As a fitness business owner, you will require a variety of insurance types in order to protect your property and to properly serve your customers and employees.
The U.S. fitness industry is an $80 billion dollar market with approximately 32,000 health and fitness clubs in business today. Clearly, the fitness business can be big business for owners and operators, but it also comes with big financial risks.
That’s why it’s so important for fitness professionals to understand the types of business insurance they should carry. We’ll take a look at the most important types of insurance every fitness business owner should have.
1. General Liability
This is important for every business owner who interacts with the public. General business liability insurance covers third-party injury, property damage and the medical and legal costs associated with the injury.
As you can see, this is especially important for fitness business owners, because the risk of injury to your customers is higher than a lot of other types of businesses. In fact, equipment-related injuries in gyms resulted in 1500 emergency room visits in 2017. Common injuries include broken ankles, fractured arms, fractured legs, and fingertip amputations.
General liability insurance will cover you if you, your employees or your products and services cause injury or property damage, whether or not you’re at fault. This coverage is especially important if you hire independent contractors, like personal trainers or physical therapists to work in your gym.
The contractor should carry insurance with a general liability limit of at least $1 million. The policy should also name you as an additional insured person.
Why is that important? Consider this scenario: you hire a personal trainer to work with a client in your gym. The client gets hurt during a workout and wants to sue the trainer and you, because you hired him or her. The contractor’s insurance policy needs to cover both of you.
It’s important to note that general liability insurance covers injuries to third parties, typically your customers. It does not cover injuries to you or your employees.
The average cost of a general liability policy is $400 to $600 a year. Claims are typically capped at $1,000,000 per incident. It helps to shop around for the best rates. This great comparison resource can help you do that.
2. Property Insurance
This is pretty standard for any type of business. It’s also the same category of insurance you have on your house. Property insurance covers your building, along with the equipment and supplies. It’s critical to have this insurance in the event of fire, theft, vandalism or a natural disaster like a tornado or hurricane.
The building you work out of is not covered by your general liability policy, so you must have property insurance. In fact, if you’ve taken out a business loan to purchase property for your gym, your lender will require property insurance.
Some property insurance policies will also cover you for lost income as a result of the incident. For example, if your business is damaged in a fire, you may not be able to operate for weeks or even months. Your property insurance may cover your income while you wait to reopen.
A typical exception to property insurance coverage is flood. You should check with your insurance provider, because you may need to buy a supplemental flood policy.
Flood insurance doesn’t just cover overflowing rivers that dump water into your office. It also covers water leaks and burst pipes. For example, if you do laundry at your gym and the washing machine floods your building, your flood policy will cover the damage.
3. Business Interruption Insurance
This is a separate policy that covers loss of income after damage to your business. As we said earlier, some property insurance policies will cover your financial losses temporarily. Not all do, however. You’ll need to ask your insurance provider if you should purchase a separate policy to cover your income and expenses if you have to shut down for a period of time.
There are some things this type of insurance won’t cover at all:
Business interruption insurance will only kick in if the damage to your building is covered by your property insurance. You may hear this referred to as a “qualifying event”. If your property insurance doesn’t cover it, your business interruption policy won’t either.
4. Umbrella Insurance
Umbrella insurance is a supplemental policy to cover any gaps between your losses and what your other insurance policies will cover.
Let’s say your property insurance will cover $500,000 in damages to your business. But, it will cost closer to $750,000 to repair and replace what you lost. An umbrella policy will cover the $250,000 gap.
It’s important to note that an umbrella policy only covers damage or other losses that are covered by your other policies. This is another time when that term “qualifying event” comes into play. If you don’t have a flood policy but get flooded, your umbrella policy won’t apply.
You also need to use the other policies first, before the umbrella policy kicks in. In many cases, it’s less expensive to add an umbrella policy, rather than increase your property insurance coverage.
5. Professional Liability Business Insurance
You may hear this called “errors and omissions” (E&O). This policy will cover claims for damages as a result of your mistakes or negligence. E&O will cover things like legal expenses, court costs, and settlements.
You need to be aware of one really important factor here. E&O will cover your mistakes if they were unintentional. For example, if you genuinely made a mistake, like forgetting to wipe up a spill on the floor, and a client slipped and fell.
E&O will not cover deliberate acts, like refusing to repair equipment that ultimately injured someone.
Wrapping It Up
Not all of the above business insurance policies will apply to all fitness companies, so it’s important to talk to your agent about your unique needs. If you offer personal training in your home, you might need a different type of property insurance.
Your insurance needs will also vary, depending on the type of business you form. For example, you might want to operate as a Limited Liability Company (LLC). You can read more about the advantages of forming an LLC here.