Beauty Store Business

DEC 2017

Beauty Store Business provides solutions for better retailing! New products, industry news, savvy business moves and important trends affecting both brick-and-mortar and online retailers are included in each issue.

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beautystorebusiness.com | December 2017 57 WHY IT'S IMPORTANT First of all, you have to have—and you do truly need—insurance for your busi- ness. There are many types of business insurance and each plays an important role when you need it. For example, property insurance will help you get the store open again after a fire. Liability insurance is there when one of the prod- ucts you sell causes an allergic reaction in one of your customers. In the event either of these circum- stances were to occur, you most likely do not have the funds lying around to cover these costs in their entirety—and the expense could potentially sink your entire enterprise. That's why insurance is a worthwhile investment—as well as a smart business practice. Imagine for a moment that you have sales around $3,000 per day at your store. What if you were unable to be open for 30 days? Could you afford to continue the busi- ness without the $90,000 in revenue that you would be losing? That's where insurance can help. Having a comprehensive policy that is up to date and covers your unique retail sit- uation protects you when events beyond your control affect operations. Whether fire or flood, theft or hacking of customer credit card data, insurance is like secur- ing a rich relative who helps you out in times of need. FILING CLAIMS Of course, the more claims you have, the higher your premiums will be. That's why it's also important to know when to file a claim and when not to. As an example, suppose you open for business one day and notice that one of your front store windows was hit by a rock. If you have a deductible of $5,000 for property dam- age, but the window would only cost you $1,000 to have it professionally repaired, there is no need to file the claim. Plus, you can write off the $1,000 as a mainte- nance and repair expense. When there is major damage, exceeding your deductible, your agent will be able to help you file the claim. Often, all you have to do is make a phone call and the agent will personally visit your site, assess the damage and get the ball rolling for repairs. Again, this is the peace of mind that insurance cover- age can provide. UNDERSTANDING COVERAGE There are many types of insurance cover- age available from your agent. Knowing what you need and how much you need is derived from a solid conversation with that agent so that he or she has a handle on what your business does. If your insur- ance agent wrote your policy entirely from a phone call or email without visiting your store, you likely are paying too much and don't have enough coverage. So what kinds of coverage are avail- able for a beauty store retailer? Actually, there are numerous types of insurance you could secure for your store. How- ever, there are five primary ones you should have. The first type of insurance you should possess is property insurance. Self- explanatory, property insurance protects the assets you have. It's the building and the structure you are occupying, but even if you rent or lease space, it's also the shelving, racks, computers, countertops and even the inventory that you have in the store. In short, property insurance is important because if there is a fire or sprinkler system discharge or a deer crashes through your front window during the night and destroys the store, you have coverage. Your agent can help you estimate how much your assets are worth and their replacement value so you can determine how much coverage you need. Second, liability insurance is there for your legal protection. Think of this as having a slush fund in case you get sued. Liability insurance helps when a customer is harmed by something he or she purchased in your store or simply trips over a snag in the carpet. This kind of coverage pays for medical bills and attorney fees. The insurance company will often even help secure an attorney for your case. Also, this is one type of coverage that is surprisingly affordable. Depending upon where you are located and your circumstances, you can obtain $1 million in liability protection for less than a few thousand dollars per year. Third, umbrella policies are helpful if you have extremely high costs associ- ated with a claim, such as the death of a customer due to an accident in your store or from products purchased from your business. An umbrella policy goes above and beyond typical liability insurance. Often, this is an add-on to your policy that can sound quite affordable (less than $1,000 per year). However, if you think the likelihood of such a catastrophic event is low, you might be able to consider drop- ping this type of coverage. You'll need to weigh the relatively low cost of the cov- erage with the probability of something disastrous happening. Fourth, a business owner's policy (BOP) is a comprehensive form of insurance that can be very helpful. It provides full cover- age for your property and for liability. The great thing about a BOP is that it can really provide cash when you need it most. For example, if you have a fire that destroys so much of the business that you have to be closed for a couple of months, a BOP will cover your employees' pay and provide you with income that would be lost during the shutdown. And, depending upon your insurance carrier, a BOP might even pay for a temporary location as your existing store is refurbished. Finally, workers' compensation insur- ance provides medical expenses and income for employees who are hurt while working on the job. In some states, your carrier does not handle this insur- ance. It has to be purchased separately. And in places like Texas, workers' com- pensation is not a legal requirement to do business. Like anything else, it is negotiable and you can shop around for the best prices—or even join a consor- tium of other small businesses to secure a lower rate. READING YOUR POLICY Your commercial insurance policy can be an overwhelming document to under- stand. A good agent will happily sit down with you and explain every detail and amount to you. But, it's also important to understand the statement yourself. Knowing a few key aspects of the policy will assist you in learning this seemingly foreign language. First, know what kinds of coverage you have. If you have a business owner's policy, then you already have property insurance and liability insurance rolled in together. The types of protection you have will be listed in your policy. Next, become familiar with some basic insurance terms. For example, if your lia- bility coverage is for "claims made," then you only have protection when both the occurrence of an event and your claim for it is within the policy period. Therefore, if you have a fire in October, but cancel your insurance in November, and make a claim for that fire in December, you would not be covered. However, if your liability coverage is for "occurrences," then even if your policy has been cancelled, if the fire "occurred" during the policy period, you are still covered. Also, the dollar amounts shown can be confusing. In one part of your policy, it will show you the "limits" of each type of coverage. If you see "fire dam- age" and a limit of $500,000, then that means the most that will be paid out is $500,000. Your claim may be less than that or it may be more; but the most that the insurance company will pay you is half a million. In addition, you may see figures such as "$1,000,000; $1,500,000 x $1,000,000; $2,500,000 x $2,500,000." These show you excess liability limits for each occurrence and in aggregate. Excess liability coverage provides higher limits above and beyond the primary lim- its. In the numbers just shown, it means that the first layer of excess liability insurance is $1,000,000. Then, the sec- ond layer above that initial amount is $1,500,000. And, the third layer above these first two layers is $2,500,000. If you have a business owner's policy, then you already have property insurance and liability insurance rolled in together.

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