As a gym owner, you are at risk. Appreciating the risks that are inherent in your business and managing those risks is the key to a successful gymnastics business. The greatest tool that you have to mitigate risk is insurance. In this article, we’ll unpack the various insurances that you need to protect your gymnastics business.
A risk is any exposure to potential loss or damage to your business. It is impossible to eliminate all risks, but they can be managed. Business risk can be subdivided into four categories:
Risk management involves four stages; assessment, selection, implementation, and monitoring. Risk assessment involves conducting a comprehensive audit of everything in the business that could result in injury or loss.
Risk control selection involves avoidance, retention, and transfer. In the gym setting an example of risk avoidance would be banning the use of the trampoline during a birthday party. You make the conscious decision to avoid risky behavior.
Risk selection relates to the financial loss you are prepared to incur if things go wrong. This loss is in the form of your insurance deductible. The higher your deductible, the higher your retention. Naturally, the more risk you assume, the lower your insurance premiums will be. The amount of your deductible should be worked out with your accountant and your insurance carrier to find the right balance between the amount of risk you can retain and the premium level you can afford.
Transfer of risk mainly takes place in the form of insurance cover. The insurance company will take on your risk in return for an annual premium.
What Will Insurance Protect Your Business From?
There are three main things that insurance will provide financial protection from:
- Unexpected Events
There are four types of policy that are designed to deliver that protection:
- Worker’s Compensation
Let’s drill down on each of them.
There are two types of liability insurance that relate to gyms: general and professional.
Whenever a business deals with the public, the risk exists that an accident may occur resulting in damage to someone or something in their possession. General Liability insurance will protect you from liability if that person were to sue the business. This includes court costs and legal fees.
An example of a general liability claim could be someone sitting on a chair in your waiting room when the chair leg breaks and they fall to the floor, needing to be hospitalized with spinal issues.
The average cost of $2 million worth of general liability insurance in the United States is between $670 and $875 per annum.
Professional liability insurance is specific to accidents, omissions, or mistakes that arise from your business operations. It is also known as Errors and Omissions insurance.
So, this type of insurance relates directly to your carrying out of your gym classes. An example of a professional liability claim could be a five-year-old tumbling from a beam and breaking an arm because you were allegedly distracted, failing to catch the child.
We recommend taking out professional liability coverage of $50,000 per annum. The average cost for that amount of cover in the U.S. is between $350 and $700 per annum.
Commercial Property Insurance
Commercial Property Insurance will be required for you to operate your business from a building. The insurance must cover the cost of the premises and fixed chattels against fire and storm damage as well as deliberate acts such as vandalism and theft. Commercial Property insurance usually does not cover earthquake damage.
If you are renting the building where your business is located, it is the responsibility of the landlord to provide commercial property insurance. However, you should check that the landlord does, indeed, have sufficient commercial property insurance in place.
Tools and Equipment Insurance
Tools and equipment insurance will cover your gymnastics equipment from fire, theft, or damage. This will allow your business to continue running seamlessly in the event of a loss of essential equipment.
The amount of equipment cover you select should be based on the replacement value of your equipment. You should expect to pay $15-20 for every thousand dollars of protection.
Business Owner’s Policy
A Business Owner’s Policy is an amalgamation of several types of insurance into a single policy. By combining policies you will be able to save money on premiums. Business Owners Policies will generally not include professional liability insurance.
Worker’s Compensation Insurance
The vast majority of states in the United States require all employers to take out worker’s compensation insurance. This type of insurance will cover an employer for an employee who is off work due to a work-related injury or illness. This will enable the employee to claim worker’s compensation benefits.
In most states, an employee includes part-time and casual workers. The majority of states will allow you to choose any commercial insurance company as your worker’s compensation provider. However, the following five states require employers to use a state-operated fund:
- North Dakota
- West Virginia
Unlike other types of insurance, Worker’s Compensation Insurance does not come with a set amount of cover. There is no limit to the coverage. The size of your premium is based on the size of your payroll.
Remember, it is a legal requirement to have worker’s compensation insurance.
Employment Practises Liability Insurance
Employment Practises Liability Insurance (EPLI) protects an employer from financial loss related to an employment-related claim. Such a claim could result from purported wrongful termination, discrimination, harassment, and retaliation.
The premium payments for an EPLI policy are quite moderate when you consider what you would be up for if you were on the losing end of an employment suit.
The policies detailed above are those that we definitely recommend that you have in place before opening your gym doors. The following types of insurance are not essential but are well worth considering.
Medical Payments Insurance
If an accident or injury occurs at your gym, it is quite likely that a medical crew will be called out. For a relatively low premium, you can get medical payments insurance to cover the costs of the ambulance call out as well as an immediate doctor or dental payments incurred by your client.
Having this type of insurance cover in place can avoid a much more serious lawsuit.
Modern businesses are heavily reliant on computer technology. Your client database, payment information, invoicing system, and related client information will more than likely all be stored online.
Cyber Insurance will cover your business for claims by clients in the event that their personal information gets hacked. An example could be that a hack allows thieves to access credit card information for some of your clients. Cyber insurance will protect you from what could otherwise be a debilitating level of liability.
Business Interruption Insurance
In the event of a fire, storm, or other damage, your business may be forced to shut down for a period of time. Business Interruption Insurance will provide a financial safety net to see you through until you can open your doors once more.
In selecting your insurance provider, you should only deal with a company that is rated by the A.M. Best rating agency. This is the only rating agency that specializes in the insurance industry. Its ratings represent the agency’s assessment of the ability of the insurer to meet its obligations to its policyholders. The highest A.M. Best rating is A++.
In the 1970s a standard was set in the gymnastics industry for $1 million worth of general liability insurance cover. However, a million dollars in the 70s and 80s is far less than it is today. As a result, a new standard of $2 million of general liability cover has emerged in the industry.
Make sure that your budget caters to all of your insurance premiums payments, especially during your off-peak season. The last thing you want is for your policy to lapse due to lack of payment. I’ve known cases where this has happened right at the time when a member sued the business, leaving the management wide open to a massive financial hit.
If you are training athletes who compete in USA Gymnastics events, you should know that that organization’s insurance coverage insures them during participation, but not in traveling to and from the event.
Be sure to take the time to carefully read through your insurance policy with your legal advisor. Be especially aware of any exemptions and exclusions that are written into the policy. Make sure that everything you do is covered under your general liability policy. This may include birthday parties, camps, circuses, off-site events, and adult classes.
To protect your athletes to and from competitive events, you may need auto insurance.
Reducing Your Liability Risk
The ironic thing about insurance is that your business will be better off if you never have to use it. Even though you may be covered financially in the event of a claim, the stress, time and potentially bad publicity that is all part and parcel of an insurance claim are a headache that nobody needs.
Here are 2 ways to reduce your liability risk:
Waivers & Hold Harmless Agreements
When a client signs up, you should have them, or their guardian, complete a contract. A waiver is part of the contract by which the client agrees to absolve the gym of any liability for injuries resulting from the ordinary negligence of the gym, its employees, or its agents.
A waiver may also be known as a release, disclaimer, or exculpatory agreement. A similar document is an informed consent agreement. The difference is that this agreement is used to protect the provider from liability for the informed treatment risks of a treatment or program to which the individual agrees.
Waivers do not always hold up in court. The main reasons that it may fail in a gym setting are when the waiver is unclear or ambiguous or when it results from gross negligence, reckless conduct, and intentional acts.
Risk Management Policy
From the very outset, institute a risk management mindset throughout the business. Here is a 9-step policy for doing just that …
- Make a commitment as an organization to risk management.
2. Identify all hazards and possible risk
3. Assess the level of each risk.
4. Decide to accept or manage each risk.
5. Formalize your risk management action plan.
6. Implement your risk management options.
7. Communicate information to everyone affected.
8. Review your risk management action plan on a regular basis.
9. Identify any new risks and update your plan
Choosing the right insurance policies for your gym is an essential step to ensuring that your business is going to run smoothly. Here’s a recap of the 5 essential insurances that all gymnasium gym proprietors should have:
- General Liability
- Professional Liability
- Commercial Property Insurance (if you won the building)
- Tools & Equipment Insurance
- Worker’s Liability Insurance
- Employment Practises Liability Insurance
Three other insurances that are well worth it if you can afford them are:
- Medical Payments Insurance
- Cyber Insurance
- Business Interruption Insurance
Be sure to mitigate your risk by including a waiver in your client agreement form and implementing a complete risk management plan for the business. By taking all of these steps you’ll be minimizing your business risk, allowing you to focus on what you love – training clients on the gym floor.