Beauty
This playbook is your go-to resource for understanding the coverage needs of beauty service providers — from client safety risks to protections for equipment, products, and personal care services.
The following playbook is intended to provide guidance on Merchants’ appetite and most desired risk characteristics. Your Merchants team is available to speak about the entirety of a risk that may have characteristics not exactly fitting our desirability.
We also encourage you to refer to Merchants Appetite Guide under the Resources/Tools menu of the Commercial Gateway in Merchants agent portal website for class-specific eligibility.
Description of Operations
Beauty shops cut, style, trim, color, and apply permanent wave or straightening solutions to hair. Other services may be offered, such as wig cleaning and styling, massage, nail care, tanning beds, cosmetic consulting, and electrolysis. Although salons traditionally catered to women, many salons now offer their services also to men. Services may be offered on a walk-in basis, by appointment only, or both.
Beauty shops are subject to state regulations to reduce possible spread of disease. In addition, each beautician, manicurist or other professional must be licensed. Shops may employ professionals or may rent space to them as independent contractors. The status of the various professionals must be determined since it may impact how coverages apply.
Merchants Appetite
The following risk characteristics are intended to provide guidance on Merchants’ appetite. Your Merchants team is available to speak about the entirety of a risk that may have characteristics not exactly fitting our desirability. Refer to Merchants Appetite Guide under the Resources/Tools menu of the Commercial Gateway on merchantsgroup.com for class-specific eligibility.
Desirable Risks
- In business and under current ownership / management for 3 years or more
- Year-round operations
Ineligible
- Sales of directly imported goods
Exposures
Understand the key risks service providers face — and how each business type’s exposures can impact insurance coverage, potential claims, and safe daily operations.
Automobile Exposure
Automobile exposure is generally limited to hired and non-owned liability.
Crime Exposure
Crime exposures are generally limited to theft of money by employees and others if large amounts of cash are on hand.
Inland Marine Exposure
Inland marine exposures are from valuable papers and records for customers and suppliers. If employees provide their own tools, there may be an employees tools and equipment exposure. If the professional goes to the client’s premises to perform services, there may be goods off premises or in transit. There may be a bailees exposure with wigs or other hairpieces, or from storage of customers’ goods at all-day events offered by some high-end salons.
Premises Liability Exposure
Premises liability exposure is moderate due to public access to the premises. Aisles must be adequate and free of hair clippings and debris with flooring in good condition, no frayed or worn spots on carpet and no cracks or holes in flooring. The number of exits must be sufficient, and be well marked, with backup lighting in case of power failure. Injuries to professionals who are independent contractors are part of the premises liability exposure instead of workers compensation. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. Security of visitors in parking areas is often deemed the responsibility of the owner or operator of the premises. Factors affecting the risks include exterior lighting, fencing, and any other security measures in place.
Professional Liability Exposure
Professional liability exposure depends on the services offered. The stylists’ training, experience and background are important considerations. Simple wash and cut operations have incidental exposures while salons that offer other types of services will have higher exposure. Because of the large number of customers served, a significant, although easily avoided risk, is the transmission of diseases and vermin such as lice. The absence of simple hygienic practices like hand washing and disinfecting solutions for combs and brushes may indicate a morale hazard. Permanent wave solutions, hair straightening chemicals, and dyes can cause considerable hair and scalp damage. Hazards may increase in the absence of procedures to test for allergies and skin reactions.
Property Exposure
Property exposure consists of a small office and the customer service area. Ignition sources include electrical equipment, heating and air conditioning. Fires may result from poor wiring, overheating, and poor maintenance. Age and condition of the equipment is important. Housekeeping has a significant impact, since hair trimmings are flammable. While most of the chemicals used in the personal applications are not flammable, some may contain alcohol. Ownership of personal property may need to be addressed. Professional equipment such as scissors and electric clippers is quite costly, and is commonly owned by the particular employee or independent contractor.
Workers Compensation Exposure
Workers compensation exposure is generally limited to minor cuts and scratches from scissors, burns from chemicals, and repetitive motion injuries. Leg and back injuries may result from standing long hours without resting. Losses also can come from eye and skin irritants resulting from the chemicals. Shops with more than one chair might qualify as multiple sole proprietorships, rather than businesses with employees. The contractual relationship helps determine the workers compensation exposure, although regulatory definitions of employee may supersede the contract terms.
Risk-Smart Beauty Service Businesses
Click each photo to see what makes it best-in-class — and how these features help minimize risk and reduce exposures in service-based environments.
Red Flags in the Field
Click each photo to learn what’s not-so-great — and how these conditions can increase risk, raise exposures, or lead to costly claims in service businesses.
Automatic Coverages
These built-in coverages come standard with our retail and service business policies, offering added protection for income, equipment, property, and more — all at no additional cost.
Accounts Receivable
Coverage for accounts receivable is provided at a limit of $25,000 on premises and $10,000 off premises. The on premises limit may be increased. This coverage is subject to the property deductible in the policy. This coverage protects against loss resulting from an inability to collect accounts receivable due to loss, damage, or destruction of books or records of accounts. The on premises limit may be increased.
Additional Insured by Contract, Agreement or Permit
Provides coverage to any person or organization when the named insured has agreed in a contract or agreement to name that person or organization as an insured on their policy. Automatically included on a blanket basis. Various other optional additional insured endorsements are available on a scheduled or blanket basis.
Annual Aggregate Limit Per Location
This policy conditions amends the General Aggregate Limit to apply separately to each location owned by or rented to the insured.
Damage to Premises Rented to You (Fire Legal Liability)
Business Liability coverage for damage because of property damage to a premises while rented to the insured or temporarily occupied by the insured with permission of the owner is provided at a limit of $300,000 unless a higher limit of insurance is shown in the policy declarations.
Debris Removal
Coverage applies for expense to remove debris of covered property and other debris that is on the described premises, when such debris is caused by or results from a covered cause of loss that occurs during the policy period. The expenses are only paid if they are reported within 180 days of the loss or damage. The coverage limit is 25% of the direct physical loss plus $25,000.
Employee Dishonesty
Coverage is included for loss or damage to Business Personal Property and Money and Securities resulting from dishonest acts committed by any of the insured’s employee. Coverage limit is $25,000 subject to a $250 deductible. Higher limits may be purchased.
Forgery or Alteration
$10,000 Provides coverage when someone other than the employee or owner forges a signature on a check or other monetary instrument in order to obtain money that belongs to the insured. Forgery by an employee is covered in the Employee Dishonesty coverage. Higher limits are available.
Identity Recovery
In the event of a covered identify theft, coverage for case management service and expense reimbursement up to an annual aggregate limit of $15,000 is provided. The identity theft must involve a insured under the policy, must be first discovered during the policy period and must be reported within 60 days after it is first discovered.
Lock & Key Replacement
Coverage applies for the cost to repair or replace locks or keys at the described premises due to theft of keys from your premises. The limit for this coverage is $500 subject to a per occurrence deductible of $50.A limit of $500 applies to customers keys.
Money & Securities
Coverage for money, securities and credit card slips is included at a limit of $25,000 inside the premises and $5,000 outside the premises subject to a $250 deductible. Higher limits may be purchased. The loss of money and securities must result directly from theft, disappearance or destruction. Additional limits for inside the premises coverage are available.
Newly Acquired or Constructed Property
If the policy covers a building, that coverage can be extended to apply to new buildings while being built on the described premises and buildings the insured acquires at a premises other than the described premises that are intended for a similar use as the building described in the policy or to be used as a warehouse. If the policy covers business personal property that coverage may be extended to such property the insured acquires at any location acquired or at a newly constructed building. This extension does not apply to personal property temporarily acquired in the course of installing or performing work on such property. Limit provided is $500,000 for building and $250,000 for business personal property.
Pollutant Clean Up and Removal
Coverage is provided to pay the insured’s expense to extract pollutants from land or water at the described premises if the discharge, dispersal, seepage, migration, release or escape of the pollutants is caused by or results from a Covered Cause of Loss that occurs during the policy period. The expenses will only be paid if they are reported in writing within 180 days from the date on which the loss occurs. The most that will be paid is $25,000 for all expenses arising out of a loss occurring during each separate 12 month period of the policy.
Utility Service - Direct Damage & Time Element
Coverage is provided for loss or damage to covered property caused by the interruption of service to the described premises. The interruption of utility services must result from direct physical loss or damage by a covered cause of loss to the insured property. Utility services include water supply, communication supply and power supply. The limit for direct damage is $25,000 and $25,000 for loss of business income or extra expense. Higher limits are available.
Valuable Papers
Coverage applies to direct physical loss o damage to valuable papers and records owned by the insured or that are in the insured’s care, custody or control caused by or resulting from a covered cause of loss. This coverage includes the cost to research, replace or restore the lost information on valuable papers and records for which duplicates do not exist. The limit for this coverage is $25,000 on premises and $10,000 off premises. The on premises limit may be increased.
Voluntary Property Damage
Voluntary Property Damage coverage is provided for unintentional property damage to the property of others caused by the insured or while the property is in the insured’s possession and the damage is arising out of the operations described in the policy. The coverage limit is $5,000 per occurrence/$25,000 aggregate with a $500 per claim deductible.
Water Back-Up and Sump Overflow
Coverage is provided for direct damage or loss to covered property caused by or resulting from water which backs up through or overflows from a sump, sump pump or related equipment. The cost of repairing or replacing the sump pump or its related equipment is not covered if the loss is caused by a mechanical breakdown. Coverage does not apply if the insured fails to keep a sump pump in proper working condition or fails to perform routine maintenance or repair necessary to keep a sewer or drain free of obstructions or the sump pump failure is caused by or results from failure of power unless the policy is amended to cover power failure. A limit of $25,000 applies.
Helpful Resources
Navigate to “Merchants On-Demand” from the homepage of your Merchants agent portal website to access flyers for your reference, as well as flyers you can distribute to clients.
