Opening your own studio is a dream fulfilled for lovers of dance and gymnastics. It’s your passion, something that you live and breathe. You want to throw yourself into the role of teacher, guide, and trainer. You certainly don’t want to get bogged down with business matters. But there are certain things that you can’t avoid. At the top of that list is insurance. Without it you’re like a tightrope walker without a net – one unexpected move and your entire business could come tumbling down around you!
Negotiating your way through the world of business insurance can be a nightmare, especially when you’ve got agents coming at you eager to earn their sales commission. In this article, we’ll step through everything you need to know to simplify the insurance process; what type, terms, and coverage you need and what price you should expect to pay.
General Liability Insurance
When you think of insurance for your studio, general liability coverage is probably the first thing that comes to mind. In fact, you probably won’t even be able to open your doors without it. Whether you’re setting up your studio at a school, in a gym, as an extension of another club, or renting space from a landlord, you will need this type of insurance to assure the other party that they will not suffer any liability if something goes wrong.
Liability insurance will protect your business in the event that it is faced with a lawsuit. This could happen if one of your students suffers an injury on the premises. Liability insurance will also cover you for any claims resulting from damage to other people’s property. The policy will pay for your legal defense costs as well as paying for any settlement that is reached against you up to the limit of the policy.
You can add extra coverage to your policy to protect you for the following:
- Competitions and Exhibitions – this will provide coverage if you and your students participate in events that are not sponsored by your business.
- Activities that take place off-premises.
- Employee benefits liability
General liability insurance will not cover you for medical costs incurred by an injured student. For this, you will need to take out accident insurance, which we’ll discuss shortly.
Here are a couple of examples of situations that could easily arise where General Liability Insurance will protect you…
You are teaching a class of preschoolers when one overly enthusiastic tot, attempting to do a pirouette, lands on the floor in a painful heap. After dealing with her tears, you realize that she has a twisted ankle. Her parents decide to sue you for inadequate supervision and training.
You are taking an evening class and a student comes in late. He throws his laptop in the corner of the room and joins the class, even though you have lockers available. Another student loses her footing during a move and tumbles down trite on top of the laptop, causing a large crack to the lid. The owner expects you to pay for the repair.
In both of the above scenarios, you will have to decide whether the expense that you’re up for is going to be more than your deductible. After all, if your deductible is $500, it is hardly worth making a claim if the other party is asking for $450.
For $1 million worth of general liability coverage, with a deductible of $500, you can expect to pay around $450 per year.
Professional Liability Insurance
In addition to general liability insurance, you should consider taking out professional liability insurance, otherwise known as errors and omissions insurance. This will protect you from claims that you performed tasks in a negligent manner with the result that the other party suffers financial or reputational loss.
Professional liability coverage differs from general liability insurance, which protects you from claims of 3rd party bodily or property damage. This type of insurance protects from claims that your deficient services have resulted in financial loss.
An example of a professional liability claim arising could be a student who is a professional business person (such as a lawyer) who falls and breaks her arm in the middle of a class. As a result, she is off work for 8 weeks and loses out on a potentially lucrative case. She claims that her injury resulted from your negligence and sues for lost income of $60,000.
A professional liability policy will cover you for:
- Actual or alleged negligence
- Defense of claims
- False or frivolous claims for damage
Professional Liability Insurance will typically cost around $45 per month or approximately $500 per annum.
While general liability insurance will protect you from third party lawsuits, it will not protect the equipment and other property that are part of your business. It is easy to think otherwise, especially when you see ‘property damage liability’ listed on your general liability policy. This, though, refers to damage to other people’s property, such as the laptop scenario mentioned earlier.
For coverage of your own property, you will need equipment coverage. This will cover …
- Equipment that you own or have leased
- Improvements that you have made to a building that you are leasing
- Other business property such as computers, furniture, and couches
Your policy will replace such property if it is stolen or damaged as a result of fire, earthquake, flood, smoke, wind, or water damage. If you are a tenant, you should consult with your landlord about what coverage your equipment will have under his building insurance. In most cases, you will have to have separate coverage to protect your equipment, though improvements to the building, such as showers and lockers, may be covered by the landlord’s policy.
Some general liability insurance policies will allow you to add equipment coverage as an addendum to your policy. Others will require you to take out a separate policy.
Accident insurance is also known as medical expense insurance. It will cover the medical expenses of students who suffer an injury under your instruction. In most cases, this coverage will be in excess of any existing health care coverage that the student’s family may already have in place.
Most general liability insurers will require you to have medical expense insurance before they will accept you for a general liability policy. Having accident insurance, then, can prevent a situation from spiraling into a major lawsuit.
If the injured person does not have their own health insurance, their medical bills are likely to rapidly escalate. When the bills start to pile up, they are probably going to seek the advice of an attorney. From that point, there is a high likelihood that you will end up on the wrong end of a lawsuit for negligence.
Think how different things could be if you were to immediately cover all of the medical expenses of the injured party. More than likely the family of the injured person will be satisfied that you have done everything that is reasonably to be expected and will not pursue any legal action against you.
In terms of medical insurance limits, you should have a minimum of $25,000 per accident. Anything less than that probably won’t cover most medical expenses. In fact, it is usually a requirement of a general liability policy that the medical expense insurance coverage be at least $25,000 per claim.
When considering a medical expense insurance policy be aware that some policies have internal limits on such specified claims as surgeon fees, physiotherapy cost, and day room expenses. If you are unaware of these, the amount that the injured party receives may be limited, causing them to pursue legal action against you. It is best to choose a policy that has no internal limits.
The deductible on a medical expense insurance policy is usually up to $1000. Of course, the higher the deductible, the lower the premium will be. For instance, if you increase the deductible from zero to a hundred dollars, you can usually save about 20 percent on your premiums.
The medical expenses policy should cover all activities engaged in by your business, including those carried out both on and off-site. This should include while traveling and participating in events and competitions. The policy should also cover staff members and contractors who may suffer an injury while working for you.
Worker’s Compensation Insurance
If you employ staff, you will need to take out worker’s compensation insurance. This type of insurance will protect your business and your workers for …
- Lost income due to time off work due to injury or illness
- Medical expenses incurred by the employee
- Vocational rehabilitation for ongoing care
- Death benefits such as funeral costs if the employee passes away
In the United States, worker’s compensation laws differ from state to state. The benefits and premiums are set by the state according to the types of business and levels of risk. As a result, a state like Alaska has higher average premiums than New York because high risk occupations like lumberjacking are more common there.
The state government will also determine who the worker’s compensation providers will be. These may be state run agencies or private insurers.
The only state where worker’s compensation insurance is optional in the United States is Texas. If you’re located in the Lone Star state, however, we recommend protecting your business and your staff with this coverage.
Although there may be some differences between the states, worker’s compensation will generally not cover injury or illness resulting from a fight caused by the employee, an accident that the employee is deemed to have purposefully caused, that occurs when the employee is under the influence of alcohol, causes no physical trauma or takes place during the employee’s commute to or from work.
Worker’s compensation is known as a no fault system. That means that your employees forego the right to sue you for their on-the-job injury.
Worker’s compensation premiums vary from state to state but average out at about one percent of payroll.
Insurance for Freelance Instructors
If you own your own dance or gymnastics studio but also do freelance independent contract training for other businesses or schools, you will not be covered by the insurances that you have to protect your business. That is because you will be deemed as operating outside of the protective umbrella of your business. As a result, you will need to take out a separate dance or gymnastics instructor insurance policy.
The same thing applies to any freelancers who are working for you as independent contractors. They should have their own insurance cover to protect themselves from liability. For your part, you should only work with independent contractors who are fully insured.
Selecting an Insurer
When it comes to selecting the best insurer for your dance or gymnastics studio, you should obviously compare rates and plans between the various insurers. Some insurers provide packages that combine general, professional, equipment, and accident insurance specifically for dance and gymnastics studios at premium discounts.
You should also look for insurers who have experience in working with your type of business. Dealing with a claims team that is used to running the gauntlet of emotions around claims involving parents and children can make the unpleasant task of working through a lawsuit more bearable.
Before you open your dance or gymnastics studio doors to the public you need to have a comprehensive insurance package in place to protect your business. That package should include the following …
- General Liability Insurance
- Professional Liability Insurance
- Equipment Insurance
- Accident Insurance
- Workers Compensation Insurance
Getting five different types of insurance for your new business may seem daunting but it will provide you with the financial protection you need to spread your business wings and soar. Then, knowing that you’ve got all of your financial bases covered, you’ll be able to put all of your energies into sharing the love of your craft.