Correctly insuring your family fun center is one of the most important issues you should address to protect yourself. We will review a few simple issues to address.
- The most important step is to work with an insurance broker that is experienced in providing insurance to family fun centers. You do not need a rookie or a friendly mistake on this issue.
- There are several coverage’s that should be included in your insurance portfolio, some are required by your lease, and other coverage’s should be included over and above what the lease requires.
- The coverage’s that should be included are:
- General Liability This provides defense coverage for negligence by you, your officers, employees and volunteers for bodily injury or property damage. Limits are usually $1,000,000 per occurrence / $2,000,000 aggregate. Deductibles range from $0-10,000 and you should keep your deductible in line with your cash flow and what you could afford to pay in case of a claim. We recommend no more than $2500.
- Abuse and Molestation This coverage is usually excluded on most general liability policies and is probably one of the most important coverage’s for anyone working with children. Defense costs if you or one of your employees touches a child incorrectly could START at $30,000 and go as high as $500,000. We recommend a minimum limit of $1,000,000
- Umbrella Coverage This coverage increases your limit over the base limit of $1,000,000 of your General Liability, Commercial Auto, and Workers Compensation coverage’s. Some leases require higher limits than the normal $1,000,000 or your assets are more than $1,000,000 and/or you are interested in protecting them with this coverage. Limits available from $1,000,000 to $25,000,000. We recommend at least $2,000,000.
- Property Coverage This coverage provides insurance for everything inside the building if you are leasing, including your tenant improvements. This would also cover the building if you own it. There is always a coinsurance clause which means you need to insure to the replacement cost limits to protect yourself. Never underinsure!!
- Business Income with Extra Expense This is another important coverage under property coverage is Business Income with Extra Expense which is frequently overlooked. This provides coverage for a business’ indirect losses resulting from damages to the property of the business. It provides for additional expense generated because of the direct loss to the property of the business. It also provides for loss of business income beginning at the date the property of the business is returned to operating status and business operations actually start, with a limit of 30 days. Coinsurance clause applies to this coverage also
- Boiler and Machinery This is often called Equipment Breakdown, or Systems Breakdown insurance. This provides coverage for damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone, and computer systems. Your lease might require you to cover the heat/ac units.
- Non Owned/ Hired Auto This provides coverage is one of your employees use their car during business hours to go to the bank, pick up supplies etc. and have an accident. Hired car endorsement provides coverage if you lease a vehicle in the corporate name or for company use. We recommend $1,000,000 limits.
- Worker’s Compensation This is required by your state to provide protection for your employees in case of bodily injury, death, sickness while working. It provides for medical costs and lost wages. States have various minimum limits, we recommend $1,000,000.
- EPLI Employment Practices Liability Insurance is another one of the most important coverage’s to have with employees. This important coverage provide insurance covering wrongful acts arising from employment practices such as wrongful termination, discrimination and sexual harassment. All it takes is for someone to accuse you or one of your managers and you could have defense costs of a minimum $30,000. We recommend a limit of $1,000,000. There is exclusion in all general liability policies for this exposure so it is an important coverage to purchase.
Your liability insurance premiums are based off your estimated gross sales and the activities that your family fun center offers. Go karts are a higher risk then bumper boats. Some insurance companies will audit at year end and if you did more in sales you could owe more money. Make sure you are aware of where you are at 6 months and 9 months so you have no surprises. Ask your agent if you have an auditable policy. The IRS is not connected to the insurance company, do not lie about your sales and possibly jeopardize your insurance coverage.
Your property insurance premiums are based on the values, the age of the building, construction type of the building, upgrades, sprinklered or not, and alarm systems. Buildings over 30 yrs old will have a higher rate; frame construction will have a higher rate. Remember to insure to replacement cost so that the coinsurance clause does not affect your claim. Take pictures of everything in your building to show what you have and the condition. Proof is on you at the time of a claim. Get a copy of those pics to your agent to hold for you off premises. Do backups of your data and keep a copy off premises, weekly is very smart!!!
Make sure that your correct corporate name and any aliases are shown on your application and policy. If you use different business names or websites make sure that they are all listed so that you will have defense coverage’s
Work with an experienced insurance broker in your industry that represents several insurance companies that can shop your insurance for you. You should not have to call 5 agents, there are only 4 or 5 competitive insurance companies out there.
Larry Cossio is a licensed insurance broker for 31 years and specializes in the entertainment industry. He is known as a renowned speaker on insurance issues for 25 years and is licensed in all 50 states. www.cossioinsurance.com email@example.com