Salons are businesses that take care of the grooming needs of people. Because these businesses work with people, a lot of things can go wrong thus emphasizing the need for insurance. Salon insurance refers to the business policies salon, barbershop, and spa owners typically purchase to protect themselves against risk.
The most common form of hair salon insurance is general liability, which covers claims from business-caused injury, property damage, or reputational harm. General liability insurance for most small hair salons typically runs from $350 to $1,600 per year in premiums.
Cost isn’t the only thing hair salon owners should consider when it’s time to buy insurance. They should also look for policies that cover their specific risks. With this, you will able to pick out a policy that is tailored to your specific business needs.
Outlined below are some of the basic insurance policies a salon is supposed to carry for protection. Note that your salon does not need to buy all these policies. You can just buy one or two that covers all you need.
Best Insurance Policies for Beauty Salon Owners
Table of Content
- 1. General Liability Insurance
- 2. Business Owner Policy
- 3. Commercial Property Insurance
- 4. Workers’ Compensation Insurance
- 5. Professional Liability Insurance
- 6. Equipment Breakdown Coverage
- Cost of equipment breakdown coverage
- 7. Commercial Auto Insurance
- 8. Commercial Umbrella Liability Insurance
- 9. Commercial Crime Insurance
- a. Number of employees
- b. Coverage needs
1. General Liability Insurance
General liability insurance is one of the most popular insurance policies that small businesses usually carry. This insurance policy covers third-party bodily injury, property damage, and advertising injury. This is a core coverage for salon owners because claims from third parties are a common risk.
Also, general liability is often required for business licenses and commercial leases. Instances where general liability applies include:
- A customer’s medical bills after they slip in your salon
- A neighbor’s repair bills if a fire in your salon causes smoke damage in their building
- Your legal bills if a competitor sues for defamation
General liability usually has products-completed operations coverage to pay for property damage and physical injury caused by defective products or faulty services.
Cost of General Liability Insurance
Personal care businesses pay a median premium of less than $35 per month, or $390 per year, for general liability insurance. This policy provides protection for third-party bodily injuries and property damage, along with advertising injuries.
2. Business Owner Policy
The Business Owner Policy combines the General Liability Insurance and Commercial Property Insurance. It is therefore the most cost effective way for insure a salon against costs associated with damage and repairs of the salon building and salon equipment as well as liability claims due to accidents in the salon. With this comprehensive policy, a salon may not get another policy.
All salon businesses need a General Liability Insurance but if you’re a booth renter or mobile salon, you may not need the Commercial Property Insurance. In this case, you should not opt in for a Business Owner Policy but only a General Liability Insurance.
A BOP protects against third-party injuries and property damage, along with damage to your own business property. You can also add professional liability insurance to a BOP for increased savings.
Cost of Business Owner Policy
Personal care businesses pay a median premium of less than $70 per month, or $800 per year, for a business owner’s policy. This policy combines general liability insurance with commercial property insurance, typically at a lower rate than if the policies were purchased separately.
3. Commercial Property Insurance
Commercial property insurance covers your business’ physical assets like your salon and the contents within it. Policies typically pay to repair or replace these assets when they’re damaged by certain events, such as fire, theft, vandalism, or windstorm.
Salons usually get commercial property bundled and general liability insurance at a reduced rate by buying BOPs. Most BOPs also include business interruption coverage, which covers your lost income and ongoing expenses if your salon is forced to close because of a covered event.
Cost of Commercial property insurance
The median cost of commercial property insurance is $63 per month or $755 per year with a limit of $60,000 and a median deductible of $1,000. The median offers a more accurate estimate of what your business is likely to pay than the average cost of property insurance because it excludes high and low premiums.
4. Workers’ Compensation Insurance
Workers’ compensation insurance provides benefits to stylists, assistants, receptionists, and other employees of your hair salon when they suffer work-related injuries or illnesses. Coverage includes medical bills and lost wages and is required in most states when a business has one or more employees.
State law determines coverage, but injuries covered by workers’ comp typically include:
- Occupational injuries such as lung disease caused by breathing in hazardous chemicals
- Traumatic injuries such as a broken wrist after a fall
- Repetitive stress injuries like carpal tunnel from cutting hair
If you have salon employees, this insurance is mandatory. Your salon staff is most likely working with hot tools, chemicals, and sometime under less ergonomic circumstances. What if one of your hairdressers burns herself that bad on a styling tool that she needs to be treated in hospital?
A Workers Compensation Insurance covers your employees lost wages and medical treatment in case of injury. It also protects you from being sued for workplace conditions that result in injury or illness.
Cost of workers’ compensation insurance
A beauty salon workers’ compensation insurance costs about $435 per year (or $36/month) per employee of a hair salon, nail salon, barber, or spa. However, the cost depends on which state your salon is based in and can range from $0.75-$2.74 per $100 salary you pay.
Almost all states requires salon owners to have a Workers Compensation Insurance if they have salon staff employed. The estimated cost of $435 per employee assumes your salon employees are at average wage. The average salary for salon employees is $24,830. Each state has a differently regulated workers compensation per industry.
5. Professional Liability Insurance
Professional liability insurance, also called errors and omissions (E&O) insurance, covers your legal fees if a client claims your negligence or mistake caused them financial harm. Whether their costs are your fault or not, professional liability insurance helps pay lawyer’s bills, court fees, and judgments or settlements.
Cost of Professional liability insurance
The average cost of a salon’s General Liability Insurance is $740 per year (or $62/ month). But the cost vary depending on salon business size, years in business, and location.
Salon owners who also control the salon location can save money by opting in for a Business Owner Policy (BOP) which combines the General Liability Insurance with a Commercial Property Insurance. A BOP costs about $1,200 per year (or $100/month).
6. Equipment Breakdown Coverage
Equipment breakdown coverage pays for losses caused by mechanical failure of nearly any equipment, including tanning beds; computers; and heating, ventilation, and air conditioning (HVAC) systems. It can be purchased as a standalone policy or endorsed onto a property policy.
Many salon owners assume their commercial property insurance covers these events, but that policy only pays for damage caused by external sources. Equipment breakdown coverage pays for damage caused by internal sources like power surges and motor burnout.
Cost of equipment breakdown coverage
A commercial salon property insurance cost about $700 per year (or $58/month) but varies depending on the building your salon is based in and how much salon equipment value you want to insure.
Salon owners can save money by getting a Business Owner Policy (BOP) that combines the salon property insurance with General Liability Insurance. A BOP costs about $1,200 per year (or $100/month) but also varies greatly depending on salon business size.
7. Commercial Auto Insurance
Commercial auto insurance covers repairs and related lawsuits when a vehicle used by your salon business is involved in an accident.
Most states require a minimum amount of liability coverage for business-owned vehicles to pay for damage you cause others, but policies can also include coverage for damage to your cars and any vehicles your business rents, hires, or borrows.
Cost of commercial auto insurance
The median cost of commercial auto insurance is $142 per month or $1,704 per year. The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of commercial auto insurance because it excludes outlier high and low premiums. Note that this coverage is optional, but if you have a company vehicle, it’s best you get it.
8. Commercial Umbrella Liability Insurance
Unlike other policies, commercial umbrella insurance is not used to protect against a specific risk. Instead, it adds coverage when other liability policies are insufficient.
For example, if your general liability limit is $1 million, but a lawsuit over a customer’s slip-and-fall costs $1.5 million, an umbrella policy pays the additional $500,000. Buying an umbrella policy is usually more cost-effective than adding coverage to your other liability insurance.
Cost of commercial umbrella insurance
Because of the discrepancy between the high and low ends of cost, the average amount for umbrella insurance is about $1,500 a year for a $1 million policy. However, many businesses pay less than that with the median premium falling closer to $900 a year.
9. Commercial Crime Insurance
Commercial crime insurance covers financial losses stemming from illegal activities like check fraud, theft, and counterfeit money schemes. Most policies reimburse policyholders whether the criminals are employees or outside actors.
Salon owners often assume these financial losses are covered in commercial property. Unfortunately, property policies often exclude employees’ actions and stolen money, so commercial crime insurance is essential for salon owners who have employees or typically have cash on hand.
Cost of Commercial crime insurance
There is not specific cost for a commercial crime insurance. This is because the costs are usually based on the business in question and the risk they carry. But by and large, standalone crime insurance costs between $240 and $4,000.
Factors That Affect your Salon Business Insurance Costs
Many factors play a role in calculating your salon business insurance cost. The most influential usually are the number of employees you have and your coverage needs. These factors can vary significantly from one salon to the other. Some of the factors that can influence the cost of your salon business insurance include;
a. Number of employees
Salons with several employees can expect to pay more for insurance because their potential for claims are higher than a business with fewer, or no, employees. Each additional employee increases exposure to accidents and other mishaps that may result in a claim.
If a business has employees, it needs to carry workers compensation coverage. This is required by law in almost every state, and it adds to the cost of insuring your business.
b. Coverage needs
The amount of coverage you select has an impact on your premium. For example, a small business policy with a $1 million/$2 million aggregate, will generally cost more than a policy with a $1 million/$1 million aggregate.