Q: What is the difference between an Occurrence and a Claims Made policy?
A: There is a big difference between how these policies respond to liability claims.
Occurrence policies protect you from any covered incident occurring at your business while the policy is in force, regardless of when it is reported, as long as the claim is reported in a reasonable amount of time.
As the name indicates, a Claims Made policy covers any covered claims made or reported during the period in which the policy is in force. This means there is a risk of an unknown or unreported claim not being covered because the claim was made outside the coverage period. To continue coverage after the coverage period ends, you must purchase “Tail Coverage.” Tail coverage extends the claims reporting period after the policy ends. It is highly recommended that you purchase Tail Coverage because many times, an insured is unaware for months after their policy ends that they will need to make a claim.
If you expect a liability claim, whether you are on an Occurrence policy or Claims Made policy, you should submit the claim to your carrier. This way the carrier can promptly investigate the facts and be ready to best help you in the event it does turn into something bigger than expected.
Q: What is Professional Liability?
A: Professional Liability (also known as Errors & Omissions) is a form of liability insurance. It is designed to protect against a negligence claim made by a salon guest and damages that could be awarded in a lawsuit. Professional Liability takes on different forms and names depending on the type of business. The medical profession refers to it as malpractice insurance; a lawyer’s insurance may be called errors and omissions, and the beauty industry refers to it as Professional Liability.
As it relates to indoor tanning facilities, Professional Liability is coverage which protects you against accidents or negligent acts that might arise from use of your UV equipment. In addition to UV exposure, Professional Liability can also provide coverage for other professional services you may offer such as airbrush tans, beauty and esthetician services, and massage therapy. Insurance companies do look at UV exposure differently; some might exclude the UV exposure altogether. Others might cover UV exposure but have limitation on certain important coverage like allegations of resulting cancer. It is very important to pick a carrier that knows and understands the tanning business.
Q: What happens if I get out of the tanning industry?
A: With all of the excitement and stress surrounding indoor tanning, your salon insurance policy might not always be a priority to you – but it should be. Besides reviewing coverage and limits, it is also important to know what happens if you need to cancel your policy mid-term. If your agent is unsure of the carriers’ cancellation provisions, have them check with the carrier, as every company handles mid-term cancellations differently. You need to be aware of whether the insurance company has minimum earned premium, if there are cancellation clauses, and whether your policy will be cancelled pro-rate or short-rate. A minimum earned premium means that you are responsible for that premium even if you cancel before the earned premium threshold has been met. If you cancel your policy to move to another insurance company you might have a short-rate penalty, therefore it might not be cost effective to move your insurance until renewal time. If you sell your salon, then you might get the pro-rated premium returned back to you, which means there would not be a penalty unless you are with a company that has minimum earned premiums.
As it relates to tanning salons, there has been a lot of change in insurance, so make sure you are with an agent who can walk you through your policy and coverage.
Jenny is Vice President of Universal Insurance Programs, based in Phoenix, AZ. She works with new and existing salon owners to determine and provide insurance coverage for their unique business models. Contact Jenny with any questions regarding your insurance at 800.844.2101 x1480 or email firstname.lastname@example.org.
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