What Types of Insurance Does a Bookstore Need?
Independent bookstores are packed with countless types of books, appealing to a wide variety of customers. The book aficionados and scholars alike will visit bookstores to discover an adventure within the pages of a new book. The bookstore’s customers are as varied as the books on the shelves are varied.
However, losses and accidents cause unfortunate financial strains on small businesses, so insurance is essential. Bookstores are no exception and benefit from having insurance to protect them from expensive losses.
Related: Guide to starting a bookstore
What Are Some Risks for a Bookstore?
Accidents can happen, regardless of the precautions made to reduce risk. In particular, bookstores are exposed to the following risks:
- Inventory damage
- Customer injuries
- Employee injuries
- Extended closures
Arguably, the most significant risk for a bookstore is fire. The bookstore has a major fire load due to its substantial stock of paper, books, and packaging materials. A fire in a bookstore not only destroys the store’s supply but also is likely to be fast spreading. Common sources of fire are wiring issues, malfunctioning equipment, and smoking. In addition, bookstores with a coffee bar will have added ignition sources from appliances in the kitchen area.
In addition to fire damage, shoplifting is a hazard to the bookstore’s inventory. Often bookstores have tall shelving units that make visibility an issue. Another hazard to the store’s inventory is water damage. Leaking pipes or malfunctioning sprinklers can cause significant water damage to the books.
The bookstore customers come onsite to shop, read, attend hosted events, drink coffee, and sell or trade books—meaning there will be numerous clients entering the store regularly. Common claims of customer injuries are for slips, trips, and falls. These risks are especially probable if the walkways are cluttered or ill-maintained. Trip hazards include stacked books, untucked cords, rolling carts, and uneven carpeting on the floors or staircases.
Bookstores with a coffee bar face an additional risk of customer injuries caused by burns from hot coffee. Broken or ill-maintained furniture can also pose a hazard to customers. In addition, hosted events can be problematic and increase the risk of liability given that events bring crowds inside the store, making quick exiting a challenge. Fire escape routes should be clearly marked, and walkways kept clear to avoid a crowd-exiting issue in case of a fire.
Like customer injuries, employees are also at risk of injury from slips, trips, and falls. Another injury risk is back strains from carrying heavy boxes of books. Stocking shelves may require employees to use step-ladders to reach the top shelves. As a result, employees can suffer bodily injury if they fall off the ladder or if a falling book lands them.
Employees who work at the bookstore’s coffee bar can suffer injuries from burns, scalds, and cuts. Employees can also be injured while operating specialized equipment—like sound equipment for events or printing and binding equipment for self-publishing services.
Many bookstores transact with credit and debit cards, but most stores accept cash. Cash is a target for thefts, such as employee embezzlement or robberies. Theft of cash is particularly problematic during the store’s peak season when there is more cash in the store due to heightened sales. The store’s coffee bar will likely have more cash, thereby increasing the store’s susceptibility to a robbery. Additionally, antique, rare, or collectible books are targets for theft and should be secured, especially while the store is closed.
Bookstores can suffer an income loss during an extended closure. Extended closures typically result from losses like fire or water damage. Relocating can negatively affect the store’s customer base since many of the store’s customers are locals and repeat customers. A temporary relocation can assist in reducing revenue loss, but relocation takes time. A relocation during a peak season means the bookstore may suffer a considerable loss of income.
What Types of Insurance Should a Bookstore Consider?
While accidents are not planned, they can be prepared for with well-rounded insurance policies. As such, bookstores should consider the following insurance policies:
- Commercial property insurance
- General liability insurance
- Workers’ compensation insurance
- Crime insurance
- Business interruption insurance
Commercial Property Insurance
Property insurance is a policy that protects business-owned structures, equipment, inventory, and supplies and is normally included in a business owner’s policy, which also has general liability coverage. Property insurance covers hazards, including:
- Water damage from leaking pipes
A property insurance policy covers structures for rebuilding or repairs up to the agreed limit on the policy. Therefore, it is important to ensure that the policy limits are adequate to rebuild a structure in the event of a total loss. When the space is rented, the bookstore generally does not need structure coverage; however, the rental agreement should be reviewed before waiving structure coverage in case the rental agreement requires structure coverage.
Another aspect of property insurance is coverage for business-owned items like inventory, furniture, shelves, supplies, and equipment. Like structure coverage, this portion of the policy covers business property up to an agreed limit. In addition, the policy stipulates how the items are covered. For example, a replacement cost policy insures items at their total replacement cost, whereas an actual cash value policy insures items at their replacement cost minus depreciation.
General Liability Insurance
General liability coverage is a core insurance policy and, like property insurance, is included in a business owner’s policy (BOP). This type of liability coverage insures claims of bodily injury or property damage occurring on the store’s property or because of the store’s operations.
For example, a customer injured by a book that falls off an upper shelf may sue the store for their injuries. The general liability policy is the line of coverage that insures such claims. In addition to covering bodily injuries (i.e., medical payments), this policy also covers property damage repairs, legal fees, and settlements.
Workers’ Compensation Insurance
A workers’ compensation policy covers claims resulting from employee injuries. This policy is essential because it protects the bookstore from potential lawsuits. For instance, an employee who falls off an ill-maintained step ladder and breaks both arms may be unable to return to work right away. This employee may then sue the store for their medical care and lost income. However, a workers’ compensation policy covers these types of claims.
A workers’ compensation policy protects injured employees by helping to cover the resulting costs. Further, the policy also protects the business from liability, making this policy an essential insurance policy. Workers’ compensation covers claim expenses such as:
- Medical expenses
- Lost income
- Disability income
- Rehabilitation care
- Funeral expenses
Crime insurance is a policy that protects the store’s cash. Since stolen cash is not a covered asset under a property insurance policy, crime insurance is important. It insures the store’s cash both onsite and offsite and covers thefts by employees and third parties. A crime insurance policy insures cash from perils such as theft or robbery, embezzlement, and forgery.
Thorough vetting in the hiring process can help reduce internal thefts, but a crime policy can help the business recover lost cash if an incident does occur. The crime insurance policy does not, however, cover cash stolen by owners or partners of the store.
Business Interruption Insurance
Business interruption insurance is normally added to a business owner’s policy or a business insurance package. This line of coverage offers the bookstore financial protection when it experiences an interruption, such as an extended closure. For example, following a loss, the bookstore is still responsible for paying regular bills and loans, even if the store is closed and unable to generate income. These situations can put an incredible financial strain on a small business.
However, business interruption insurance covers regular bills and loans during an extended closure. In addition, this policy also covers lost income, employee wages, and the cost of temporary relocation. Coverage is set for a limited amount of time, which is normally about 30 days. Yet, many insurance companies offer the option to extend the limit (usually for an added cost).
How Much Does Insurance Cost for a Bookstore?
The cost of bookshop insurance varies depending on the specific needs of each business. For example, a bookstore with a structure, numerous employees, an extensive inventory, and a coffee bar will need far more insurance coverage than a small, owner-operated, home-based bookstore.
Several factors that influence the cost of insurance include:
- The size and condition of business-owned structures
- The amount of inventory
- Any valuable items, such as rare or antique books
- The number of employees on the payroll
- Fire suppression and safety measures
- Previous or current lawsuits or insurance claims
The best way to determine insurance costs is by calling insurance companies for a quote specific to your bookstore’s needs. Ideally, you should contact multiple companies to compare rates and coverage amounts as each company offers different benefits.