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Professional Liability Rating for Tattoo Shops: Gross Receipts vs. Number of Artists

February 9, 2013

We’ve talked here before about the importance of Professional Liability Insurance in the Tattoo and Body Art industry. Once you’ve decided to invest in a PL policy for your tattoo business, your next question might naturally be “How do insurance companies decide how much to charge tattoo shops for Professional Liability coverage?” The process of determining PL premiums is based on a number of individual factors surrounding a given policy and is another example of what we call policy or insurance “rating.”

You may remember that last week we talked a little about policy rating as it related to Commercial Auto and Fleet policies. We discussed how, ultimately, the rating process can vary from insurance provider to insurance provider but that there are a few conventions that are helpful for business owners to understand when making policy decisions. The same could be said for Tattoo PL policies.

This week, we would like to explain two particularly important conventions in the Tattoo Insurance industry: rating PL policies according to “gross receipts” and rating them based on “number of artists (or chairs).” Depending on the insurance company, tattoo shop PL policies are rated either one way or the other, and while additional factors do affect the ratings process (a business’s claims history, for example, or its purchase of additional coverages) an understanding of “gross receipts” versus “number of artists” can go a long way toward understanding where your premium is coming from and what your responsibilities are to the insurance company when it comes time to review your policy.

Gross Receipts
A policy rated based on “gross receipts” is pretty much what it sounds like. The premium for a given payment period will scale with the total gross revenue earned by your business. The more business you do, the higher your premium will be based on the theory that selling more tattoos creates a greater likelihood that a claim may be brought against you. When you purchase a policy rated using the “gross receipts” method, you should be aware that you may be opening yourself up to regular audits by the insurance company in order to ensure you’re paying a properly adjusted premium. This, in turn, increases the risk of misrepresentation and the importance of keeping proper records.

Number of Artists/Chairs
A policy rated based on “number of artists” or “number of chairs” scales in premium with the number of artists working for your shop. More artists mean a higher premium, again on the assumption that you’re producing more tattoos. When you purchase a policy rated according to “number of artists” you have a responsibility to inform the insurance company any time you add or remove an artist from your staff so that the policy can be adjusted to fit your business’s current operations. Failure to inform the insurance provider of such changes can lead to consequences for misrepresentation. One way to help control the cost of a PL policy based on “number of artists” is to ensure that each artist you employ maintains a personal Professional Liability policy covering his or her work. This is easily done by requiring your artists to provide you with a certificate of insurance from their insurance provider.

As always, thanks for reading. To stay up to date on important insurance topics affecting the Tattoo, Body Art and Beauty industries, as well as other topics of interest to business owners, subscribe to the Avanti Reader via RSS. You can also connect with Avanti Business and Insurance Services on Facebook and Twitter (@AvantiInsurance) to receive automatic notification of future posts.

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