In today’s uber-competitive car care market, protecting revenue streams is one of the most important steps a carwash owner can take to guarantee that a business is financially secure. Proper insurance coverage is a huge component when it comes to establishing income security. With that said, many operators have discovered that finding the perfect insurance fit is a process that can initially create more questions than answers.
Whether someone is seeking insurance for a single carwash or a chain of locations, there are various types of coverage available to many small businesses. Learning the industry’s basic terms and developing a set of insurance best practices are some of the first steps for operators looking to select or upgrade their business coverage. Once a base of knowledge has been developed, an owner can further work with companies and agents to custom fit an insurance package for a particular business.
While many people think of insurance coverage as a way to protect property and minimize liability, it can also safeguard against a loss of income, according to Peter Beames, an account executive with NBT–Mang Insurance Agency. If an operator experiences a large property loss that shuts a location down for a period of time, he or she will need income to continue paying ongoing bills for the business. Other considerations are wages for the operator and possibly key employees as well as a potential loss of business when the wash is finally back in operation.
“This type of coverage generally is written on a 12-month Actual Loss Sustained basis,” Beames explains. “This is a key coverage to ensure that after a property loss — when you become operational again — you can regain the profitability that you had before the loss occurred.”
James Pallante, a commercial lines marketing manager with Allen Insurance, agrees that most insurance policies for the car care industry will protect an owner from things like fire and general liability. The liability coverage protects a business in case it is sued and ultimately found negligent. If a wash does experience lost business income after a disruption, certain coverages would also pay owners while the location is being restored.
Finally, many carwash locations also have Garage Keepers insurance. This coverage protects the operator in the instance that a vehicle is damaged on the property.
Types of coverage
For carwash insurance policies, Beames recommends several coverages which a company generally can combine into one package. These coverages include:
- Property Coverage at replacement cost with an agreed value provision attached
- Liability Coverage at a minimum of $1 million underlying
- Business Income Actual Loss Sustained including Extra Expense for 12 months
- Garage Keepers coverage with a minimum of $75,000 (an operator should consider higher limits in this instance if they are available).
- There are other optional business coverages Beames suggests as well:
- Umbrella Coverage of between $1 million and $5 million with possible higher limits depending on the customer’s business and location
- Cyber Liability Coverage, which has become one of the newest and biggest unknowns to the carwash industry, according to Beames
- Employment Practices Liability (EPLI) that includes a variety of coverages, including sexual harassment.
Generally, insurance policies include coverages for money and securities, signs, etc. Beames recommends an owner look over all of these additional coverages when he or she receives the initial proposal. Also, if a site includes additional profit centers, such as ice vending, vending machines, pet washes, etc., owners should let the insurance agent know, so he or she can relay this information to the insurance carrier. Many of these items have separate classifications for insurance purposes, but Beames has helped insure washes that include convenience store operations, gas pumps, laundromats, etc.
Pallante notes that different geographic locations will affect the final list of coverage options. “What we try to do is take down their information and find them the best fit for that particular business,” he says. “It depends on a lot of different things. Sometimes, it depends on what state they’re in, what kind of coverages they’re looking for. We work with different brokers in different states, and insurance rules are different from state to state.”
There are steps that even the most perfectly insured carwashes can take to avoid liabilities and make sure that the site is safe for customers and employees alike. Beames states that engaged wash operators can help prevent losses via the following steps:
- Fully train wash employees. This training is critical to the success of a car care operation. Each employee should have training in lockout/tagout procedures, driver safety, chemical training, OSHA requirements, incident reports, accident or robbery procedures, equipment use and self-inspection steps for carwash property, customers’ cars and carwash equipment.
- Keep cameras in good working order. Also, have a procedure to secure video in the event of a claim.
- Keep all equipment in good working order. In addition, have a maintenance program that is followed and logged.
- Maintain salt logs. This is primarily for washes that operate in states with icy conditions.
The carwash industry includes many risk components that other businesses do not. Beames notes that wash locations have vehicles coming onto the premises, hopefully nonstop. Employees often get into customer vehicles and move them around without being familiar with the vehicles’ modes of operation.
Further, the public is coming onto a premises where water and soap are almost always on the ground and the industrial equipment is operating continually. Because of this, carwashes face a unique problem. There are, unfortunately, many claims that cannot be averted even with the best management practices.
These multiple risk factors for the typical carwash have resulted in a market tightening for insurance operators. Today, many insurance companies have left the car care market or non-renew when a customer files claims, Beames states. Thus, an operator needs to be extremely careful when studying the market. Thorough research is a must before choosing to work with an agent and company. Pricing should not be the only factor that an operator considers in the current insurance market.
“From my viewpoint, it is the most critical choice an operator can make in today’s marketplace,” Beames continues. “I have represented many carwash carriers over the years that are no longer in the industry. I find insurance companies have a tendency to jump in, get some claims and then jump back out of the marketplace.”
Also, if a wash loses its insurance and ends up in an excess lines marketplace that has no restrictions on pricing, it can really be devastating to the operation. Carwashes are going to have claims, and businesses need to work with a carrier that understands this fact. Neither the operator nor the insurance carrier is going to operate at a loss for long, according to Beames.
“I am lucky enough to have an insurance carrier who only does carwashes in the program, and I have worked my way through many difficult renewals and been able to keep the customer with the same carrier,” Beames states.
Pallante notices similar trends in the carwash insurance market. “From what I find, carwashes are not prevalent everywhere as far as the insurance companies that write them — it’s not one of the risks that’s everywhere. There are markets out there that offer carwash programs, but it’s somewhat hard to find sometimes.”
Information and resources
Can carwash owners looking for insurance coverage turn to the internet when comparing options? Pallante notes that the internet is where the company he works for lands a lot of its business. Internet shopping for insurance has been good for the company, and now more and more companies are working to become internet-friendly.
That said, Pallante warns that online information will often be just a starting point, because there are so many variables at play. “Different companies have different ways of rating things, and they have different things that they might not cover,” he says.
Beames agrees that the internet is now a great resource to locate and gather insurance information. Further, an owner can use the internet to learn about his or her state or regional carwash association. These groups are valuable for finding out more about insurance professionals who specialize in the car care industry.
“I would suggest your local carwash association as a great resource,” Beames concludes. “I am involved with several associations, and the sharing of information at these associations is invaluable. Also, call another carwash operator; they know the local area and possibly a local agent or an agent who is involved in the industry.”
Mark Martin is a freelance contributor.