Barber shops, spas and salons: Styling insurance to fit your needs

Emmet Pierce

If good grooming is your trade and you're planning to open a barber shop, spa or hair salon, you typically won't have a problem finding a company to write your business insurance policy.

Because the risk of claims against these businesses is well understood by the industry, "it's a classification most insurance companies love," says Alan Levenson, agency manager at Technology Insurance Associates LLC in New Jersey.

"It is a retail, brick-and-mortar operation," he says. "The claims that come out of these places are pretty standard. The trip-and-falls and the cuts are predictable. Getting insurance for these entities is not difficult and not expensive."

Underwriters will consider your business experience and your insurance claims history when they set your premiums. Prices vary by your claim risk and business size. Carey O'Brien, a salon owner in the St. Louis area, says he spends between $2,500 and $3,000 annually -- less than 1 percent of his gross annual income -- on insurance for his business.

Things that raise your premiums

Having adequate liability insurance will be important to protect you against claims, says John O'Connor, Travelers' vice president for product and platform in the small commercial sector. If your business includes a nail salon, that could raise your costs, since your employees may be considered at greater risk of developing health problems from chemical exposure.

In addition to the dangers from chemicals, "there are some services that can raise your rates," says Derek Ross, president of Kulchin Ross Insurance Services Inc. in California.

"When you get into procedures like electrolysis or Botox injections or permanent eyeliner and tanning, that is when you see an increase in prices and the availability of carriers begins to shrink," he says. "You open up to a whole new set of liabilities."

The larger your operation, the greater your liability insurance needs will be. A $1 million policy typically is adequate, Ross says. For most barber shops, salons and spas, such policies cost between $500 and $700 a year.

Sometimes salon owners function as landlords, renting out business space to stylists. To provide themselves with an extra layer of protection, they may require the stylists to take out liability policies that name the salon as an insured party, Ross says.

Buying the right amount of insurance

When it comes to property insurance, there is no typical cost, Ross says. Your premiums will be affected by the improvements you make and the value of your store's contents. To boost customer appeal, spa owners often make large investments in decor, adding such things as fountains, special lighting and sound systems.

Finding the coverage you need

When putting together a policy, Brad Masterson, a spokesman for the Professional Beauty Association trade group, recommends working with agents who are familiar with the industry and its risks. "You are going to people who are knowledgeable," he says. "There are certain types of insurance that you are going to want to get."

Most barber shop, salon and spa policies are written as packages called business owner policies BOPs), says Levenson, the New Jersey insurance agent. Here are seven types of coverage that typically are included:

  1. Property insurance -- This is necessary to protect your investment from mishaps such as fire, flood and theft.

  2. Liability insurance -- This guards against claims or lawsuits. If you add an umbrella policy for unusually high losses, it will kick in when your standard policy reaches its coverage limit.

  3. Employment practices liability insurance -- Often called EPLI, this covers you if an employee takes you to court over allegations of harassment or wrongful termination.

  4. Key employee insurance -- If you depend on certain employees to keep your business running, key employee insurance provides compensation if they are unable to work.

  5. Loss of income insurance -- In most cases, this protects you if you're forced to temporarily close your business. Salon owner O'Brien says a power outage once cost him $4,000 in a single evening.

  6. Workers compensation insurance -- This pays for medical care for employees who are injured at work, regardless of fault. Because requirements vary around the country, contact your state insurance department for details.

  7. Employee dishonesty insurance -- This protects you from criminals who may be on your payroll.

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