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When it comes to insurance for your carwash business, it’s better to have it and not need it, than to need it and not have it, according to Sam Furno, the vice president of sales for the Western Carwash Insurance Agency and the former owner/operator of a full-service carwash, detail and smog center.
“To date I have yet to find a crystal ball that reliably warns me of an impending insurance claim,” Furno said. “That’s why I buy insurance — for the peace of mind. It allows me to go smoothly about my daily business and not toss and turn at night worrying about those ‘what ifs’.”
Don’t make these common mistakes
Insurance is a necessary evil of operating a successful business, but many operators make the mistake of rushing to buy coverage without considering their options. Furno said many prospective buyers often forget to do a thorough “apple to apple” comparison of benefits, limitations and pricing between competitive policies.
According to Furno, shopping for insurance coverage predicated only by the premium may be a costly lesson when an insurance claim eventually arises. “Be wise by making sure that the savings gained from a lower premium is just that and not a significant decrease in coverage. Have your agent or broker explain the differences as it’s in their best interests, too,” he said.
Lastly, he suggested, work with agents or brokers who know the carwash industry. And one key tip is to ask your area carwash association for a recommendation. “After all,” he said, “it’s just a phone call.”
Scott Brothers, president and CEO of the Joplin, MO-based The Insurancenter, said not getting proper coverage is the biggest mistake a business owner can make. Many operators do not understand the right liability limits or the types of coverage needed for their carwash. For instance, coverage for the theft of money is an especially important policy for a self-serve carwash owner.
He also said that normal policies don’t cover natural disasters, such as floods or earthquakes, and if your area is prone to them, then you need to make an effort to buy that special kind of coverage.
To have and to hold on to
It’s a shame, but carwash operators out there do accept insurance policies without fully understanding the benefits and savings being offered.
Furno said business owners tend to take their insurance policy purchases too lightly. “It’s imperative that we as business owners have a good understanding of what our insurance benefits and exclusions are if a claim is filed against us or our business,” he explained. “Take the time to review your insurance program with your agent or broker as it will be time well spent.”
Be educated and make sure your agent understands your operation, said Brothers, and buy a policy that covers their exposure properly.
Scams and shams
Unfortunately, false claims are common in the insurance industry and with the economy now in turmoil, they are becoming even more prevalent. Carwash operators can avoid being taken for a ride by following advice from Furno and Brothers.
Furno told PC&D that workers’ compensation, property damage and personal injury claims tend to increase as money gets tight and jobs are being lost.
“Don’t just roll over and surrender if you think that you are being scammed,” he suggested. “Work closely with your insurance carrier to get to the truth of the matter. Besides the principle, you’re just working too hard for your money to give it away on a fraudulent claim.”
Brothers said carwashes are especially vulnerable to false claims by customers or employees who fake an injury or accident in order to make a few bucks.
“Those scams are alleged slip and fall claims,” he said. “We see plenty of abuses of workers’ comp claims that could be fraudulent and potentially fraudulent liability claims.” The best way to keep those scams from seeing the light of a courtroom is to install surveillance cameras.
Eggs in one basket versus many
One thing that Furno often hears from carwash owners that they don’t like or understand is whether they should buy insurance coverage that will cover every claim in total. That would be nice, said Furno, but carwash owners and their insurance needs are unique from wash to wash.
“There are the general coverages which are virtually the same for all carwashes, but then there are the many endorsements (additional coverage and/or modifications) that the carwash owner may want to purchase,” Furno explained.
For example, Furno said that Employment Practice Liability Insurance is obviously not needed if you have a self-serve carwash with zero employees. On the other hand, if you are a full-service carwash, then it could be one of your most important coverages.
Common myths debunked
There are several common myths regarding insurance, and they usually have to do with claims and deductibles.
One such myth is that turning in a claim if it’s more than the insurance policy’s deductable is always your best option. This isn’t always the case, Furno said.
For instance, a $10,000 claim with a $1,500 deductable clearly should be filed, but if it’s perhaps a $600 claim with a $500 deductable, then you may want to think that over. True, the carwash owner saves $100, but if you file similar claims during the same year it could potentially lead to a “high frequency history.” Operators with a high frequency history risk the chance of their insurance carrier significantly raising a premium or even cancelation.
“You need to be aware and understand the risks versus the rewards when utilizing your insurance coverage,” Furno said.
“Please keep in mind that it’s an insurance policy and not a maintenance agreement.”
Brothers said some owners will fiercely proclaim that after a slip and fall that it isn’t their fault and they shouldn’t have to pay for it, but it is important to understand that anybody that comes onto a carwash owner’s premises is considered a business invitee and they’re owed a higher degree of care because of that.
To reduce your risk, Brothers suggested the following:
- Place signage around your premises indicating there are wet and slippery surfaces;
- Make sure your property is well lit;
- Install heated floors;
- Place mats throughout the bay for better footing;
- Sand and de-ice the floor; and
- Ensure the grates are always closed.
In other words, try and prevent an incident from occurring in the first place.