In this difficult economic climate, do you use a hatchet or a scalpel to trim your facility's insurance costs?
Taking a scalpel to an insurance policy means looking carefully at premiums and plans - and it may be difficult to get significant results. "Insurance premiums, in general, are a very low percentage of the overall operating budget of any health club. Shaving a couple of hundred dollars in premium is unlikely to make an impact on the club's profitability," explains Ken M. Reinig, senior vice president of Association Insurance Group, Lakewood, Colo.
No matter what, reducing your fitness center's insurance carries a risk. "Cutting insurance costs unfortunately often translates into cutting protection and coverage," says Reinig. For this reason, it's important to weigh the risk of cutting insurance coverage with its financial benefits. "Opting for less coverage or limits or a higher deductible always comes with some risk, especially in distressed economic times," says Sheila Morton, sales director for K&K Insurance Group, Fort Wayne, Ind.
Protecting your businessOne risk fitness center owners face in a failing economy is an increased chance of being sued. When finances are tight, people look anywhere and everywhere for cash. Some litigious souls may even look at your fitness center. "Keep in mind that when the economy declines, claims often increase. Unfortunately, a percentage of the population will always look at a lawsuit as a potential means for personal gain," warns Morton.
Weighing the risks is a difficult but necessary task. "Club owners should buy coverage for any and all exposures that would place undue financial risk on their business," advises Morton. "The question all owners should consider is, 'What amount of financial loss will adversely affect my business?'"
Coverage must-havesThere are some coverage options no facility should ever be without. "General liability is a must; anyone can be sued, and the legal costs of defending a claim are often more than enough to put a business in financial jeopardy," says Morton. "If a club carries a loan or a lease, property coverage is probably required by contract. If vehicles are part of the club's operations, auto liability must satisfy the state requirements." In addition, Reinig says that facility owners should never go without workers compensation insurance.
Using the scalpelIf a facility owner calculates that the benefits of cutting some insurance coverage outweigh the risks, there are short- and long-term ways to save on insurance costs.
Short-term solutions. "If they are not making money, [fitness facilities] can go without loss of business income protection to save on premium," says Reinig.
Owners can also reconsider their deductible. "[Facility owners] might look at raising the deductible," says Simpson. "But, it has been my experience that the savings are pretty insignificant unless the premiums are very high."
Also in the short-term, says Morton, "shopping for coverage among multiple insurance carriers may be one way to lower premiums." Still, it's important to remember that not all insurance companies offer equal service. "All businesses should be very cautious that they still have adequate and comparable coverage, and that the carrier will provide good claims service if a lawsuit is filed," Morton says. "When choosing between insurance companies, lower cost may mean that less coverage is being offered, so complete a careful review of all the options."
Another short-term solution is re-evaluating your riskiest programs or profit centers. "Another option may be to eliminate exposures that aren't profitable and/or have additional premium attached, such as saunas, pools, tanning beds or climbing walls," says Morton.
Long-term solutions. Looking down the road, effective risk-management practices are the best way to save money on insurance. "In the long run, one of the best ways to reduce the cost of coverage is to have fewer claims; pay attention to all areas of the health club operations that create a risk," Morton says. "Use appropriate waivers and releases, and practice loss control within the club."
Insuring your facility's futureWhether you plan to play a lumberjack or surgeon with your fitness center's insurance policy - or leave it alone - remember that its purpose is to protect your business. "You need to protect the physical property you have invested in to the full replacement value," says Reinig. "In other words, what would it take to replace this club if it burned to the ground tomorrow?" These are difficult decisions to make in difficult times. The question is, what will you pay to protect, and what are you willing to risk?
Andrea Pugliese Insurance Services
800 664-5489; www.apinsuranceservices.com
Andrea Pugliese Insurance Services is a full-service agency that specializes in meeting the insurance needs of the health club industry. It has provided facility owners with coverage since 1984.
Association Insurance Group
800 985-2021; www.clubinsurance.com
Association Insurance Group has provided insurance and risk-management products for the health club industry since 1995. Its staff members are known for their customer service and educational support for thousands of health club owners nationwide. President Ken Reinig is a nationally known speaker, and is recognized as an authority on litigation prevention in the industry. He has written numerous articles for industry trade magazines, but most people know him as the "singing insurance guy."
Fitness and Wellness Insurance Agency
800 395-8075; www.fitnessandwellness.com
Fitness and Wellness is an insurance program manager for the fitness industry that has 20 years of experience insuring businesses for property, general and professional liability, workers' compensation, bonds and other ancillary insurance products. Clients include fitness centers, yoga studios, tennis clubs, spas, dance studios and martial arts centers.
K&K Insurance Group
866 554-4636; www.kandkinsurance.com
K&K Insurance Group provides a wide array of products to all segments of the health club industry. K&K's standard insurance program provides coverages for full-service health clubs, and it also has a program designed specifically for smaller clubs and circuit training studios that includes premises and operations liability for facilities with annual receipts that are less than $500,000. An additional program was designed specifically for circuit training studios with less than 3,000 square feet of leased or owned space.
Sports & Fitness Insurance Corp.
800 844-0536; www.sportsfitness.com
Founded in 1985, Sports and Fitness Insurance Corp. is a program administrator that focuses solely on the fitness industry. Its staff has more than 35 years of combined experience in the fitness industry - from serving on President Bush's Fitness Council to owning and operating fitness centers, and serving in management with equipment manufacturers. Its underwriting staff has more than 100 years of underwriting experience, mostly within the fitness industry. It is licensed in all 50 states, and endorsed by numerous organizations.
West Bend Mutual Insurance Company
262 334-5571; www.thesilverlining.com
West Bend Mutual Insurance Company offers a specialized program specifically tailored to the needs of the fitness industry. Because it focuses on circuit workout and health club facilities, it can provide competitive pricing, coverage and payment options, and experienced claim professionals. This program is available through the independent insurance agencies that represent West Bend.