Many fitness studio owners find insurance coverage to be a mystery, and when it comes to property insurance…well, that’s just another layer of confusion.
The main thing that fitness professionals need to understand is that property insurance is very different from general liability insurance. If a rock flies through a glass door at the studio, you may find you’re responsible, and you’re not covered under the general liability insurance policy.
Here’s where it gets really tricky: Many studio owners who are renting in a building think that because they don’t own the physical property they don’t need property insurance. That’s a misconception. There are many things under that roof—from fitness equipment to sound systems to televisions and computers– that need to be insured. You may even be surprised to find out that even though you’re leasing the space, you’re still responsible for the studio’s flooring, ceilings, fans, and fixtures.
Before moving in to that brand new studio space, read the lease. You may be responsible for damaged glass, signs, or the air conditioning unit.
For example, lightning strikes an HVAC unit on the building’s rooftop and it’s damaged. You call the landlord and they state that you—the fitness studio owner—are responsible for replacing the HVAC per the terms of the lease. If you only have personal property coverage for equipment, the claim could be denied. In reality, the studio owner needs coverage for personal property, tenant improvement, and a small amount of building coverage.
Another situation that is frequently misunderstood has to do with the value of the property insurance, as there is a difference between replacement cost and actual cash value as equipment depreciates over time. Often, you are insuring equipment for more money than it’s worth. Here’s why: If your treadmill is damaged and can’t be repaired, do you want a new one or just what the old one is worth? It is the difference between insuring for replacement value vs. cash value.
There is also the issue of business income insurance, which is really important to a small business owner as it provides coverage for lost income during a period when the studio is not accessible. For example, that lightning strike didn’t just take out the HVAC, but caused an electrical fire which resulted in smoke and water damage. You’re not in business when the restoration is going on, so how will you pay bills, staff, and yourself? A three month business income plan could cover the costs.
With that in mind, it’s also important to realize that if the damage were related to a flood—defined as rising water (but not a pipe break, for example), it requires separate coverage.
It’s a confusing insurance labyrinth, yes. But SFIC is here to help you navigate through the maze—and daze—of property insurance. We recommend asking a lot of questions before signing that lease, and even allocating money in your original business plan toward property insurance. And, please, call us — we tackle the job of solving the insurance puzzle for you so that you can get back to your business!
Recently SFIC, in partnership with the Association of Fitness Studios (click here to visit their site in a new window), presented a two-part webinar that outlined insurance requirements for fitness studio owners to help them understand exactly what they need.