Fabric Store Insurance – Cost and Types of Policies
Managers of retail fabric stores all understand that one of the essential budget items is an appropriately tailored fabric store insurance portfolio, even before opening their doors to business.
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Like any retail store, they must protect their business interests against the usual hazards it carries, which we can outline below.
A fabric store also carries many unique risks that expose the store owners to multiple losses.
They will be covered only by having the proper insurance in place in advance.
In this post, we will outline most of the special risks encountered by fabric stores.
It would be best to have adequate and correct insurance in place to not be exposed personally.
A Short Primer on Retail Fabric Trade
Fabric retailers are specialists in providing specific goods to customers either through direct contact inside a physical store or through a website portal.
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The most important sectors of its trade are direct sales to end-customers and bulk supply to service providers.
Typically, end-users are home-based people who are making their own clothing and household linen items.
In many cases, this is a family tradition passed down over generations.
Other demands for fabrics can come from hobbyists building or repairing household furniture, redecorating with curtains and drapes, and other domestic activities.
Fabric stores also supply service providers such as tailors, dressmakers, home decorators, furniture builders, and other artisan and skilled workers.
Servicing both of these markets can also be done via an active website offering the chance for customers to browse through virtual catalogs and order their choices for pickup or delivery.
What are the Retail Fabric Store Insurance Requirements?
No matter what kind of trade a fabric retail store does, whether direct sales or virtual marketing or any other kind, all retailers share certain common risks that dictate the kinds of insurance they need.
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These characteristics are:
- Public safety on the shop premises
- Responsibility for the quality of goods and services provided
- Investment in real estate
- Security of inventory
- Dependence on income continuity
- Security in the movement of goods
- Data security
- Employees safety
We will outline below what specific risks relate to each of these aspects.
We recommend the proper way to protect yourself against the possible outcomes.
Public access means risk
The moment a person, whether it’s a customer or passer-by, steps into your fabric store, you are responsible for their well-being and their property’s safety.
Liability can arise in any retail business activity in case of injury or damage to third parties like the customer standing across from you at the counter, or browsing through your racks, or simply when someone casually steps through your front door.
It means that businesses of all sizes need some form of general liability insurance.
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General liability insurance is the most basic kind of insurance for any fabric retailer that deals in any way with the public.
It protects you should you be faced with a claim from a person that some incident occurred in your store, causing them some kind of injury or loss.
Claims like this can arise from a simple accident, like the person tripping over a reel of fabric left in an aisle.
Similarly, if you climb up on a ladder to reach a high shelf and accidentally dislodge a heavy item that falls onto someone passing underneath.
Public liability insurance covers you for any accidental damages or injuries caused to third parties stemming from your business activities that are claimed to be the result of negligence on your part.
It’s vital to understand that there’s no limit to the amount you can be sued for.
Direct costs, pain and suffering, loss of income and other such amounts can add up quickly.
Whatever the jury decides, it is your responsibility.
So you need to protect your business and yourself from potentially unlimited claims.
Responsibility for goods and services
Whatever you sell or advice you give about the goods, you are running a risk that customers may claim that the fabrics did not meet your specifications.
Especially for a web-based portal, and also when your trade is based on samples and swatches which you show customers and then order from suppliers, if the fabrics supplied did not match your samples or description, you may be held responsible for any loss sustained.
To cover yourself, you need Product Liability insurance.
If the customer consulted with you before making a choice and then claims that your advice was incorrect, you need Errors & Omissions insurance to cover yourself against any possible lawsuit.
Liability Insurance doesn’t only cover you if you lose!
Coming to court to defend yourself in a liability case is not just a matter of winning.
You will need to pay for all legal representation, as well as for any investigations to cover all of the facts of the claim. In the end, even if you win the case, you could find yourself left having to pay the bill for all of these.
Liability insurance will cover most if not all costs relating to any claim, win or lose.
Real estate insurance
If you are operating a retail fabric store on the high street or in a mall, it means you either have to own or rent some physical space.
All physical locations should carry insurance coverage for the value of the building and business contents against natural occurrences like floods and storms, and against man-made damages like fire and vandalism.
In areas of high risk, additional coverage may need to be taken for earthquakes and hurricanes or tornadoes.
Still, it’s important to remember that for a retail fabric store, this does not cover inventory, for which specific cover is necessary.
Stock and inventory are essential parts of a fabric store and may be the business’s biggest asset.
Loss of inventory caused by fire, water damage, storm damage, roof damage etc., can be severe.
A fabric store is especially vulnerable to two particular hazards:
- Water damage from rain, burst pipes, leaking fire extinguishers and all other sources can quickly ruin the whole stock
- Fire can spread quickly and uncontrollably because of the nature of the stock. Even when good fire controls exist, they can cause secondary damage that renders the stock unusable.
Business Owners Policy (BOP) insurance
Many insurance companies offer a combination of commercial property and general liability insurance in a single package.
This is known as a BOP policy.
You can also take extra coverage for business continuity insurance, data loss or theft, e-commerce insurance for internet vendors, and employee theft or misappropriation.
Business interruption insurance is vital to protect you in the event of total shut-down in your operations.
It may be caused by something totally unrelated to your own business, such as a fire that destroys the entrance to the shopping mall where your business is located and so blocks access from the street.
Until all the repairs are complete, you are still responsible for any mortgage or rental payment, payroll, and other “fixed” expenses.
It means you need to replace lost income so that you can meet these outlays.
You need to be aware that ‘catastrophes’ such as floods or earthquakes are not typically covered in a business interruption policy.
Income insurance can also cover what is termed “ancillary losses”.
For example, if your suppliers cannot deliver to you because of a road bridge collapse and similarly, the delivery of your products or services to customers is interrupted.
Cyber and data security insurance for e-commerce
When you are offering to display and sell your fabrics on a website, you have a special and additional need for e-commerce insurance.
Cyber insurance covers damage to or theft of all data stored in your fabric store as well as on your business phone and home computer.
You should fully protect all of the information regarding your financial transactions, as well as your customer records and anything else that could become a target for cyber theft.
Commercial vehicle insurance
Suppose part of your business requires delivery of goods to customers, especially when you offer your fabrics on an online website.
In that case, you should make sure that you have appropriate vehicle insurance.
Private auto insurance is not the same as commercial vehicle insurance.
If you use your personal auto for deliveries on behalf of the business.
In that case, you will almost certainly be breaching the terms of your private auto insurance policy since this almost always excludes commercial activity.
If you are using delivery service providers, you should make sure that they have their own insurance.
The moment that goods move out of your premises, your business insurance cover stops, in case of loss, theft and all the other dangers.
Workers Compensation Insurance
Worker’s compensation insurance is required in most states if your retail fabric business has more than the designated number of employees.
Refer to the US Department of Labor website for specifics in your state.
The requirement for workers comp insurance applies regardless of whether they are full-time, part-time or casual.
Worker’s compensation insurance covers your business against any claims if an employee suffers an injury or becomes sick directly due to work.
Worker compensation insurance rates are dependent on the level of worker remunerations, usually calculated based on premium per $100.
What does fabric store insurance cost?
Keep in mind that insurance companies always take care to cover the level of risk that they can expect.
Fabric stores usually have higher levels of risks for fire and water damage depending on location.
For example, a store on the main street is exposed to more risk of storm damage than one located in a mall, whereas the one in the mall has a greater risk of fire.
While it’s not possible for us to give exact costs, since it depends very much on the size and the location of the fabric store, here are some general guidelines.
The list below is a rough estimate of average annual premiums for the main types of insurance small businesses will have to pay and could change at any time.
|Product Liability insurance
|Commercial vehicle insurance
|Commercial Property insurance
|General Liability insurance
How do you determine the level of coverage you need?
Only you can decide the coverage limit you need.
Your coverage needs may not be the same as other businesses, so it is good to speak to insurance agents and brokers, or search the internet for the best advice.
For example, most fabric stores choose public liability insurance of one million dollars for a single occurrence, with an annual aggregate of $2 million.
If you think more cover is required, these limits can be raised, and the premium will be adjusted.
Real estate property, stock and vehicle insurance levels are all based on specific levels of your own business operations.