Words of wisdom from our business insurance experts.
Spa and Treatment Center Insurance: The Risks You Face and the Coverage You Need
In today’s world, everyone could use a bit of rest and relaxation—and there’s no better place to unwind than a spa. The spa industry’s global market size was recorded as $95 billion in 2021, though it should skyrocket to more than $185 billion by 2030. And as of 2022, there were 21,840 active spa locations in the US alone.
While spas can be a soothing getaway for the people visiting them, you can’t often afford to let your guard down if you run one of these facilities. Whether you own a day spa, a destination spa, or another type of treatment center, you’ll need a strategy in place to deal with common risks such as injuries, property losses, and even cybercrime.
Naturally, insurance should be at the heart of your spa’s approach to risk mitigation. By purchasing the right types of insurance, you’ll know you have access to the funds you need if your building is damaged, a worker or visitor is injured, or your business is accused of slander or libel. Here’s our in-depth look at the insurance policies every spa should have in place.
What is a spa/treatment center?
Traditionally, a spa was a place where people could bathe in mineral-rich water. There are two primary theories about where the term “spa” came from, and water plays a crucial role in both of them:
- According to one hypothesis, “spa” is an acronym for “Salus per Aquam”—a Latin phrase that means “health from water.”
- The other leading theory claims that the term “spa” was inspired by the Belgian city of the same name. There, Roman soldiers treated their wounds at the local hot mineral springs.
The modern definition of the word “spa” is a bit different. Today, this term can describe just about any business providing beauty, therapeutic, and relaxation-related treatments. Depending on the services they want, the type of spa they’re planning to visit, and the amount of money they’re prepared to spend, people can spend anywhere from a few hours to a few months at a spa.
As you might expect, not all spas are identical in terms of the accommodations and services they offer. Some of the primary spa categories are:
- Day spas. Day spas are currently the most common type of spa out there. These spas don’t allow customers to stay overnight, but they do offer a broad selection of health and wellness services. Massages, manicures/pedicures, facials, and treatments like scrubs and wraps are a few of the many procedures offered by the average day spa.
- Destination spas. On the other end of the spa spectrum, destination spas are what people typically think of when they hear the term “spa retreat.” Unlike hotel and resort spas, these facilities don’t merely offer spa services—instead, they put these treatments front and center. Many destination spas are located in isolated, beautiful areas to help clients focus on their own well-being instead of the outside world during their visits.
- Hotel/resort spas. These spas are located at resorts and hotels, which means they fall somewhere between the previous two categories. While they aren’t dedicated destination spas, the fact that these spas are attached to a hotel or resort means customers can stay overnight. Resort/hotel spas are ideal for travelers who are interested in high-quality spa services but who aren’t planning to make spa services the primary focus of their vacation.
- Medical spas. Put simply, “med spas” combine a day spa and a medical clinic. These facilities offer many of the same treatments as “normal” spas, but they can also handle medical procedures like Botox injections, chemical peels, and laser facials.
What risks do spas face?
No matter what type of spa you own, you need to take your insurance needs seriously. After all, spas routinely face risks such as:
Injuries to patrons
By definition, commercial spas are open to the public, and that means there’s always a possibility of your valued customers getting injured during their visits. Safety risks at your spa don’t have to be dramatic or obvious to be worth taking seriously, either. For example, a wet floor could be enough to cause severe injuries.
If a customer gets injured at your spa, you’ll likely be on the hook for their medical bills—and that’s the best-case scenario. You could also wind up dealing with a pricey, time-consuming lawsuit.
Injuries to workers
Taking steps to protect your clientele from potential safety hazards is essential. However, there’s another group of people who are equally susceptible to injuries at your spa—your employees. It doesn’t matter if your spa’s workers are fully aware of the safety risks they face; they still need to be fully protected by insurance just in case something goes wrong.
Spas and treatment centers provide a wide variety of services related to health and wellness. Unfortunately, there’s always a possibility that a client won’t be fully satisfied with the treatments you offer. Even a skin treatment that doesn’t deliver the advertised results could be enough to trigger a lawsuit.
Spas need to operate out of a physical location, and that means property loss is always a risk for these businesses. That risk category includes floods, fires, and other natural disasters—along with a few other threats. As a spa owner, you should also be on the lookout for other forms of damage to your building, inventory, or equipment, such as theft and vandalism.
Like any other business that actively advertises itself, spas can get sued over advertising injuries. This category includes slander (AKA spoken defamation), libel (AKA written defamation), copyright infringement, and violations of privacy rights. Given the potential consequences of lawsuits stemming from one or more of these issues, you need to make sure your spa’s insurance coverage takes advertising injuries into account.
Does your spa store any data about its customers? If so, you need to be ready to deal with the potential effects of cybercrime. That might not sound like an obvious risk factor for spas and treatment centers, but any business that has an online presence or stores personal data can fall victim to data breaches and other cyberattacks.
What insurance policies do spas need?
While you can never truly eliminate risks like the ones listed above while running a spa, you can take steps to deal with them—and buying the right insurance policies is a big part of that. While you shouldn’t just buy insurance policies for your spa at random, some policies you definitely should have in place include:
General liability insurance
If you own any business, you need a general liability insurance policy—and that’s certainly the case for spas. With these policies, you’ll get help when you need to pay for the medical bills and legal fees that come with customer injuries. You’ll also get financial assistance with lawsuits related to advertising injuries.
But the support provided by general liability insurance doesn’t stop there. These policies can also help pay for expenses resulting from customer property damage and injuries caused by products you sell.
Worker’s compensation insurance
The people working at your spa are responsible for everything from pampering your customers to cleaning treatment rooms after they leave. But just like your clients, your employees could end up getting injured at your spa—no matter how careful they are at work.
Luckily, worker’s compensation insurance can help you cover short- and long-term medical costs, lost wages, and other expenses related to workplace injuries. The legal requirements related to worker’s comp insurance vary between states, but there’s a strong chance that your spa needs to have this type of insurance in place.
Professional liability insurance
No one wants to get subpar service during what should be a relaxing spa day—and no one working at a reputable spa will intentionally cut corners on the services they provide. But while mistakes happen, saying that to an angry customer won’t stop them from suing you. Instead, you’ll need professional liability insurance to deal with this situation.
Professional liability insurance policies provide coverage for lawsuits related to work mistakes, accusations of negligence, and undelivered services. Whether your spa has been accused of making a mistake while providing a service, causing injuries during a treatment, or canceling an appointment due to a scheduling error, one of these policies can help.
Commercial property insurance
While it’s easy to focus on the injury- and lawsuit-related risks your spa faces, it’s also in your best interest to be aware of the dangers that threaten your spa’s physical space. Like any other business with a storefront or warehouse, your spa could get seriously damaged by fire or flooding, you could lose valuable equipment, or your inventory could be the target of theft. Because of that, it’s equally wise to invest in commercial property insurance.
If you’re planning to rent a building for your spa, your landlord will probably require you to carry a commercial property insurance policy. Even if that’s not the case for your business, having one of these policies is definitely in your best interest.
Business owner’s policy
As anyone with a Costco membership knows, buying in bulk can be an easy, smart way to save money. But what if you could apply the same mindset to your spa’s insurance coverage? You could do just that if your spa is eligible for a business owner’s policy (BOP). These insurance “bundles” can include general liability insurance, commercial property insurance, and other essential policies.
Not every spa or treatment center can take advantage of a BOP. That said, if your spa makes less than $1 million in revenue annually, operates in a small building, and employs less than 100 people, you’re likely to be eligible for one of these policies.
Cyber liability insurance
Your day spa might not maintain an online storefront to speak of. With that in mind, you may be tempted to skip out on cyber liability insurance—but in the 21st century, that almost certainly isn’t a good idea. Any modern business that takes credit card payments from clients and stores that information could find itself dealing with a data breach.
The type of cyber liability insurance most small businesses need is called “first-party cyber liability insurance.” Unlike third-party cyber liability insurance, which is primarily intended for companies responsible for other clients’ cybersecurity, this form of cyber insurance offers financial assistance to businesses that have to:
- Inform their customers about a data breach
- Plan PR campaigns on said data breach
- Make cyberextortion payments
- Provide credit monitoring services
- Interrupt normal operations as a result of cybercrime
- Do anything else related to the data breach recovery process
Commercial umbrella insurance
Unfortunately, even the most robust insurance policy has its limits. When things are going smoothly at your spa, hitting your policy limits isn’t something you’ll need to worry about. Of course, that could change quickly once you have a lawsuit on your hands.
Situations like these are where commercial umbrella insurance comes in. This form of insurance serves as an add-on to policies like general liability and employer’s liability insurance (in many cases, employer’s liability insurance is included in your worker’s comp insurance policy). When your expenses related to these policies go past your policy limits, umbrella insurance will help you deal with the overflow.
There’s no denying that the spa industry is doing well right now—and based on current projections, this industry should become even bigger in the future. But just like any other business, spas face a variety of dangers. It doesn’t matter whether you run a small day spa or a massive destination spa: you can only do so much to prevent risks like worker injuries, cybercrime, and lawsuits from unsatisfied customers.
The good news is that general liability insurance, commercial property insurance, professional liability insurance, and other insurance policies can help you deal with those risks. By purchasing these policies, you’ll be able to relax and protect your peace of mind—just like the people visiting your spa.