Do you feel like you were meant to have a kick-ass career as a hairstylist, like you got into this industry to make big things happen? Maybe you’re struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you weren’t seeing any results. Maybe you’ve already had some amazing success, but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer. Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists. I’m Britt Siva, social media and marketing strategist just for hairstylists, and this is the Thriving Stylist Podcast.
What is up and welcome back to the Thriving Stylist Podcast. I’m your host, Britt Siva, and we’re going to talk about something that could be a little bit boring today. We’re going to talk about insurance. It’s not one of those fun, exciting marketing topics. However, sometimes I think it’s important to circle back to the basic boring stuff. I did not realize until recently how many stylists were either uninsured or underinsured. How many independent stylists didn’t even realize they needed to carry insurance? And I thought this was a good topic to walk through. I think there’s a lot of different types of insurance that salon owners and stylists don’t even realize are options. And I also think there’s some people who are way overinsured. And so I just wanted to take a moment to talk about business insurance primarily for salon owners and independent stylists. Now, if you’re an employee stylist, you can still listen to this.
It’ll give you a great appreciation for one of the expenses you don’t have to take on as an employee, and we’ll give you some insights to maybe some types of insurance that could be beneficial to you depending on where you work and how you’re covered and all of the things. This is one of those episodes I think people won’t care about until they need it. And if you are a independent stylist working in a studio suite or you’re booth renting or you are a salon owner, listen up because you might learn some things. In the research I did for this episode, I found that 77% of US small businesses are underinsured. I think that would be because of lack of information. I don’t think it’s because of lack of interest or care. I would say most booth renters and salon owners have some kind of insurance, but aren’t even sure that it’s covered.
For example, if you have just a general liability policy, which is kind of like the go-to, that may not cover you if a client is injured on property and you might need an additional rider to get that taken care of or a secondary form of insurance overall. When we look at the data on insurance claims that stylists and salon owners are making every single year, which by the way, they are, it most often comes back to client injuries during a service and/or property damage. So slip and fall type of injuries, chemical reactions, burns from hot tools, or a piece of equipment is damaged beyond repair and making an insurance claim makes sense, which we’ll talk about later in this episode, when it makes sense to file a claim, when it doesn’t make any sense to file a claim, we’ll go through that too. For salon owners specifically, property damage to the salon is a big one.
Imagine somebody breaks into the place and shatters windows or maybe there’s a flood, something like that. Property damage can happen for a number of different reasons. Employee liability issues, I’ll give you some examples of things like that. And then contract and compliance gaps. And that is a huge piece of insurance that I think gets missed is that it’s not all about injury or a shattered window. There are other reasons that you would want to be insured that it’s worth talking through. So let’s talk about the most common types of insurance first, and then we’ll get into the more interesting, more detailed, kind of weirder stuff even. So general liability insurance is kind of like the baseline. It’s what most people get when they insure themselves. They at least get GL or general liability, and that takes care of accidents in the salon. So a slip and fall, there’s a puddle of water on the floor, a client takes a bad step, slips, breaks an arm, something like that happens.
Your general liability policy more than likely would cover you. Now, if you’re a salon owner, what you might’ve done instead of getting general liability is getting a business owner’s policy, and usually that’s a blanket type of policy that would include general liability to some degree. And then it would also include commercial property insurance, sometimes business income insurance, which we’ll cover later. It’s like a bundle of different policies. That can be great. One of the things to look at if you do have a business owner’s policy like a bundle like this is to actually do a deep dive into the coverages. At surface level when you hear like, “Oh great, it covers commercial property, general liability and business income.” That sounds wonderful, but when you get into the details and the nuance, which we’re going to give some examples of later, you might find that you don’t have as much protection as you need.
So if you’re in one of these bundled policies, it’s definitely worth looking into exactly what that’s going to cover for you. So another type of insurance we just briefly mentioned was commercial property insurance. So that’s something that’s commonly included in that building owner’s policy bundle. If you are a booth renter, it’s not something that you would likely need. It’s going to cover things that come with your build out, your furniture, your equipment, things like that. It’s a pretty standard coverage if you are a salon owner. Now let’s get into the more nuanced options. General liability insurance, the type that we talked about first, like I said, that’s the one that’s most commonly what I see around the industry. Most booth renters who are insured have that. Most salon owners have that. Often when you sign your lease to get your space, your landlord won’t even let you walk into the building until you have it.
So when we’re doing an insurance check, that general liability is almost always there. If somebody’s insured, they’ve got it. The second most critical piece of insurance for a stylist or salon owner would be professional liability insurance. So that’s often also called errors and emissions insurance covers what’s considered to be malpractice. So things like chemical burns from color or something else, bleach could be anything, or you cut somebody with your shears or you burn them with an iron, you’ll need to check the details of your general liability policy. Often that is not covered and you would need professional liability insurance instead. A slip and fall is one thing, right? Somebody being cut with your shears is something completely different and you might need a secondary coverage to get that taken care of. So professional liability insurance, if you were to talk to an insurance broker, that is something they would almost always suggest for a stylist or salon owner because of the type of work we’re engaging with.
When we went to school, we learned the danger of the chemicals we use. Obviously we’re using sharp shears, hot tools that go 450 degrees. Our odds of at some point potentially injuring somebody are relatively high, and so a policy like that would help to get you covered. Then we have workers’ compensation. If you are an employee-based salon owner and you have employees, workers’ comp is going to be something you’ll have to have. Employee-based injuries and lost wages. There was a stylist at our salon who was plugging her, I can’t remember now if it was a blow dryer or a curling iron. She was plugging it into the socket and there was an electrical spark and she shocked herself. She got a little bit of an electrical shock to her arm. She ended up going to the hospital for it. She was totally fine, but that would be something that workers’ comp would cover because she was injured on the job doing a normal function of her job.
It wasn’t a slip and fall injury, but there was some kind of electrical malfunction at her station and she was injured. I can’t remember now if she was out of work or things like that, but potentially there would be a pretty significant claim. That is something that workers’ compensation would get taken care of. So as an owner, that’s something you would definitely want to have on deck. You could imagine if you didn’t have that kind of coverage for some reason and you’re taking on employees’ medical bills because of an injury on your property, that would add up pretty quick. Now there’s two types of product-based insurance that I don’t hear talked about very much. We have the product and completed operations coverage. So that would be allergies to styling products that are used in the salon, chemical products used in the salon. So maybe somebody wasn’t burned by the bleach, but they had a delayed reaction.
You might need the products and completed operations coverage depending on what your other coverages look like. And this is where reading the details of your policy really makes a huge impact and/or working with a broker who can work you through all of these things. Now with that, there is a secondary line of coverage for retail product liability. If you are selling product and something happens to the client you sell it to, an allergic reaction or something else, I don’t even know what it would be, your products and completed operations coverage would not cover that and your professional liability coverage would not cover that. So if you wanted to have coverage for the retail that you carry, that is a completely separate line of coverage that you would need added onto an additional policy. Now, there’s also a funky policy called the Inland Marine Policy, which would protect tools that can go offsite.
So imagine that you are a bridal stylist and you’re bringing hot tools on site to an additional location because you’re styling for the bridal party somewhere that’s not in your salon space. Your insurance might not cover with you. Often the insurance that you get for general liability and professional liability is attached to the salon, like the space itself that you are saying that you work in primarily. When you go offsite, it doesn’t mean that all of your insurance travels with you. So this Inland Marine policy, I know it’s a funny name, is an insurance that if you are somebody who works quite a bit offsite could protect you. If you are somebody who teaches classes in salons that are not your salon, anything that you do professionally that isn’t happening within your own space, a policy like that might be smart for you. Then we have a cyber liability policy.
This is really interesting. So something I’ve talked about really openly is the risk of storing client credit cards. In the last few years, it became very trendy and it was attached to being able to do cancellation policies or penalties for certain things. You’re running the risk of a cyber attack now because you’re storing personal client information. Now, every system of policy is different. I’ve seen some systems where it’s encrypted. In our credit card processing system, we can’t see anybody’s credit card information. It’s completely encrypted. So the companies that we partner with are taking on that risk. If you are able to see the credit card information of your clients or the personal information of your clients, having a cyber liability policy might make sense for you. Again, I’m not a broker, I’m not an expert here, but I think it’s worth looking into, especially depending on the type of information you store about your clients and how confidential or secure it would need to be.
That could be pretty risky. If somebody said that you were the cause of fraud or a leak, you wouldn’t want to end up liable for that. So a policy could protect you in that as well. Then we have a tools and equipment policy. This is another add-on. So when you look at the details here, these are additional levels of coverage for things like styling and salon tools. So think hair dryers, facial steamers, even potentially your hydraulic salon chairs. Some of those things, a lot of those things would not be covered, potentially even a commercial property policy and certainly not under your general liability. So if you wanted your tools and equipment covered, that would be separate. Building systems often fall into that same tools and equipment category. So heating, ventilation, HVAC, water heaters, electrical panels, a lot of those things would be additional coverage because to replace them is expensive.
So a lot of the broader range coverages don’t get into these detailed things, computers, business electronics, POS systems, things like that. This would be an additional rider that you would need to carry if you wanted those things covered by insurance. Now, a lot of salons don’t, and probably for a good reason, these policies, this additional rider, so this would go on top of your general liability, your professional liability policies, 500 to $700 a year just to get these things covered. And when you look at the deductible or how many years you might be paying this before you actually cash in on it, a lot of people look at it and think, “Well, I’m going to pay it off. By the time I’m making a claim on it, it doesn’t financially make sense.” So it is quite a bit more expensive because if you are making an insurance claim asking for a new water heater, I mean that could be thousands of dollars, so the cost for coverage is high.
The reason I even bring it up, I’m not bringing it up because I think every salon owner should get it. The reason I bring it up is it’s probably a gap for a lot of you in coverage. And so when and if you do need to replace your HVAC unit, it is going to cost thousands of dollars, which is why we talk about budgeting for savings and emergency funds because often our basic coverages are not going to cover things like that. So let’s get into the more nuanced things. We haven’t even gotten super nuanced yet. So in a lot of areas, it can be recommended to get sewer drain or flooding endorsements. When you look at a lot of the policies that talk about damage to salons, break-in damage versus flooding damage, a lot of salon owners unfortunately find out the hard way that their insurance is not going to cover them for flood damage.
And the nuances to what is covered under sewer drain flooding endorsements is really, really specific. So for example, I was looking at the fine print of some of these policies, and if a pipe were to burst or a water heater were to just flood your entire space, your business policy, your standard business policy that we talked about right at the beginning might cover that, maybe. I can’t promise anything, but maybe. However, if there was, let’s say, a slow leak and you didn’t know it was happening, but all of a sudden you found mold everywhere and some kind of faulty whatever, more than likely your general business policy is not going to cover that because it’s this nuanced caveat that the insurance wouldn’t choose to execute on. And that’s why it’s really important to understand what is covered and what is not and consider the situations that are more likely in your area.
Some areas are prone to flooding, some are not. FEMA has a national flood insurance program. I am certain it’s not inexpensive, but for some it might make sense and it’s worth looking into. Then we have business income insurance or business interruption insurance. That can replace lost net revenue and help to support you in paying your bills like rent and payroll and basic utilities if your salon were to have to have some kind of temporary closure. So if you’re a booth renter, probably not something you need. I have something else for you, but think about how would you afford to pay your people or continue paying rent if there was damage to your space? That insurance is also not cheap, but sometimes it can be really beneficial. Often that’s offered as an add-on to a business owner’s policy. And oftentimes when bundled in, it can be a little bit affordable.
It’s worth asking about the business income insurance. Now, if you’re a booth renter, something you might want to consider is short-term disability insurance. So we talked about this on a recent podcast episode. I was talking about maternity leaves and leaves of absences and talking about how many stylists don’t understand short-term disability and how beneficial it can be. We’re in the state of California, or I live in the state of California, I should say. And here in California, if you’re an employee, you can get paid short-term disability insurance if you are an employee. It’s in a fund you’ve been paying into forever and we’re a state that would allow you to cash in against that and supplement your income if you were to take a covered leave of absence. In a lot of states, that’s not even an option. In many states, what you can do is pick up short-term disability insurance and choose to insure yourself.
If you were to just Google search short-term disability insurance, you’ll find a handful of different insurance companies that allow you to pay an annual or a monthly premium so that if you do injure yourself on the job or have another covered cause for why you’re not going to be able to work for a period of time, they could supplement the income that you would’ve made so you’re not in such a financial bind. I think short-term disability is one of the more underused insurance options, and it’s one of those things that you don’t need it until you desperately need it and it’s at least worth looking into and getting a quote on because imagine being out of work for 12 weeks, what would you do? If there was some kind of supplemental compensation, it’s certainly at least worth looking into. Then we have umbrella policies. Umbrella policies, think of it as an actual umbrella, something you carry out in the rain.
It is an additional layer of coverage overarching most of your other insurances and it creates an additional barrier, kind of like, listen, if all the other insurances you have don’t cover you, this will help close the gap. Again, it’s generally speaking not cheap. It’s not like a budget option, but sometimes when you have a lot on the line in your business, it can be worth looking into. So umbrella policies can be really great as well. Some things to keep in mind, sometimes you need to have a additional insured noted on your policy. If you’re in a studio suite, almost always it’s required and something that people could miss until you are having trouble and you’re in a bind and now you’re really in a bind. If you’re a booth renter, you should check with your salon owners, see if they want you to have one.
Often if you are leasing a salon space from a landlord, they will ask to be listed as the additional insured. So that’s something you need to look at, your leash should detail, things like that. It’s something that you would want to check in with. If you are a salon owner, ask somebody who could offer you good legal advice if that’s something that you should be requiring your booth renters to include on their insurance policies or if it doesn’t make sense for you. So let’s talk about filing claims for a minute. If you have ever filed an insurance claim, let’s say for homeowner’s insurance or car insurance, the thing that gets you every time is that darn deductible. And you’ll find with business insurance, often the deductible is quite high and you’ll go to make a claim and your deductible will be like $2,500. Sometimes it’s more like 500 or 1,000 and it may make sense.
Sometimes it’s like you have damage of $3,000 and your deductible against the insurance is 2,500 before the insurance kicks in. At that point, you’re like, “Man, is it worth going through all the trouble and filing all the paperwork and making the claim and potentially my rates going up?” When you’re thinking about making a claim and you’re looking at all these coverages, looking at that deductible is really important because it helps to define if a claim really is even necessary or appropriate. And a lot of these even insurance carriers and insurance houses are saying, “We get a lot of stylists and salons who go to make a claim and it doesn’t even make financial sense because of the average claim amount, which is right around $2,800 and kind of in that funky spot where it really doesn’t make sense to go through with the claim. It just makes more sense to pay in cash.” That being said, you want to have the coverage in case it is a claim that’s 15,000, 30,000, $300,000 to know that you’re covered in those instances.
So let’s look at a scenario where things get really tricky and talk through how all of these insurances might kick in. So let’s say your shares are stolen or maybe a team member’s shares are stolen. They’ve gone missing and you’ve decided somebody stole them. I don’t know if somebody came to the salon for a class and stole them. I don’t know if a client stole them, who knows, but the shears have been stolen. So if you’re the owner and it was your shears that were stolen, you could potentially file a claim under commercial property insurance. Commercial property insurance was one of the insurances that’s often under a more general business owner’s policy, one of those bundle policies, but not always. More than likely it’s that insurance that would kick in and cover for it, but not necessarily because there’s all these caveats. So first things first, the nature of the theft has to be a covered cause.
So do you know who took it and you can’t get it back? Was it potentially a team member who took it? All of those nuanced things play into, is this going to be covered or is it not? If potentially an employee took them, that would fall into a bucket we didn’t even talk about, which is employee dishonesty coverage. Yes, that is a totally different type of insurance that you could get. So you can see how complicated this can get. Trust me when I say I did not go into every single insurance coverage that exists for businesses. We could go on and on and on, but that’s the nuance where you would think, well, a team member stole them. Obviously that’s covered. Well, not necessarily because it falls into this funny loophole. Now, the other thing is where were the shears stolen from? Did somebody break into your car and steal them?
Were you doing a haircut at a client’s house? Were you doing a haircut for somebody who was getting married that day and you were at an offsite? If it didn’t happen on property in your salon, then most of your insurances wouldn’t cover it. You would have to have that inland marine coverage or maybe a tools and equipment policy depending on the nuances of those policies. Now here’s another one. Let’s say the shears weren’t yours. You’re the owner, but the shears that were stolen weren’t yours, they were a team members. Well, now that falls into a different loophole of personal property of others’ provisions. So again, depending on your coverage, that might not be covered, which is often why booth renters are asked to carry their own coverage because just because you’re working in a building, it does not mean that their coverages cover every single person in the room.
It’s very complicated. Now, the other trick is once you’ve looked at deductible and you’ve looked at replacement cost, often with insurance, they will pay out replacement costs based on the current value of what the tool is worth today, not what it was worth when it was brand new. And most of us, if we’re looking to replace our shears, are just going to buy a new pair. We’re not going to buy the used shears from somewhere else if that’s the situation that we’re in. And these are all of the things to consider. So the reason I share all of this is because I probably shared a dozen different types of insurance that you could get. It doesn’t mean you should get all 12. My call to action for you is that you should go through the policies you have and make sure that you have at least the core few that are going to give you the biggest shot at protection.
So the ones that I would suggest strongly looking into, if you are a booth renter or a salon owner, general liability insurance is not optional. You have to have it. I would say the professional liability insurance is something that most everybody should strongly consider. It gives you at least a good baseline coverage. Again, if you are a salon owner, check with your leaseholder or even your mortgage company if you have a mortgage you own your building and see what insurances you are required to carry because sometimes there are requirements and you do not want to show up underinsured. So always check what your legal requirements are and then think about the parts and pieces of your business, the logistics and what makes sense, what are your biggest risk areas, and what do you feel like having a bit of a safety net around would be a good idea for?
The other thing I want to mention is when you look at making a claim with most of these companies, I was kind of looking into like, okay, let’s say we’re going to make a claim, what would happen? Man, a lot of them say you have to have made a police report within 24 hours. You have to have receipts. You have to have photos of the items, serial numbers sometimes. There is a certain window that you have to report it to the insurance. It’s a lot, and so you want to make sure that you’re organized, you’re documenting. Often we say things like, “Well, I don’t want to file the police report. It’s a waste of time.” Maybe it is a waste of time or maybe it feels like overkill, but if you think at some point you might need to make an insurance claim, it might be legally required.
So your homework is to take a look at what insurances you have, what is included in the fine printing details, do you have enough coverage? You don’t need to have all the things, but do you have an appropriate amount so that at least your baseline is covered, and then it’s worth exploring what other things make sense and are a good idea for you. Okay. So much love. Happy business building, and I’ll see you on the next one.
