Question

Simulation:

You have been asked to provide an insurance quote for a new business. The business is a small business operating as a Hairdressing Salon in Carlton. It has 3 employees, one of which is a First Year Apprentice. Assemble an insurance package covering insurance over the business, staff (workcover and indemnity). Work with others to compare at least 3 product offerings.

Ensure your package meets relevant legislation, regulations and codes of practice, and organisational policy, guidelines and procedures. Provide a report for the client including a range of options to meet their needs. In your response provide consideration to environmental sustainability.

Answer 1

Salon insurance is a category of insurance coverage for salons, barber shops, and spas. The most common form of salon insurance is commercial general liability, which covers third-party bodily injury, property damage and theft on your premises. Salon insurance costs for most small businesses typically run from $350 to $750 per year in premium.

If you work from home, don’t assume your work is also covered. Standard home insurance doesn’t protect you against claims resulting from business activities you conduct at your house. What’s more, you may be inadvertently invalidating your home insurance policy if it’s not adequately tailored to include commercial activities.

If you run a hairdressing salon and employ staff, you will need employer’s liability insurance as mentioned above. You may also want to consider taking out cover for loss or damage caused to your stock and products, general contents, fixtures and fittings, as well as to improvements you have made to the premises. These covers usually come under a salon package, which you could extend to include buildings cover, if you own the building where your business is located. You may need to take out additional insurance if you provide beauty treatments as well.

If you’re employed by someone, it’s worth reviewing what insurance they have in place first to see if it meets your needs.

If you are a mobile hairdresser and work on your own, apart from getting public liability cover, you may want consider one for your equipment too. It will cover your kit from damage, theft or loss should any of these happen, meaning you can get back on your feet without too much of a detrimental effect on your business or finances.

To ensure you have the right policy in place, fill out a call back form. Our advisors will call you back and help compare tailored quotes over the phone.

How much will hairdressing insurance cost?

That depends on your needs. Premiums are based on various factors such as the amount and type of covers required, the size of your business and your claims history. This is why it’s imperative to be honest and upfront when it comes to providing information about your business – even teeny, tiny untruths can invalidate your policy (and you don’t want to discover that when you’re trying to make a claim).

Comparing insurance policies

Use our public liability or employers’ liability comparison services to find the right deal for you or fill out a call back form and one of our advisors will get in touch to discuss your individual business need

When shopping for salon insurance, you will speak with a captive insurance agent or an independent agent, or you may work with a broker. The captive agent represents a single insurer while the independent agent represents multiple insurers, and brokers represent the insured or the customer, not an insurer. Regardless of what you choose, we recommend you get at least three quotes from three different providers before purchasing your policy.

Here are four of the top hair salon insurance providers:

1. The Hartford

The Hartford is a large insurance agency, which can be an advantage, even for small business owners. Large agencies have greater capital funding, which is important for meeting large claims should they arise. The Hartford offers several coverage types, including the popular business owners policy (BOP).

Salon businesses that will need multiple coverage types in a BOP will want to consider The Hartford. They also offer specialized coverages that are not as common for hair salon owners, such as insurance for backup of sewage and drains. If you’re looking for a traditional insurance provider, this is likely your best option.

2. Nationwide

Nationwide offers a wide variety of insurance types with specialized products and services for small business owners. Their beauty salon and barber shop insurance includes all coverage types needed for business owners of every size, from startups to larger businesses with employees.

Where Nationwide differentiates themselves from some of the other large providers is that they customize their packages specifically for niche businesses within the beauty and hair care industry. They offer coverage for barber shops, cosmetologists, and estheticians.

3. Next Insurance

Next Insurance does a good job of providing tailored insurance products and services to small businesses, including beauty salons. They offer competitive rates, flexible payment plans, and an easy application process. You can start a quote online or simply call them directly.

Next Insurance can be ideal for salon business owners who don’t have complex insurance needs and who want to make the insurance application process quick, easy and affordable.

4. Allstate

Allstate is a large, highly rated insurance company that provides salon insurance coverage for beauty salons, nail shops, and barber shops. They offer commercial general liability and commercial property insurance, and offer the most popular policy type for small businesses, which is the business owners policy (BOP).

Salon business owners wanting a local agent should consider Allstate. Although they are one of the largest U.S. insurance providers, their presence in thousands of communities across the country allows for greater customer service focus at the local level.

How Stylist Insurance Works

Salon insurance is not a specific type of insurance but rather a combination of coverage types specialized for beauty salons. Most salon businesses choose a business owners policy (BOP) for their insurance coverage. The BOP is an insurance policy that typically bundles commercial general liability (CGL), property insurance, and business interruption insurance together into one package for cost efficiency.

The CGL policy covers third-party bodily injury, property damage, medical bills and related legal expenses. You may need other types of insurance to properly cover the risk exposures unique to your business. For example, to protect your own assets, such as the building you own and your supplies, equipment and inventory, you’ll also need commercial property insurance.

How to Apply for Hair Stylist Insurance

Applying for hair salon insurance can be a simple process if you take a few important steps to prepare. Although the insurance coverage needs of each salon business are similar, some businesses will need more coverage than the basic business owners policy. Depending upon several factors, such as the services and products you offer to clients, the size and revenue of your business, and if you have employees, you may need a more customized insurance package.

Here are three of the most important things to remember when applying for hair salon insurance:

1. Gather Documents You Need Before You Apply

You know your salon business, but you might not know which insurance types you need. To ensure you get the right coverage, be sure to gather all the information that will be needed for the application or initial quote. This will help the insurance agent, broker or underwriter know how to best protect your business against risk exposures common in the salon industry.

These documents will help you prepare to apply for salon insurance:

1. Business contact information
2. Building lease, if applicable
3. Number of employees
4. Value of assets, such as chairs, equipment, products and inventory
5. Type of potentially hazardous services you offer, such as chemical treatments on hair
6. Type and amount of your customers’ personal data you store
7. If and how you ship products to customers
8. Number of years you’ve personally worked in the industry
9. Number of years your business has been in the industry
10. Information on other insurance coverage you already have
11. Claims history (at least the past three years)

2. Choose a Provider Who Knows the Salon Business

Salon insurance is industry-specific, which means there are risk exposures and insurance needs that are unique to your business, such as injury or damage caused by hair products that you use. If you work with an insurance agent or broker who knows your business, you’ll have a better chance of getting the right coverage at the best price.

3. Complete the Application

Completing the application sounds like an obvious step in the application process, but what’s important here is that you don’t leave out information, which can cause you to be underinsured or result in rejected claims. For example, if you forgot to mention to your provider that you sell products to customers, you may not be covered for professional liability.

Most Common Types of Salon Insurance Coverage

There are several types of insurance coverage that salon business owners may need, but there are up to three main types required. Many salon business owners can get the basic coverage they need with commercial general liability, but some will also need commercial property insurance. These two coverage types can be bundled into one package called a business owners policy (BOP).

Here are details on the four types of insurance coverage that most salon business owners need:

1. Commercial General Liability

Commercial general liability (CGL) insurance covers third-party bodily injury, property damage, medical payments and even personal and advertising injury. This is the main coverage type every salon business owner needs to buy because claims from third parties are the most common claims. Also, a CGL policy is often required to get a business license.

For example, if a customer slips and falls in your salon, your CGL policy will pay their medical bills or damage. Liability claims can be the greatest financial risk to salon business owners, especially if you own or lease a building.

Some liability claims can result from a simple oversight but can lead to expensive lawsuits. According to Keith M. Fletcher, Simmons and Fletcher, P.C.:

2. Professional Liability Insurance

Professional liability insurance, also called errors and omissions insurance (E&O), protects your business against claims arising from damage caused by your negligence or mistakes in delivering your service to clients. Whether a mistake is your fault or not, professional liability insurance will help pay for lawsuits if clients sue you.

For example, let’s say one of your employees makes a mistake and uses a product on a customer that ends up causing severe scalp burns. The customer is extremely upset and sues you for damages. Professional liability insurance would cover the cost of the lawsuit, even if the damage was purely accidental.

3. Business Interruption Insurance

Business interruption insurance covers a loss of income to your salon business resulting from a covered event. If your salon is forced to close because of fire or extreme weather, business interruption coverage will cover income that is lost during the closure. This coverage is often included in a business owners policy (BOP).

For example, a fire can do damage to your salon that can cause you to close the doors to your customers for days or weeks. The revenue lost while the damage to your salon is being repaired can be covered by business interruption insurance, whether you own or lease the space. This can be crucial if you have beauty salon business loans that need to paid, regardless of your salon’s financial status.

4. Commercial Property Insurance

Commercial property insurance covers the assets of your business, such as your salon and the contents within it. Property Insurance may protect your business against losses due to fire, theft, vandalism, and extreme weather. The greatest risk exposure to small businesses with brick-and-mortar locations is theft. This makes property insurance a must for salons in most locations.

Commercial property insurance is required coverage because it helps protect the place where you operate your hair salon and the tools and equipment you use every day, like furniture, styling brushes, curling irons, and computers, whether you own or lease them. It’s important to note that, if you’re working out of your home, your personal insurance likely won’t cover damage to business assets. Therefore, you may need commercial coverage in addition to personal.

Other Types of Hair Stylist Insurance Coverage You May Need

Many salons need coverage types outside of the most common insurance policies like commercial general liability. This will depend on things such as whether or not you own the building where you work, if you have direct employees instead of independent contractors, and if you use a vehicle for your business other than commuting to and from work.

1. Commercial Umbrella Insurance

Commercial umbrella insurance extends the limits on other insurance types. Umbrella insurance coverage is therefore not used to protect against a specific risk exposure, like other insurance types such as general liability or commercial property insurance. Instead, it adds coverage wherever you need it, with limits being expanded in increments of $500,000 or $1 million.

Umbrella insurance is needed when the standard liability limits on other policies, such as $1 million, is not sufficient coverage to protect against the typical risks involved with salons and related businesses. Since the needs for this coverage can be difficult to measure, business owners should speak with their provider for guidance.

2. Workers Compensation Insurance

Workers compensation insurance provides benefits to stylists, assistants, receptionists and other employees of your hair salon or beauty shop for work-related injuries or illnesses. Coverage includes medical bills, wages from lost work time, and more. Workers comp is required in most states if you have one or more employees.

Since most salons, beauty shops and barber shops have employees, workers compensation is required coverage for the owners. The cost of coverage depends upon risk exposures, the number of employees working for you, and the state where you work. However, most small businesses in service-related industries pay an average of 1 percent of wages per employee for annual workers compensation premiums.

3. Commercial Auto Insurance

If you use a vehicle in your work, whether it is owned by you or the business, and it is involved in an accident, commercial auto insurance will cover you for repairs and related lawsuits. This insurance can also include protection against an uninsured or underinsured driver. In general, you should have a commercial vehicle insurance policy if you or your employees use a vehicle for business purposes other than for commuting to and from work.

For example, if you use your own car to visit clients for house calls or to pick up beauty supplies for your hair salon, you’ll need commercial auto coverage. It’s important to note that commercial coverage for your business is not typically included in a personal auto insurance policy.

Who Needs Hair Stylist Insurance

Every business owner in the salon industry needs at least some degree of insurance protection. In fact, some coverage will be required by lenders, landlords, or local municipalities. This is primarily because you work with the public, which opens yourself and your business to a range of risk exposures.

These three types of business owners will need hair stylist insurance:

1. Salon Owners

Hair stylist insurance for salon owners will include commercial general liability and commercial property insurance, which can be combined into a business owners policy (BOP). If the salon owner has employees, most states will require them to have workers compensation coverage. Many salon owners also get professional liability insurance to cover lawsuits arising from mistakes or negligence.

2. Hair Stylists Renting Chairs in a Salon

Hair salon professionals renting a chair, sometimes referred to as booth renters, will need commercial general liability at a minimum. To cover equipment, tools and supplies, they may also need commercial property insurance. The most popular insurance type for booth renters is a business owners policy (BOP), which combines both general liability and property insurance into one package.

3. Home-Based Business Owners

If you run your salon business out of your home, don’t assume that your personal homeowners insurance will cover you. The primary type of salon insurance for home-based business owners is commercial general liability, which covers you if a customer slips and falls on your property. Talk to your insurance representative about other coverage types you may need.

Bottom Line

There are many different types of salon businesses, which means that each business will have unique insurance needs and respective risk exposures that need to be protected with the appropriate policy type. To get a better idea of what insurance types you need, it’s important to speak with an insurance representative and get a quote from a top insurance provider.