Policy Info & Resources


Aggregate

The aggregate limit of liability is the maximum amount an insurance company will pay for all accumulated claims arising within a specified period of insurance (usually a 12-month period of time). General Liability policies are a combination of an occurrence/aggregate limit such as $1,000,000 Each Occurrence/$2,000,000 Aggregate. Many Barber & Beauty Professional Liability policies can be a claims made/aggregate limit such as $1,000,000 Claims Made/$2,000,000 Aggregate. (See Claims Made Coverage and Occurrence Coverage).

Binder

An insurance binder provides temporary written acknowledgement that the insurance applied for is in force for a specified time until the actual insurance policy is given to the named insured.

Business Owner Policy (BOP)

A Business Owner Policy, or BOP, combines the protection required by a business owner for almost all major property and liability risks into one policy. By combining these coverages, the BOP has a very inexpensive premium. Some specialty coverages are not included in the BOP form and must be purchased separately such as workers’ comp, commercial auto, health, earthquake and flood.

BOP policies typically can consist of the following coverages:

  • Property insurance.
  • Covers buildings and attachments.
  • Covers business personal property (equipment and inventory).
  • Loss of income and extra expense (covering losses that cause you to shut down operations or reduce production for a time). This coverage can also provide money to offset lost profits or to pay continuing expenses (typically for up to a year for insured losses).
  • Liability insurance covering lawsuits arising from accidents (as when someone trips and falls on your business’s property) or when you sell a product that causes a loss.
  • Professional Liability for Barbers & Beauticians can also be bundled into the BOP policy.
  • Crime insurance (covering loss of money or securities resulting from burglaries or robberies or destruction) as well as losses from employee theft or embezzlement.

Certificates of Insurance

A Certificate of Insurance (Cert) is a document issued by an insurance company and/or broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. The document lists the policy term, the type of insurance coverage purchased, and the types and dollar amount of applicable liability. A person or business, usually a lessor, can demand to be a certificate holder of another’s insurance policy. They receive no rights under the policy but have proof that insurance coverage exists. The insurance company promises to notify the certificate holder if the policy cancels or expires.

Claims Made Coverage

A claims made policy provides coverage only if a claim is made during the policy period. If the policy has a retroactive date, a loss which occurred before that date is not covered. (See Occurrence Coverage for comparison.) Professional Liability Policies often have claims made forms.

Declaration Page (aka Dec Page)

A declaration page is usually one of the first pages of the insurance policy and it states the main details of the insured’s business activities, policy period, named insured, policy number, and a summary of insurance coverages.

Employment Practices Liability Insurance (EPLI)

An EPLI provides protection for an employer against claims made by employees, former employees, or potential employees. It covers discrimination (age, sex, race, disability, etc.), wrongful termination of employment, wrongful refusal to employ, invasion of privacy, sexual harassment, defamation claims, and other employment-related allegations.

Exclusions

Policy exclusions are causes of loss, conditions or property specified in the policy which are not covered by the policy.

General Liability Insurance (GL)

General Liability Insurance is designed to protect business owners and operators from a wide variety of liability exposures causing bodily injury and property damage. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold by the insured, operations completed by the insured, and contractual liability. General Liability coverage extends not only to paying damages but also to the attorneys’ fees and other costs involved in defending against the lawsuit, whether the suit is valid or not. It is also designed to protect your business and you against bodily injury, property damage claims; personal injury and advertising injury lawsuits such as slander, libel or false advertising; medical payments for others "limited"; products and completed operations; and fire damage to premises. For everyone who owns a business, general liability insurance is something you cannot do without.

Hired & Non Owned Auto Liability Insurance

Hired and Non Owned Auto Liability Insurance provides auto liability coverage for short-term auto rental (hired) or for employees using their personal auto (non-owned) during the course of business.

Indemnity Agreement

An indemnity agreement is a contractual agreement made between different parties to compensate for any damages or losses. For example, a renter agrees to indemnify "pay back" the salon owner if they cause damage to their space.

Landlord Requirements

Landlords and salon owners devise sophisticated contractual agreements to protect themselves. Leases and various other contracts are used to define the rights and obligations, terms, and conditions between parties. Salons frequently rent/lease space. Booth Renters always rent/lease. The typical insurance endorsements that are critical to understand as they are mandated by most leases are:

A Certificate of Insurance (Cert): A Certificate of Insurance (Cert) is a document issued by an insurance company and/or broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. The document lists the policy term, the type of insurance coverage purchased, and the types and dollar amount of applicable liability. A person or business, usually a lessor, can demand to be a certificate holder of another’s insurance policy. They receive no rights under the policy but have proof that insurance coverage exists. The insurance company promises to notify the certificate holder if the policy cancels or expires.

An Additional Insured (AI) is a person or business that can demand to be listed as an additional insured on the certificate insurance form. They attain many rights under the insurance policy. Once the additional insured (i.e., landlord or salon owner) has been endorsed onto the policy, the additional insured will be protected under the named insured’s policy and can file a claim in the event that they are sued.

A hold harmless agreement is an agreement or contract in which one party agrees to hold the other free from the responsibility for any liability or damage that may arise out of the transaction involved. Hold harmless agreements are ordinarily contained in leases and easements.

The purpose of these insurance endorsements (certificate of insurance, additional insured, and hold harmless agreement) is to transfer the risk of financial loss from one party (the indemnitee) to another party (the indemnitor). This transfer or shifting of financial consequences is often called non-insurance contractual risk transfer and is considered a risk financing technique.

Loss of Income

Loss of Income consists of two coverage parts: business income and extra expense. Business income (BI) coverage reimburses your business for revenues you lost during downtime caused by damage to or loss of your property if caused by an insured peril. Extra expense (EE) insurance reimburses you for expenses incurred to avoid or minimize the suspension of business. An example of BI &EE is the roof of your building collapses after a heavy thunderstorm. The business income policy pays for the income you lost while you could not occupy the building, while the extra expense policy covers rent for a temporary office space while your building is being repaired.

Occurrence Coverage

An occurrence policy provides coverage for injury or loss that occurs during the policy period regardless of when the claim is made. For example, a claim made after expiration of a policy would be covered if the injury or loss occurred during the time the policy was in force. (See Claims Made Coverage for comparison.)

Policy Period

The term of duration of the policy. The policy period encompasses the time between the exact hour and date of policy inception and the hour and date of expiration. Business Insurance Policies (BOPs) are almost always annual (12-month) policies.

Professional Liability (PL)

Professional Liability insurance protects you and your business for loss or expense resulting from claims of professional errors, mistakes, or failure to perform professional duties committed or alleged to have been committed by the insured in his or her professional activities.

Named Insured

A Named Insured is an individual or company specifically named on the insurance policy with whom an insurance contract is made and whose interests are protected under the policy. All rights and responsibilities are bestowed upon the named insured.

Property

Property is a type of insurance that covers damage to property for fire, wind, hail and theft. For example, the insurance policy will reimburse the owner for such business inventory (chairs, salon stations, faxes, phones, sinks, shampoos, etc.) that was stolen or damaged in a fire. Additional types of property insurance can be purchased to cover other perils such as flood and earthquake.

Reinstatement

Reinstatement is the restoration of a lapsed or cancelled policy.

Risk Management

Risk management is the identification, assessment, and economic control of risks that threaten the assets of a business.

Umbrella/Excess Limits

An umbrella policy or excess limits provides an extra cushion of insurance protection. It is designed to protect businesses against claims above the insured’s policy limits and it is triggered once the underlying policies have been exhausted. Many leases demand a higher limit of liability than is usually offered under the general liability policy. For example, many shopping center or strip mall leases demand a $5,000,000 policy. The umbrella will satisfy the landlord’s requirements for more insurance.

Workers’ Compensation

Workers’ Compensation policies are comprised of two types of coverages: Work Comp & Employers Liability.

Workers’ Compensation Insurance (WC) provides payments to employees who suffer a work-related injury or occupational illness. Employers’ Liability Insurance protects your business against lawsuits due to employment-related injuries or illnesses. The lawsuits can come from the employee, his/her family members, relatives and third parties. Employees who are injured due to an employers’ negligence can pursue their employer for compensation even in case the business goes into liquidation. The types of benefits offered by Workers’ Compensation are medical care, temporary disability benefits, permanent disability benefits, vocational rehabilitation services, and death benefits.

It is the law for employers to purchase a work comp policy to cover their employees. Work Comp is state controlled and federally mandated. If an employee or "insured booth renter" is injured and the salon owner does not carry work comp it is no longer a misdemeanor – per the law it is a felony (AB899). There are hefty fees attached to these fines which can be upwards of $10,000 per violation. The owner will have to appear in court before a judge who will then assign a fine price to be paid by the salon owner for not carrying the federally required work comp policy. When owners have specific forms of business such as a corporation, LLC or partnership, they become employees of that entity. They reserve the right to cover themselves for work comp or exclude themselves. A sole proprietor cannot cover him/herself for workers’ compensation. Employees of that sole proprietor must be covered.

Resources

IRMI Glossary of Insurance Definitions:
http://www.irmi.com/forms/online/insurance-glossary/terms.aspx

Professional Beauty Federation of California (PBFC):
http://www.beautyfederation.org/

Professional Beauty Association (PBA):
http://www.beautyfederation.org/

Internal Revenue Service (IRS) Information for the Beauty Industry:
http://www.irs.gov/businesses/small/article/0,,id=210745,00.html

Reference guide for the items that Booth Renters are responsible for in their business:
http://www.beautybusinesssuccess.com/html/booth_renters.html

Board of Barbering & Cosmetology for the beauty industry owners in California:
http://www.barbercosmo.ca.gov/forms_pubs/establishment_app.pdf

Resource offering details on how a business owner can accomplish the correct human resource management development:
http://humanresources.about.com/od/glossaryh/f/hr_development.htm

Attached is the link to California’s Barbering & Cosmetology Act & Regulations of 2009:
http://www.barbercosmo.ca.gov/laws_regs/act_regs.pdf

Attached is the establishment license application, instructions and information as provided by the Board of Barbering & Cosmetology for the salon owners in California:
http://www.barbercosmo.ca.gov/forms_pubs/establishment_app.pdf

The Barbering & Cosmetology Industry Information Sheet Published by the EDD (DE 231C Rev. 7 (05-08) Internet) answers the question, Is a licensed professional an employee or independent contractor? Attached is the link to this document:
http://www.edd.ca.gov/pdf_pub_ctr/de231c.pdf

Attached is the California Workers’ Compensation Uniform Statistical Reporting Plan (July 1, 2010) published by the WCIRB. It provides all of the information discussed in this work comp segment as well as the work comp pure premium. The link is:
https://wcirbonline.org/wcirb/root/pdf/usrp_ic_regs_only.pdf

Attached is the link to a document that describes the difference between an employee and an independent contractor:
http://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm

Attached is the Cash Audit Techniques & Resource Guide published by the IRS which states how to properly file BR taxes:
http://www.irs.gov/businesses/small/article/0,,id=210745,00.html