Insurance Guide for Dry Cleaning Business

Laundromats are one of the steadiest businesses operating in the neighborhood. Whether the economy is good or bad, people wash clothes, drop off comforters, and press shirts. Thus, many Korean business owners have stably operated coin laundromats or dry cleaning stores for a long time. However, for a business as steady as this, the fact that a single accident can wipe away what has been built up over several years is often overlooked.

From an insurance perspective, a laundromat is by no means a simple line of business. Water and heat are handled all day, equipment ranging from thousands to tens of thousands of dollars per unit fills the store, and above all, it is a business that stores other people’s belongings left by customers. On top of this, customers directly enter and exit the store, floors are frequently wet, and if it is a dry cleaner, chemical solvents are used as well. In other words, paths through which accidents can occur are open in multiple ways.

The problem is that many owners only know the fact that “insurance is purchased,” and do not well know what accidents that insurance actually covers and by how much. There are also many cases where an insurance policy signed upon introduction when first opening the store is simply renewed as-is for years. In the meantime, equipment has changed, the store has expanded, and inflation has risen significantly, yet the contents of the insurance remain unchanged.

In this article, we explain the core of insurance that laundromat owners must know, divided into seven topics. It covers basic concepts of property insurance, differences in policy forms that determine the coverage scope, methods to properly set insurance amounts, BOP which is a package insurance for small businesses, liability surrounding customer accidents and customer clothing, certificates of insurance needed when working with outside contractors, and the impact of inflation on insurance.

1. Business Personal Property (Property Insurance), How Much to Put In

The first thing to do before purchasing insurance is to make a list of store assets without omission. The list must be accurate so that you can be compensated enough to restart operations after an accident.

Property commonly missed in laundromats includes the following:

• Washers, dryers, dry cleaning machines, boilers, steam presses
• Coin changers, card payment kiosks, POS, and computers
• Interior, plumbing, electrical, and exhaust facilities directly renovated on leased premises (Tenant Improvements and Betterments)
• Signs and exterior facilities
• Cash and business books
• Wages and additional expenses during non-operation after an accident

Compensation amounts vary greatly depending on the evaluation method.

Evaluation Method	Meaning	Impact on Laundromats
Replacement Cost	Replacement cost with a new one of equivalent level without depreciation	Compensates enough to bring in new equipment
Actual Cash Value	Amount subtracting depreciation from Replacement Cost	Compensation amount is significantly reduced for 10-year-old equipment

If it is a laundromat with a lot of equipment, it is advantageous to enroll based on Replacement Cost if possible.

2. Fire, Water Damage, Theft, How Far is Covered?

For laundromats, the broadest Special form is recommended. Even for the same property insurance, covered accidents vary depending on which form (Causes of Loss Form) you subscribed to.

Form	Coverage Scope	Laundromat Perspective
Basic	Only specified perils such as fire, lightning, explosion, windstorm/hail, smoke, vehicle collision, riot, vandalism, sprinkler leakage, etc.	Insufficient for laundromats as washing machine leaks are not covered
Broad	Basic + falling objects, weight of snow/ice, water damage caused by appliance leakage, collapse	Minimum level required for accidents like washing machine hose bursts
Special	All risks except those excluded in the policy	Broadest coverage, recommended for laundromats

However, even in the Special form, flood, earthquake, and equipment breakdown are excluded by default. For laundromats where equipment equals revenue, a separate Equipment Breakdown endorsement must be added to prepare for boiler or dryer motor failures.

3. Equipment and Interior, Did You Insure Them at Full Value?

If you set the insurance amount low, you save a little on premiums, but if an accident occurs, the business owner will bear a much larger amount out-of-pocket. According to industry data, about 75% of U.S. commercial property is underinsured by more than 40%.

Insurance amounts should be set not at market price or property tax appraisal value, but at the cost to re-purchase and install (Replacement Value). For laundromats, we hope the following items are added as well.

Shipping and installation costs in addition to equipment prices,

Plumbing, electrical, gas, and exhaust (vent) construction costs,

Additional costs to meet up-to-date building and fire codes when rebuilding an old store

Soft costs such as design and permits

4. Contents Regarding Coinsurance

Most commercial property insurance policies contain a Coinsurance clause stating that “at least 80% of the property value must be insured.” If this is not observed, compensation is reduced even for partial losses.

Item	Amount
Equipment and Interior Replacement Cost	$500,000
Required Insurance Amount (80%)	$400,000
Actual Insured Amount	$300,000
Loss due to Water Leak	$100,000
Compensation Amount ($300,000 ÷ $400,000 × $100,000)	$75,000
Store Burden (Deductible separate)	$25,000

4. Basic Insurance for Laundromats, BOP

BOP (Business Owners Policy) is a package insurance for small businesses. Premiums are often cheaper than enrolling in each separately. It covers three main things by default:

1. Liability Insurance: Compensation and litigation costs for customer injuries or third-party property damage
2. Property Insurance: Equipment and store damage caused by fire, windstorm, theft, and vandalism
3. Business Interruption Insurance (Business Income): Lost sales revenue during closure due to an accident, as well as fixed costs like rent, wages, and taxes
4. Customer Clothing (Bailee) Coverage: Insurance for customer clothing

For laundromats, when doors are closed, customers immediately move to another nearby establishment. Therefore, business interruption coverage is especially important.

BOP usually targets businesses with fewer than 100 employees and annual revenue under $5M, though criteria vary by insurer. Dry cleaners using solvents directly in the store may have limited BOP enrollment depending on the insurer, requiring custom design under general commercial insurance.

Additional Coverage	Reason Needed for Laundromats
Equipment Breakdown	Boiler, washer, dryer mechanical breakdowns
Bailee’s Customers	Damage, loss, fire to clothes left by customers
Workers’ Compensation	Employee workplace injuries (Mandatory)
Commercial Auto	Pickup and delivery vehicles
Cyber Liability	Card payment information leaks
EPLI	Employment-related disputes such as wrongful termination and discrimination
Umbrella	Additionally broadens liability limits

BOP typically includes Equipment Breakdown and Bailee’s Customers, while Workers’ Compensation and Commercial Auto are enrolled separately as distinct policies.

5. From Slip-and-Fall Accidents to Customer Clothing Damage, Liability

Laundromats and dry cleaners where customers directly enter and exit are lines of business with frequent liability accidents. Commercial General Liability (CGL) is basic, and common risks in laundromats include:

• In-store accidents: Slipping on wet floors, bumping into carts/washer doors, accidents involving children
• In-operation accidents: Damaging customer home property during delivery
• Contractual liability: Taking on landlord liability through indemnity clauses in lease agreements

Commercial General Liability covers three areas:

1. Compensation and litigation costs for bodily injury and property damage
2. Personal and advertising injury, such as defamation and advertising infringement
3. Medical payments: Quickly paying treatment costs for minor injuries without litigation

Two items not covered by CGL

The two most important accidents in a laundromat are actually excluded from CGL.

• Damage/loss of clothes deposited by customers: CGL does not cover third-party property in my care, custody, or control. Bailee’s Customers insurance is needed separately.
• Soil/groundwater contamination caused by dry cleaning solvents (PERC, etc.): Excluded by pollution exclusion clauses. Establishments using solvents should also review Pollution Liability (Environmental Pollution Liability).

Accident prevention is also important. Placing anti-slip mats and “Caution Floor” signs, and taking photos of clothing conditions during intake can significantly reduce disputes.

6. Certificates of Insurance (COI) That Must Be Received from Repair Technicians and Delivery Contractors

Before outside vendors work in the store, be sure to receive a Certificate of Insurance (COI). If a vendor causes an accident without insurance, liability may transfer to the store.

Representative vendors from whom a COI must be received include:

• Washer and boiler repair technicians
• HVAC, electrical, and plumbing contractors
• Interior construction contractors
• Outsourced pickup and delivery contractors

Conversely, landlords usually require business owners to submit a COI and list them as an Additional Insured. You must check requirements whenever renewing a lease agreement.

When receiving a COI, verify the following:

• Is the vendor name on the contract identical to the insured name on the COI?
• Are insurance types and limits above the level required by contract?
• Does the insurance period fully cover the work period?
• Are policy numbers and signatures of the insurer or agency present?
• Is it issued by a trustworthy insurer?
• Have you separately recorded the expiration date?

A COI is merely a summary document showing proof of insurance enrollment, not the insurance contract itself. Even for vendors with long-standing transactions, it is recommended to collect one every year.

7. When Prices Rise, Insurance Must Be Reviewed Again

Insurance amounts set a few years ago may not keep up with current equipment prices and construction costs. Since COVID-19, construction material costs and labor costs have risen significantly due to labor shortages and supply chain disruptions, and as a result, premiums for property insurance and commercial auto insurance have risen together.

Laundromats face two risks:

• Underinsurance: In the event of a major accident, insurance money cannot restore equipment and store facilities.
• Premium increases and tightened conditions: When loss ratios worsen, insurers raise premiums and narrow coverage scopes. If there are pickup/delivery vehicles, auto insurance burden also grows.

Things that stores can do in advance include:

• Consulting with your agent 60 or 90 days prior to renewal
• Re-checking policy limits, sub-limits, and exclusion clauses
• Re-evaluating equipment and interior values at current market prices
• Keeping safety management records: Equipment cleaning logs, fire extinguisher inspections, anti-slip measures, CCTV. These records can serve as grounds for premium discounts.

This article is provided for general informational purposes and does not promise coverage for specific insurance products.