When you start your salon, you have a long list of items and resources you need to purchase. Since your expenses can be high in the beginning, it is common for new salon owners to wonder if they need to purchase business insurance or if it’s possible for your business to go without this expense. We have all the details you need to know about business insurance, including why it’s essential for your salon.
All salons need to invest in business insurance! Without insurance, you will put your salon in jeopardy. When it comes to purchasing insurance, you need to know how much coverage you need, what types of insurance you should purchase, what it will cost you and how to find the right policy for your specific salon.
How Much Coverage You Need
Before you start looking for an insurance company, you should have an overall idea of how much coverage you want for your business. You can decide on the specific coverage amount once you are deciding on a policy, but we recommend at least having an idea of what coverage you want before getting quotes.
When it comes to coverage, you want to keep in mind that higher amounts of coverage will generally result in higher insurance costs. Do you want to keep your costs lower and only invest in the minimum amount of coverage needed? Do you prefer to spend more money and have more coverage to give your salon extra protection? Before you speak to insurance agents, you want to ask yourself these questions.
The amount of coverage your business will need ultimately depends on the size of your salon. If your salon is a large size and you offer an extended list of services, you may want to consider investing in a larger amount of insurance coverage.
As new salons are starting, it is common to start with a lower amount of coverage. As your salon grows and you increase your client base, you can always increase your amount of coverage. You do not have to stick with the same amount of coverage throughout the life of your salon. You can easily change your coverage amount when a new policy starts by reaching out to your insurance agent.
When you work with potential insurance companies, the insurance agent will be able to evaluate your current business needs and provide you with their recommendations on a specific amount of coverage as well.
As you are considering the amount of coverage you want for your salon, you also want to consider what you would like your deductible to be. For most policies, the deductible will either be $500 or $100.
If you have a lower deductible, the cost of your insurance may be higher. However, before you set your deductible higher to save money on your premium, you need to also make sure you’d be able to pay your deductible comfortably if you need to file a claim.
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What Types of Insurance You Need
As you are starting your salon, you should at least invest in commercial general liability insurance. This type of insurance typically covers third-party injuries, property damage, and theft that takes place in your commercial building. For new salons, most of the situations where you need to file a claim will fall under the general liability area.
As your business grows, there will be additional types of insurance that you need to invest in. For example: If you hire employees, you will need to get Workers Compensation Insurance. This type of insurance covers your employees’ medical bills and wages if they get injured while at work. Workers Compensation Insurance is required in most states (once you have hired your first employee).
Once you hire employees, another type of insurance you may be required to purchase is Unemployment Insurance. Similar to Workers Compensation Insurance, most states will legally require you to purchase Unemployment Insurance once you have one employee.
Another type of business insurance you can invest in is commercial property insurance. This type of insurance would protect your salon and all of your assets inside your building in case of fire, extreme weather or theft takes place. You need to consider this type of insurance as your salon grows, and your amount of assets increases (like if you start selling retail items).
To combine their insurance needs, many small business owners also prefer to invest in a BOP, which is an abbreviation for a Business Owner’s policy. This type of policy combines protection for your property and liability risks. One benefit of this policy is it often includes business interruption insurance, which covers the loss of your income if extreme weather or damage prevents your salon from being open for business.
Another benefit of a BOP is convenience. You don’t have to shop around for multiple policies. However, you do need to consider that many insurance companies will have certain criteria you may need to meet in order to qualify for a BOP. To see if you qualify for this type of insurance, you can reach out to your potential insurance companies.
Once your salon has grown and has a large amount of clients, the last type of insurance you need to consider is professional liability insurance (it is often also referred to as errors and omissions insurance). This type of insurance protects you against legal fees that may arise from a client claiming your error caused them financial harm.
For example: If you have a client that claims that you colored their hair incorrectly and they had to spend hundreds of dollars to fix it, your professional liability insurance will help you cover the fees for your lawyer, any court costs, and any settlement.
As your salon is just starting out and your clients are limited, professional liability insurance isn’t a requirement. General liability insurance will be much more essential for you. However, as your salon grows and your client base develops, then you want to consider if professional liability insurance is something you want to invest in.
If you plan on purchasing a company car for your salon down the road, you need to keep in mind that you will also need to ensure that the vehicle is covered with auto insurance. Purchasing insurance is a vital part of growing your business! As your salon grows, you will likely need to continually add on new types of insurance to make sure you stay protected.
Finding the best insurance policy and insurance company for your salon is not a step you want to rush through! To save yourself money and get the best policy for your needs, it is essential that you collect multiple quotes from various insurance companies. We recommend getting at least three quotes.
When you reach out to the insurance companies to get quotes, you want to ask how much coverage is included in the quote, what the premium cost is, if you have to pay the premium upfront or if they offer monthly payments, what your deductible will be and if there are any other benefits included in the policy.
We also recommend paying attention to how easy it is to communicate with each insurance company. Is their process for filing claims easy and quick? Did it take you a long time to get a hold of any specific insurance companies? If an emergency takes place at your salon, you will need to get a hold of your insurance company quickly, so communication is important!
After you have all of your quotes, you want to take the time to compare each of them. Is there a specific policy that will fit your needs better? What price is the best for the services you will receive? It is important to take your time when analyzing the quotes you received and to pick what policy will be the right one for your salon.
When you are comparing the various quotes, you want to make sure that the policy you are leaning towards fits within your salon budget. If you plan on paying the premium monthly, can your business handle the monthly payment? Although having coverage is essential, it’s also important to prevent getting such a large amount of coverage that you have trouble paying for your insurance as well.
Another important thing to remember about your insurance policy is that you are not stuck with the same policy and insurance company for the life of your salon! If you end up deciding that a policy or insurance company doesn’t work for you after using them, you don’t have to continue to renew after a policy has ended.
Once your policy has ended and has been paid for, you can switch to a different policy, insurance company, or amount of coverage that might be better for your salon. It is vital to ensure that your business insurance works best for your specific needs.
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Average Costs of Business Insurance
Business insurance is typically a lower expense compared to many of your other expenses for your salon. The cost for your business insurance will depend largely on the types of insurance included, the amount of coverage you have, how high your deductible is, and any other benefits that may come along with your policy.
On average, new small business owners pay between $400 to $900 per year for business insurance. If you pay your premium monthly, that averages between $33 to $75 a month. However, if you have multiple types of insurance and more coverage, your cost for business insurance can go up to $2,500 per year.
Cost is a large reason why getting quotes is so important. By getting various quotes, you can ensure that you’re getting the best price for your policy and coverage. If you invest in business insurance from the first company you speak to, you may end up paying a higher cost for insurance.
Insurance acts as financial protection for both you and your business. If a client gets injured at your salon, you would be financially responsible for yourself if you don’t have insurance. Depending on the injuries, it could financially devastate your business! Investing in business insurance gives you peace of mind and will always be worth the price.
What expenses will I have when I start my salon?
When you first start your salon, your expenses will include your licenses and permits, your building (along with making sure it’s ready for business), supplies, equipment, business insurance, and any marketing you want to invest in.
As you are starting, the expenses you’ll spend the most on are your building, equipment, and supplies. You can save yourself money by shopping around for your equipment and supplies, along with looking for a commercial building that is the most prepared to operate as a salon.
How long goes it take to open a new salon?
The amount of time it takes to open a salon will generally depend on how long it takes to get your commercial building ready for business and the amount of time you have available for getting everything set up. If your building is in great shape, you could have your salon up and running within about three months.
However, if your building needs a lot of work done before it will be ready or if your time availability for your business is very limited, it can take up to 6 months for your salon to be set up and open for business.
Should I start my salon out of my home or get a commercial building?
When considering whether to start your salon out of your home or in a commercial building, you need to think about what type of budget you have for your business and how quickly you want your salon to expand.
If your budget is lower for your salon, then starting your salon out of your home can be a great way to save yourself money. However, you do need to consider that you will be limited to growing your salon when it’s based out of your home. If you want to grow your salon quickly, then we recommend considering investing in a commercial building.
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Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Shawn Chun is an entrepreneur who has owned several types of businesses from a coffee shop to an import and export business to an online review business plus a few more and now creates online resources for those interested in starting a salon business. It is demanding work he loves to do it. Shawn says “I do it for those passionate about their business and their goals. I know how hard the struggle is to obtain and retain clients, finding good employees all while trying to stay competitive.”
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