"Insurance helps protect you financially + legally in the case of any business dispute."
What Type of Insurance is Needed for Cosmetologists, Hairstylists + Estheticians?
There are a few major types of insurance that a business might seek to obtain. To our knowledge, insurance is not formally required in the beauty industry by any governmental entity (with the exception of Workman's Compensation Insurance), however your employer or salon suite provider might require or strongly recommend it. (Bear in mind that this section is written with US protocol in mind - Canadian beauty pros will also need General and Professional Liability Insurance, but double-check with your provincial officials in terms or any other tax responsibilities).
Insurance is an important and critical investment for small business owners to protect you in the event that you are ever sued. Legal defense fees can quickly become very expensive, and out-of-pocket settlement costs tend to be thousands of dollars as well. In addition, other unforeseen events can bring you to financial ruin without adequate insurance coverage. Keep reading to learn more about the different types of insurance that you'll need if you are a cosmetologist, esthetician, nurse injector, or any other type of beauty pro.
General Liability Insurance
This liability insurance provides coverage that helps protect your small business from claims that come from your normal business operations, such as Property damage, Physical injury, and Defense costs in the event that you are sued, and Personal and advertising injury. This does NOT cover any claims that arise as a result of your professional cosmetology or aesthetics work.
Professional Liability Insurance
Also known as Errors and Omissions or Malpractice Insurance, this covers certain professional and personal services, in case you're sued for Negligence or for the Advice you give clients. If a client sued you because you severely damaged their hair, this insurance policy would kick in to cover legal defense costs and pay out any damages you might be ordered to pay the client. While we at My Salon Desk to provide a remote receptionist option to salons + spas, you would still be solely responsible for your professional practice.
💡 BE CAREFUL when selecting your Professional Liability Insurance!
There are two common categories of Malpractice insurance - Claims Made and Occurrence. In Claims Made Coverage, your insurance only kicks in if someone files a claim WHILE you are still insured. Meaning that if you decided to switch to another insurance in the future, or you stop styling altogether, you will NOT be covered and will have to foot any bills for legal costs and monetary awards by yourself! If you have a Claims Made insurance and for some reason choose to leave your policy, you’ll have to pay for an expensive “tail coverage” insurance policy that will cover claims made during that period for at least two years (or however long your state’s statute of limitations for personal injury claims is). The best option is Occurrence Coverage, meaning that as long as you had insurance when the alleged incident occurred, you’ll be covered in the future if someone ever files a legal claim (FYI, car insurance works on an occurrence basis).
Cyber Liability Insurance
Cyber Liability is a type of insurance policy that protects businesses from risks associated with the use of computers and technology like data breaches or hacking. You'll also be protected if your computer, phone, or other device containing confidential information is stolen. Cyber-crime is on the rise, so this coverage might not be a bad idea. We at My Salon Desk also take extreme precautions to prevent cyber-theft of the data we maintain.
Workman's Compensation Insurance
This is a type of insurance required for any business entity that has employees - in some states, you'll need Workman's comp even in you are self-employed. If you ever choose to add employees, you’ll definitely need this coverage.
Employers must contribute an amount equivalent to a couple percent of each of their employees' earning towards unemployment insurance (this is how your state has money to fund unemployment payments). Typically most states have exceptions for small businesses with fewer than a couple dozen employees. You wouldn't have to find your own private Unemployment Insurance provider - they're all state-operated in the US. Check with your state’s Unemployment Office for more details.
Business Interruption / Loss of Income Insurance
Some businesses opt to protect themselves in the event that a natural disaster, act of vandalism, global pandemic, etc. destroys their property and prevents them from being able to generate revenues. Consult with your Salon Suite to determine whether they cover property damages.
Commercial Renter’s + Equipment Insurance
You’ve probably heard of renter’s insurance – you may have been required to obtain a renter’s policy if you’ve ever lived in a professionally managed apartment. This is a similar concept – the property within your rented business space would be covered in the event of a natural disaster, vandalism, or other unforeseen event. Again, you should consult with your Salon Suite to determine whether they cover property damages.
Although this technically isn’t a business insurance, you also need health insurance! If you are under 26 you may be covered via your parents, or you might be covered by a spouse. If not, you can opt-in for a Healthcare Marketplace (Obamacare) plan or purchase a plan in the private market. If you file taxes as an S-Corp (we’ll get into this next week) you’ll technically be your own employee and may have access to private market employer-provided insurance plans via your accounting + payroll software.
You can only sign up for health insurance during a specific time-frame each year, commonly known as Open Enrollment. Open Enrollment for health insurance is normally at the beginning of each year (extended to August 15th this year due to Covid) but, you can qualify for Special Enrollment period at any time if you experience a qualifying event: getting married, having a baby, moving, or losing other health coverage. Note that the lowest premiums will likely start at about $400-500 / month (not including any Obamacare subsidies). Please DO NOT skip out on health insurance, especially if your state requires it!
Long term + Short Term Disability Insurance
Covid has forced us all to learn the hard way that entrepreneurs always have to expect the unexpected. As cosmetologists, we rely heavily on our physical capacities in order to perform our work. Even a relatively small injury can prevent us from attending to our clients. The benefits of Disability insurance are that you'd be protected financially if you ever had to stop working due to disabling illness or injury. If you are a breadwinner in your household, this coverage will help keep income flowing while you remain home from work.
Just imagine if a scenario like Covid 19 were to repeat itself, but you had NO access to unemployment! Technically as independent contractors or self-employed workers, no cosmetologists or estheticians would have typically had access to any of the pandemic unemployment assistance programs that were made available - it was a temporary exception given the severity of the public health crisis. However, should you be injured or ill in the future do not expect to receive access to state unemployment funds!
Some of you may be familiar with FMLA the family medical leave act. This federal labor legislation requires certain employers to provide their employees with time off to address medical or other family related issues (Such as pregnancy or adoption). However, there is no requirement that you are paid while you are exercising your rights to take time off. Some states have introduced public insurance funds (similar to unemployment insurance), known as FMLA insurance, to ensure that employees receive some sort of income while they are not working.
However, most states do not. You may want to consider purchasing your own private FMLA insurance policy to help supplement your income, especially if you are anticipating adding little ones to your family.
Long story short - insurance is an important business item that shouldn't be missed by beauty entrepreneurs, no matter how small your business is. Please consult with an insurance agent about the best coverage options for you, especially as some of these insurance types may offer overlapping coverage.