When you’re working out how much to charge for your hairdressing services, it’s relatively easy. It’s just a case of adding a profit margin to your costs and you have your price.
Obviously, it’s not quite as simple as that because how much you charge will affect how many customers choose to use your services. You might make less profit as a percentage if you charge a lower price, but if that lower price means you get a lot more customers, you might find that you make more profit overall.
It’s a lot more difficult for an insurance company to work out their costs. They will know how much their offices cost to run, but they don’t know what they’ll have to pay out in insurance claims. Every time an insurance company is asked to provide a quote for a hair salon’s insurance, their underwriters will need to try to determine the probability of an insurance claim being made during the policy’s period of insurance and the likely cost of any claim that is made.
There are a number of factors that an underwriter will consider when determining the price of hair salon insurance:
- The cover that is required
- How much insurance is required
- Whether there have been any previous claims
The cover that is required
Hair salons usually buy their insurance as part of a package that contains a number of different covers that protect the salon against a range of different risks.
The core cover is usually public liability insurance, but most hair salons will also buy property insurance to cover their salon’s premises and other property against losses due to accidental damage or theft. If a salon has employees, it is legally required to add employers’ liability insurance to the package as well.
However, additional covers are available. The salon might decide to add legal expenses insurance to the package to protect it in case it becomes involved in legal action. It might decide to add personal accident & sickness insurance as well.
Buying these extra covers will cost extra money, but the additional cost can be a good investment because otherwise, you could be facing uninsured losses.
Another thing to consider is the fact that standard public liability insurance excludes cover for compensation claims which arise from professional activities, so it can be worth paying the extra to make sure that your public liability insurance has a treatment cover extension to plug this gap in cover.
Standard public liability insurance also only covers compensation claims which involve either an injury or property damage. It can be worth paying a small additional premium to ensure that your insurance has a financial loss extension so that you are covered if a compensation claim for purely economic losses is made against you.
How much insurance is required
The range of covers you require affects your likelihood of making a claim, but how much cover you require affects the potential size of any claim you might need to make.
The sum insured in a property insurance policy is the maximum amount that an insurer will pay in the event of a claim. If you select a higher sum insured, your premium will be higher. You should select a sum insured that reflects the true value of all of your business property, though, because, if you are found to be underinsured in the event of a claim, you will be penalised.
The equivalent maximum claim payment amount in a liability insurance policy is defined by the indemnity limit. The standard indemnity limit in a public and products liability insurance policy is £1,000,000 and, if you choose to increase that limit, your premium will increase.
If you have had previous claims, the underwriters will expect you are more likely to make a claim in the future than someone who has traded for a number of years without having made a claim. As such, previous claims will make your hair salon insurance more expensive.