As we prepare for the PGA Merchandise Show, we are now receiving a lot of inquiries regarding PGA Professionals and their own golf shop insurance needs. This article is designed to help you “navigate the course” of options when it comes to purchasing insurance for your own golf shop.
The first thing to understand is that your golf shop is not automatically insured by the PGA of America or the facility where you operate. Usually, neither of these entities has an insurable interest in your owned property or inventory. If you have formed any type of entity, such as an LLC or Corporation, then the Professional Liability coverage through PGA membership does not extend to the entity that you have formed, and it is necessary to purchase a policy to protect yourself and your investment.
As a proprietor of a golf shop, you have two primary exposures: the contents of your shop and the liability if someone suffers bodily injury as a result of your operation. This article will concentrate on your property exposures.
There are some things that you should keep in mind when it comes to property exposure. You should always insure a value equal to the maximum amount of the property that you carry in the shop. The reasons for this are twofold.
First, if there is a total loss from a covered peril, like fire, you would want to make sure that you can replace all of the contents that were in your shop prior to the loss. The second reason is because of a clause in most insurance contracts called co-insurance. Simply put, co-insurance is a penalty that would reduce your claim payout in the event that you did not insure to 100 percent of your exposure. The formula for a co-insurance penalty is simple: • “Did” divided by “should” multiplied by the “amount of the loss.”
For example, if you are insured for $50,000 (did) of personal property and your exposure was $100,000 (should) and you suffer a loss of $20,000 (amount of the loss) the insurance company would only pay you half of your loss, or $10,000. You insured to 50 percent and they pay 50 percent of the loss. This gap is the penalty for not insuring to value.
Many contracts have the ability to add a peakseason endorsement. This endorsement can add anywhere from 25 to 200 percent for an increase in your property values to help you insure your exposures when there’s value fluctuation. Some companies specifically endorse peak-season months onto your policy, others have you prove peak-season history in the event of a loss. Do you have this coverage on your policy?
Most property coverage also includes Business Income/Extra Expense. In the event of a loss from a covered peril, loss of income and ongoing extra expenses that you incur while you are trying to restock, move to a new location, etc., are insured. There are two ways to purchase this coverage. First, you can include the amount of coverage you would like to carry, stated by an actual dollar amount. However, a more comprehensive way to cover Business Income/Extra Expense is on an Actual Loss Sustained (ALS) basis. Whatever loss of income and additional expenses, including payroll, you incur while you are trying to get back up and running is covered on either a 12-, 18-month or unlimited basis.
One other consideration is how much risk you are willing to assume in the form of a deductible. We usually recommend a deductible in the $1,000 range. Premiums for golf shops start at just $500, and average around $1,200 for golf shops that carry Liability, Property, Business Income and Professional Liability. High property values may benefit from an increase deductible to $2,500 in order to save some valuable premium dollars
Do you work with an insurance professional that specializes in golf shop insurance? If not, feel free to give us a call at 1-800-888-Golf. The PGA Preferred Golf Course Insurance Program, in partnership with Philadelphia Insurance Company, has recently launched a golf shop program that is endorsed by the PGA of America.
Are you attending the PGA Merchandise Show? Please stop by and visit us at booth 4458 in the PGA Partners section on the PGA Show floor.