insurance is a good option to protect your family and investment, too, he says. “If you die, who is going to pay the loans on all of your equipment? Perhaps your spouse does not want to run the Laundromat after you are gone.”
If you have any questions or comments about this article, contact Larry Trapani at ltrapani@brookswaterburn.com.
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