For small business owners, opening a second retail location is a giant leap forward. Having another storefront will mean more customers, greater revenue potential, and a stronger presence in your market. However, don’t become so distracted by planning inventory, hiring staff, and designing the new space that you forget to update your retail insurance policy.
Whether you’re opening across town or in a different state, understanding how to adjust your insurance coverage properly is essential for protecting your growing business.
Essential Takeaways:
- Notify your insurance provider about expansion plans as soon as possible.
- Understand which policy types require immediate updates or additions.
- Carefully calculate your coverage needs for your new location.
- Ask your agent the right questions during the update process.
- There are a few ways you can potentially reduce premiums while expanding coverage.
Contact Your Insurance Agent Before Signing the Lease
Don’t wait until you have signed the lease for your new location to get in touch with your insurance agent. You will want them to review the property details and explain the types of insurance expenses involved so you can budget accordingly.
Some properties will inherently have higher insurance requirements, such as those situated in flood zones or high-crime areas, and those that are older and have outdated infrastructure. All of these are important considerations before you sign on the dotted line.
Understand Which Coverage Types Need Adjustment
Retail insurance policies include several types of coverage, and you may need to update all of them when you open a second location. For example, general liability insurance may extend to additional locations you own, but you will have to raise your coverage limits to address the extra exposure. Property insurance will also need a significant update to reflect the new building, additional inventory, and equipment.
Workers’ compensation insurance can also become more complicated when you open a second location, especially if it is across state lines. Each state has different workers’ compensation requirements, and you will need separate policies or endorsements for employees working in other states. You may also need to update your commercial auto insurance if you will have company vehicles operating from the new location or making deliveries between the stores.
In addition, product liability coverage needs to be raised to reflect the higher sales volumes you expect with two locations.
Calculate Your Coverage Needs Accurately
Each location you open will have distinct characteristics, so simply doubling your current coverage is not a sound approach. Instead, make an accurate inventory of everything that needs protection and consider whether you intend to carry the same inventory value at both locations. You may plan to use your second location differently from your first, or it may have more or less foot traffic. All these differences will influence your insurance needs.
You should also consider your liability exposure. For example, a larger store with more customers poses a higher slip-and-fall risk. If your second location includes features your first location doesn’t (such as a parking lot you’re responsible for maintaining or a small café area), your liability needs will increase accordingly.
Ask Your Agent These Important Questions
You will want to have some questions prepared for your insurance agent before you meet. The main question is usually whether your current coverage can be extended to the new location; if not, you will need to obtain a separate policy.
Cost is another consideration. It may be more cost-effective to keep both locations under a single policy with a single carrier. However, retailers can sometimes secure better rates by shopping around for the new location independently.
Be sure to inquire about premium discounts, such as multi-location discounts and other savings you might qualify for if you use certain safety features. Clarify how claims would work with two locations. If you file a claim for one location, will it affect the premiums for both of them? This can help you decide which claims are worth filing when the time comes.
Review and Update Yearly
Your insurance requirements will need to be updated as your company changes. Perhaps your second location is performing better than you expected, and you’ve increased inventory levels or added new product lines or services. Set a reminder to review your coverage annually, and revisit it whenever you make significant changes to either location.
Remember that expanding to a second location can change your risk profile in ways that might not be immediately obvious. Having more employees, customers, inventory, and physical space can all increase your exposure.
Let Us Help You Protect Your Growing Business
At John M. Glover Insurance Agency, we specialize in helping small retailers like you manage the insurance complexities that accompany business growth. We understand that opening a second location can be both exciting and overwhelming, and we’re here to make the insurance part as straightforward as possible.
Give us a call today to schedule a consultation, and we will walk through your expansion plans together to make sure you have the right coverage in place before you open your doors. When you’re ready to grow, we’re prepared to protect what you’ve built.
