NIE Insurance has serviced the dry cleaning industry since 1915. It was a natural progression for us to begin providing insurance products to laundromats as well since they are part of the fabricare industry. The precise date that we began insuring laundromats is unknown but I can say that it has been a minimum of 35 years.
• Building (when building is owned by laundry owner)
• Business Personal Property
• Loss of Income
• Liability
• Crime
• Workers’ Compensation
• Bailee (when laundry owner is doing drop-off dry cleaning and/or wash, dry, fold)
• Equipment Breakdown
The limits of insurance are ultimately up to the business owner but we strongly suggest using our building replacement cost survey for the building and our equipment replacement cost survey for business personal property. When calculating the amount of business personal property insurance needed, the owner must include improvements and betterments, delivery, installation and taxes plus all operating supplies. These items are often left out when the owner is giving his agent the desired limit of insurance but they are all covered under business personal property.
Some of the unique risks found at a laundromat are the ones you might expect with the public operating washers and dryers all day every day.
They include:
• Wet floors from leaking washers
• Uneven floor surface due to drains located in path of customers
• Dryer fires due to greasy fabrics, excessive lint, plastic or other combustible items
being left in clothing
• Children playing with equipment and/or running through the laundry
• Tables and chairs that are all connected with little support (customers like to sit on
the table section)
• Tanning beds
• Pool tables
• Rides
• Climbing toys
Fires are the biggest risk in the sense that they can cause the most devastation. However, the most frequent risk is trip or slip and fall. People come to the laundromat in flip-flops, slippers and a variety of other shoes that can contribute to a fall. People are of various size and age which can also have an effect on the seriousness of an injury.
Weather-related risks include hurricane, tornado, flood, windstorm, hail and just simply heavy rain. Every area of the country is subject to weather-related losses, not just coastal areas. It is wise to purchase a coverage that is an extension of loss of business income coverage known as Utility Services-Time Element. This will apply to a loss of utility service that happens away from your premises but affects your premises with loss of power or water supply. It will pay for the income you lose due to this event. There is normally a waiting period before the coverage applies, usually 72 hours.
There is another coverage called Utility Services-Direct Damage which would apply if, after the utility comes back on, there has been damage to your equipment from the power surge.
All of the weather-related risks named above are covered under your Commercial Policy with the exception of flood. Flood can only be purchased through the National Flood Insurance Program (NFIP) but most insurance agents would be able to get a quote for their customer. NIE has access to the NFIP quote system and can get a premium for you. Remember that flood occurs everywhere, not just near the ocean or the rivers. It is well worth looking into.
I should also mention that, in coastal areas, windstorm and hail are covered with a 2% or 5% deductible. This deductible applies to the limit of insurance and not to the amount of the loss, as some may think.
Unattended and/or 24 hour stores do pose a greater risk than a laundromat with normal business hours or one with full-time attendants. You can imagine that a fall can seem much worse if no one is there to witness it occur or to assist the injured person with the care that is needed. Vandalism often occurs in unattended laundries, especially during late night or overnight hours. We often come across laundromats that are partially attended, usually an attendant to open and be there an hour or two, and then to come in an hour or two before closing. There is usually an additional cost for liability when the store is open 24 hours and/or unattended.
Extra profit centers bring with them additional risk. A laundromat owner must weigh that risk with the profit it brings in and decide if the additional profit is worth the risk. Profit sources such as tanning beds, pool tables, kiddie rides and food sales may also bring additional cost of liability insurance, often quite high. Some carriers may even decide not to write the risk because of these additional hazards.
Laundromat owners who have business interruption insurance use it when they have a severe loss such as fire or hurricane. However, the coverage applies to any covered loss, such as a small fire that puts only some of your machines out of service. The loss of income from those few machines can be claimed after the waiting period has been met. Remember that there must be a direct physical loss at the premises for the coverage to apply.
There are many optional coverages that can be considered in addition to the ones already mentioned. Some of these are:
• Sign (attached and detached from building)
• Awning
• Computers
• Earthquake
• Loss of rental value (for laundromat owners who own the building and lease to tenants)
• Valuable papers
• Accounts receivable
• Increased Cost of Construction
• Fences
• Shrubs
• Retaining walls
If you have an exposure for any of the above coverages you should consider adding them to your business policy. I believe the most important thing that operators pass on is Replacement Cost Coverage. Often, to save premium dollars, the insured will opt to buy an Actual Cash Value policy which means that any loss will be depreciated according to the age of the item(s) claimed. In a total loss, there would not be enough coverage to rebuild and the insured would be out-of-pocket for everything over the depreciated cost. Replacement Cost is a limit high enough to replace and rebuild with like kind and quality with no depreciation for age.
One myth about all insurance is that credit is always given for alarm systems and surveillance cameras. Television ads often make this claim. The problem is that alarms are often not turned on when the store is closed. They are either forgotten or they go off too often so the owner stops setting them. Surveillance cameras are nice but they don’t help the insurance company to see a slip and fall if they are recorded over time and time again. Often a lawsuit is filed up to two years after an incident occurs and the owner may never have been aware of it. By then the tape is gone and doesn’t help the insurance company in settling the claim.
Sometimes there is confusion on the part of the tenant regarding his lease requirements. A lease may require the tenant to buy building insurance. In this case the named insured can include the actual building owner and the business owner and both the building and the business will be insured on one policy. This is not common, however, if the tenant is located in a shopping center. It would not be efficient for each party in the center to cover the building so the landlord will include the cost of building insurance in each part’s rent. But please read your lease thoroughly and, if you don’t understand something, contact your attorney. If it is an insurance matter, contact your agent.
Laundromat owners should evaluate their coverage needs when first purchasing a policy and then three months prior to each annual renewal. If new equipment is purchased or a new operation is started, your needs may change and you should not wait until renewal to call your agent. And don’t forget to contact your agent if you close or sell a location. Many customers completely forget to let the insurance company know and they may be entitled to a credit when the location is deleted. Also let the agent know about any new locations immediately.
Multiple stores do not usually create an automatic discount. However, if you have multiple stores it may save you some premium dollars to put them on one policy as opposed to writing each one on a separate policy.
My advice to laundromat owners:
• Do what you can to reduce risk
• Do walk-around inspections both inside and out on a regular basis
• Clean lint on a daily basis
• Post emergency numbers in a prominent place
• Do a yearly review with your insurance agent on coverage needs
• Remember to include all costs in choosing your insurance limit
• Report all claims and incidents that could result in a claim promptly
Most Main Street businesses, including laundries, shop for coverage at renewal because they are contacted by so many insurance agents. This seems to be the case regardless of the status of the economy. But once an owner finds the company that can give him what he needs at a fair and competitive price and he has trust in the company reputation, representatives and service, he is likely to stay with that company for many years.
DISCLAIMER: This is only a brief overview of general coverage issues. Actual coverage is determined by the coverage terms, definitions, and exclusions in each individual insurance policy.