UPDATED: Mar 19, 2020
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With more than 400,000 beauty salons, barber shops, and spas being run as small businesses across the United States, these types of businesses are a popular choice for entrepreneurs. Having the right commercial insurance policies in place is a very important part of running any type of business and these are no exception. In addition to property coverage, general liability, workers compensation, and business interruption insurance these types of businesses also need to have a professional liability policy.
The Insurance Policies Needed By Barber Shops, Salons, and Spas
Commercial Property Insurance
As these types of businesses have business property on their premises they will need to have a commercial property insurance policy. This will protect the company’s investment in its furniture, mirrors, tools, and specialized equipment like stationary hair dryers. This will provide coverage if the business’ property is damaged or destroyed by a number of perils such as fire, theft, and vandalism. This is important coverage to have even if the business is leasing a space as the building owners insurance policy does not provide coverage for the contents of their lessees.
Commercial General Liability Insurance
Another coverage vital to any business is a commercial general liability policy. This policy provides protection if a customer or other person is hurt on the business premises and/or suffers property damage due to the business’ activities. In these types of businesses, it’s not that uncommon for someone to slip and fall or trip on a cord and break an arm. If the owner of the business is found to be liable for this than the commercial general liability policy will pay for the injured party’s medical costs as well as any settlement.
Commercial general liability insurance also provides coverage if a business is sued due to libel, slander, or copyright infringement. One business could get sued by another for misappropriation of an advertising idea. There have also been lawsuits where one company sues another because they feel the other company’s advertising slandered their own business. This type of lawsuit would be covered under the commercial general liability policy up to the limit specified in the policy.
The third coverage for these types of businesses to have is business interruption. If a covered peril such as a fire makes it impossible for the business to operate while repairs are ongoing the business interruption coverage will step in and pay the bills during the time of these repairs. It also covers the loss of business income and salaries for those affected employees.
Business Owner’s Policy
Making life a little easier for the business owner, they can buy what’s called a Business Owner’s Policy (aka BOP) which packages these three coverages together into one convenient package. The additional benefit is that a BOP is usually going to save money over buying these policies separately. Optional coverages can be added to a BOP such as data breach coverage which pays the expenses that result if a business’s sensitive personal data about their customers is exposed whether by accident or through a cyber attack.
Another optional coverage is employee theft coverage. This protects the business if an employee is taking money from the till or otherwise engaged in dishonest acts. Anyone that employs people who handle money, cash in particular, should be interested in this coverage. Additionally, equipment breakdown coverage is an option which provides protection in case the business’ heating or air conditioning fails and the company can’t operate until the situation is fixed.
Errors & Omissions
Barbers, hairdressers, and spa operators all should have a professional liability insurance policy, otherwise known as errors & omissions. Everyone can make a mistake, including a person in these professions. If a customer decides you messed up their hair, dyed it the wrong color, or they were accidentally cut by a razor or scissors they could sue the business. This lawsuit wouldn’t be covered under a general liability policy but it will be under a professional liability policy. The policy will cover the costs of mounting a legal defense as well as covering the settlement up to the limit on the policy.
The last policy, workers compensation, is one that anyone who employs others in their business needs to have. If an employee is hurt while on the clock they will be covered under a workers compensation policy. Most states make having workers compensation a requirement in order to do business within the state. It will cover the affected employee’s medical bills, lost income, and provide death benefits should they be killed while doing their jobs.
Some barbershops and beauty salons rent out a booth to other people to provide their professional services. These people are considered independent contractors and may or may not be covered under the business’ general liability and professional liability policies. If a booth renter does need to get their own general liability policy it will be fairly inexpensive as they’re only responsible for their booth area. Booth renters should also a commercial property insurance policy if they are working with expensive equipment they personally own.
For the owner of the business, they should make sure they are named on their renter’s insurance policies as an additional insured if the renter does have to get their own general liability policy. Also, they should make sure the renter has their own errors & omissions policy in place before they start providing their services.
How Much It Costs To Insure a Barber Shop, Beauty Parlor, or Salon
A general liability policy for these types of businesses will be largely determined by the size of the business which is based on revenues. Busier businesses have more exposure as more people are coming and going into and out of the premises. In general, these types of businesses pay about $500-700 a year for this type of policy.
The commercial property insurance policy entirely depends on how much property there is to insure but a typical barber shop will pay around $300 a year. A business with more expensive equipment, such as a salon with multiple tanning beds, could pay $700 or more all depending on the value of all of their business property. Some salons, in order to boost the appeal of their location, also add elaborate sound systems, fountains, and other high-end decors. While these bring in additional clients it does increase the cost of insuring the property of the business.
An errors and omissions policy for most hair stylists and barbers is likely to be about $500 a year for a $1,000,000 policy. A salon could face higher costs if they provide services such as Botox injections, tanning equipment, and permanent eyeliner. A botched haircut will resolve itself in time but a botched permanent eyeliner treatment is considerably more difficult to fix, after all. A hair stylist that works with chemicals, such as hair dyes, will also pay more than someone that just strictly cuts and styles hair. As with all insurance policies, the higher the risk of injury or loss the higher the cost to insure against these risks will be.
Workers compensation policies entirely depend on the state in which the business operates and how many employees they have. Some states operate their workers compensation plans through a department of the state itself which means there is no “shopping around” for a better rate. Relatively speaking, being a barber, hair stylist, or spa worker is considered a low-risk profession so the rates to insure against injury for these professions is pretty low.
Where to Buy a Policy for These Types of Businesses
There are a wide variety of insurance companies that offer policies to cover barber shops, beauty salons, and spas. An agent for any of the big insurance companies can provide a quote including those that work for Allstate, Safeco, Farmers Insurance, State Farm, and the other big players in the insurance industry. There are also independent agents who work for themselves and instead get rates through a variety of companies when looking to provide a quote to a business owner.
As with any insurance policy, it’s always a good idea to get at least three quotes. Most barber shop, beauty parlor, and spa owners will elect to have a BOP as it’s easier and more convenient than purchasing three separate policies. They can have the errors & omissions policy through the same company and agent, which is the most convenient and normal option. However, it is possible to have this policy through a different company if the cost savings are enough to justify doing so.
The workers compensation policy will also far more often be obtained through the same insurance carrier as the business’ other insurance policies. In some states, however, the policy is purchased only directly through the state agency that runs this program. It is handled in this case completely independently of the other insurance policies.