Insurance For Carwash Businesses
By Melissa Pirkey
The global carwash service market size was estimated at USD 34.19 billion in 2019 and reached USD 35.34 billion in 2020 and is only continuing to grow. The global carwash service market is expected to grow at a compound annual growth rate of 3.2 per cent from 2019 to 2025 to reach USD 41.0 billion by 2025.
That being said, it is important if you’re a carwash owner today in this market to ensure that you have the proper coverages in place on carwash businesses to protect your equipment, building, employees and customers to keep you profitable and growing. The cost of a new carwash to be built from the ground up can range anywhere from $2.5-4.5 million. With statistics reflecting that two-thirds of new businesses close their doors within the first two years and only 50 per cent of the rest survive the first five years, the prospect of becoming a small business owner may sound unappealing. In addition, there are a myriad of expenses to consider, not the least of which is what type of insurance is needed to get started.
The purpose of insurance is to transfer a risk that is too great to pay from cash reserves (building fire, theft, lawsuit, injured employee, etc.) in exchange for a predetermined premium. For example, after building a new wash, it may be safe to assume that you and your investors may not have sufficient capital readily available to rebuild that wash in the event of a disaster. So, an investor purchases an insurance policy whereby you transfer the financial risk of loss in exchange for a premium paid for a select period of time. This is where having an agent/agency who specializes in carwash insurance is extremely important as no two carwash locations are alike. There are many small variances and nuances in each location, resulting in different coverage needs.
Commercial insurance is one way of ensuring that you’re in control of your future rather than being controlled by it. Commercial insurance for your carwash operations can provide protection against common risks if you carry the right types of business insurance for your specific and unique operations.
Unfortunately, insuring your carwash or auto detailer operations is not as simple as insuring your car or home. Because carwash and auto detailer operations are all so unique, it is important to design a package of insurance that meets your business needs and provides the level of risk transfer that you’re comfortable with and can afford. The more risk you transfer to the insurance carrier, the higher your premiums will be. For example: A lower deductible puts the insurance company at more risk and thus would generate a higher premium.
As you start out your carwash operation, know that there are several types of business insurance that all operations need.
Who needs builder’s risk coverage? Any person or company with a financial interest in the construction project needs builder’s risk insurance. Some common people you may want to include on your policy as insureds include the:
· Property owner
· General contractor
· Subcontractors
· Lender
What types of property does builder’s risk insurance cover? A basic builder’s risk insurance policy helps cover buildings and structures under construction. It also helps protect:
· Materials
· Supplies
· Equipment on site, in transit or at other locations
Property insurance: Property insurance protects the assets your business owns, including the building and equipment, from vandalism, fire, destruction or damage.
Building/structure: All structures should be accounted for and valued for what it would cost to replace. This would include wash buildings, vacuum bays, payment kiosks and storage buildings.
Business personal property: Also known as “contents insurance,” this protects your business inventory and equipment. Think of it this way: If you turned your operation upside down and shook it, most everything that fell out would be considered business personal property.
To determine how much property or contents insurance you’ll need, create an itemized list of your business assets and their individual dollar values. Remember, at the time of loss, you will be required to provide a detailed inventory of all items lost/damaged. The total dollar amount of insurance required will be listed as your limit of insurance.
General liability insurance
General liability insurance protects your business from liability lawsuits arising from negligence that may cause injury to others, such as a customer. It also protects your company if someone is injured because of using your product or service or while on your premises.
In addition to general liability coverage, if your wash takes “care, custody or control” of your customer’s vehicle, you will also need to obtain garage keepers liability coverage. This coverage provides liability protection while you have “care, custody or control” of your customer’s vehicle and provides coverage for physical damage to the vehicle.
Here are several examples of how your wash may take care, custody, or control of a customer’s vehicle:
The customer exits the vehicle and waits within a designated area until the wash is completed (your wash would be assuming temporary custody of the vehicle.) From the moment the customer exits the vehicle and until he or she gets back into the vehicle, the garage keepers liability form would be providing liability as well as physical damage protection for the customer’s vehicle.
The customer pulls into your tunnel and is told to take his or her hands off the wheel and put the vehicle in neutral (your wash would be assuming control of the vehicle). From the moment the customer relinquishes control of the vehicle and until he or she shifts back into drive and resumes control, the garage keepers liability form would be providing liability and physical damage protection for that vehicle.
Workers’ compensation
Workers’ compensation protects your business and employees by providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue your business for the tort of negligence.
Every state has very specific requirements regarding whether an operation is required to carry coverage. For example, in the state of Missouri, you are required to carry workers’ compensation insurance if you have five or more employees.
Even if your state does not require that you carry coverage if an employee is injured on the job, you would most likely be held liable for their lost wages and medical benefits. For the relatively low cost of this coverage, it is recommended to obtain coverage even if not mandated by your state.
Business interruption insurance
Business interruption insurance helps protect your wash against the income that is lost due to a covered property loss while it is shut down for repairs. Covered losses may include theft, fire, wind, ice, falling objects and lightning. Read your policy to make sure you know which types of loss your policy may cover.
Let us say a fire damages your wash. The fire leaves the building unfit to do business in, and it destroys most of your equipment. Business interruption coverage may help reimburse you in two ways:
- · For the loss of income during the period, your wash is shut down for repairs. Your pre-loss earnings are the basis for reimbursement under business interruption coverage. Lost earnings are typically defined as revenues minus ongoing expenses.
- · For extra expenses, if it is necessary to expedite the manufacturing of replacement equipment or special shipping arrangements must be made. This coverage may help pay any additional expenses incurred.
Employee benefits: Your people are the crucial system underpinning your organization’s ability to grow and thrive. So how crucial are employee benefits to achieving your company’s goals & objectives? They are extremely important.
What are employee benefits?
We often get asked – what are employee benefits? Employee benefits, also known as perks or fringe benefits, are provided to employees over and above salaries and wages. These employee benefit packages may include overtime, medical insurance, vacation, profit sharing and retirement benefits, to name just a few.
Choosing an agent: Equal to the importance of choosing the correct coverage is the task of choosing the correct insurance agent. Thanks to the many advances in technology, it is no longer inevitable that you choose the agent that is located closest to your wash.
When you start your search for an agent, you’ll have a couple of different types to choose from. You can pick an independent agent or a captive (sometimes called direct) agent. An independent agent will have contracts with many different insurance companies. A captive agent writes exclusively with one company. It is generally to your advantage for your agent to be able to solicit coverage for your operations from multiple sources. At Assured Partners, we are the sixth-largest property and casualty independent broker firm in the U.S. with access to multiple markets, and an entire agency and staff trained and educated on the specifics of carwash operations to assemble a robust policy with coverage offerings to fit your unique business needs.
Our team of specialists manage the national carwash program, which offers significant savings on the cost of insurance for our carwash industry clients. We partner with industry specialists, carwash associations, and educate carwash owners about the basics of carwash insurance on a national level.
The extra time it takes to locate an agent who is well-versed in the carwash industry and has obtained additional training designations, will help ensure that your operation has the exact coverage needed to protect not only your customers and employees,but also your investment and financial obligations.
Melissa Pirkey is the vice president of carwash vertical at Assured Partners, located out of the Dallas, TX office. Since Melissa first entered the insurance industry, she wanted to make a difference and not only help clients get the best coverage for their money but also change the carwash and auto detailer/auto dealer insurance industry for the better. Melissa resonates with carwash businesses in general as she comes from a family of carwash owners and auto dealer owners. Melissa saw firsthand the struggles carwash owners and auto dealers experienced on a day-to-day basis in relation to management, claims, insurance, and more. Melissa has years of experience in the insurance industry and has invested her time in completing Sonny’s Car Wash College courses to add value to her insurance clients in the way of risk mitigation, equipment safety, equipment valuations and site management. Melissa is responsible for creating and implementing a very successful National Car Wash Insurance Program for reduced rates and better coverage for clients. Melissa can be reached at 214-998-8960 or melissa.pirkey@assuredpartners.com
