Being a pawn shop owner can be quite rewarding when you get to help out customers who find themselves in a financial bind. Additionally, diverse clients and the opportunity to handle unique items may be exciting, but there are also a host of risks associated with owning and operating a pawn shop. From third-party bodily injuries to theft, it’s essential to obtain a wide range of business insurance to protect your business no matter what sort of catastrophe comes along.

What insurance coverage do I need for my pawn shop? 

Although there are several types of insurance coverages to consider, the following policies are particularly relevant for pawn shops:

General Liability Insurance

General liability insurance covers accidental third-party bodily injury, property damage, personal injury, and advertising injury. Whether your pawn shop is neatly organized and spacious or filled with a random assortment of products on cluttered shelves, third-party accidents are impossible to completely avoid with heavy customer traffic. 

If a customer is hurt while shopping inside of your pawn shop or if their personal property is damaged, your general liability insurance can cover legal fees to defend your business and third-party medical payments. 

General liability insurance also covers third-party bodily injury or property damage resulting from product liability. You could be held liable if a customer is injured or becomes ill from an item sold at your pawn shop.

In addition, general liability insurance can protect your business from lawsuits based on non-physical personal injuries. Common claims include invasion of privacy if a customer’s personal information is revealed to others, or false arrest and unauthorized search if a customer is suspected of shoplifting.

Examples: 

• Bodily injury: A heavy item from the top shelf falls on a customer, causing severe injury to her head. Your general liability insurance will cover medical costs associated with this bodily injury as well as legal fees should the customer decide to sue your business.
• Product liability: An employee mistakes a nickel ring for a platinum ring and sells the ring to a customer. The customer has an allergy to nickel and sues your business after a severe allergic reaction. Your insurer would pay for medical expenses and legal fees. 
• Personal injury: You accuse some customers of shoplifting and detain them while you review the security footage. After reviewing the footage, you realize there was no shoplifting committed. If the customers sue your business for false detention, your insurer would pay the legal fees to defend your business. 

Commercial Property Insurance

Commercial property insurance can protect the value of your business property, including the buildings you own or rent, as well as the contents within the building such as furniture, computers, and merchandise. 

Damage or destruction of your store’s property can be a serious risk for pawn shops. If your property is damaged by covered perils such as fire, storm, vandalism, explosion, or water damage, your commercial property insurance policy can provide funds to repair or replace the damaged property.

Example: 

• Overnight, vandals break into your pawn shop, smashing windows and spraying graffiti. Much of your merchandise is ruined and many of your display cases are destroyed. Your commercial crime insurance would provide coverage for the loss of merchandise and damaged property.

Commercial Crime Insurance

Commercial crime insurance provides protection for businesses from financial losses resulting from criminal acts. This includes forgery, robbery, burglary, and theft. This coverage also protects your business from employee dishonesty, which is often excluded from standard commercial property insurance policies.

Commercial crime insurance is a necessary coverage for pawn shops since employees handle monetary transactions. Also, since the public has access to your inventory inside of your shop, the exposure to theft is high. In both instances, your insurer can provide funds to compensate your business for any losses resulting from crime.

Example: 

• The employee responsible for locking up your pawn shop at the end of the day takes cash from your registers. Commercial crime insurance would cover the loss.

Workers’ Compensation Insurance

Workers’ compensation insurance covers the medical expenses and lost income of employees who are injured or fall ill while working. This coverage is legally required for companies with employees in most states and includes coverage for an employee’s medical expenses, rehabilitation, and a portion of lost wages. 

Additionally, workers’ compensation insurance can provide funeral, burial, and death benefits for the employee’s surviving family in the case of a work-related death. Like many other retail businesses, employees of pawn shops are susceptible to a number of workplace injuries no matter how much your business prioritizes safety. 

Example:

• An employee trips over a loose power cord and falls, fracturing his leg. Workers’ compensation insurance will provide funds for the injured employee’s medical treatment and a portion of his lost income while he is recovering and unable to work. 

Bailee’s Customer Insurance

Bailee’s customer insurance is an important coverage for pawn shops because it covers your business for damages and losses to customer property that is in your care, custody, or control. Customers pledge property as collateral to your pawn shop and in return, you lend them money. When customers pay back the loan, their merchandise is returned to them. 

You may be held liable for any damage or loss to this property and face financial repercussions—especially if the customer intended to pay back the loan and receive the returned merchandise. Perils covered by this policy include burglary, theft, windstorm, fire, and vandalism.  

Example:

• Due to a faulty heating system, a fire breaks out in your pawn shop. The fire destroys many high-value pawned items. Your bailee’s customer insurance would provide funds to replace the items because it was under your care, custody, or control during the incident.

Additional Coverages

• If your business carries a number of jewelry pieces, it would be wise to consider jewelers block insurance. Jewelers block insurance is a form of inland marine insurance that provides financial coverage for physical loss or damage to your jewelry. 
• Business income insurance (also known as business interruption insurance) provides funds for loss of income and operating expenses if your business must temporarily close to recover from physical loss, damage, or destruction. This coverage includes your business’s net profits and normal operating expenses such as rent, employee salaries, and taxes. In order to qualify, the damage to your property must be the direct result of a covered peril.
• Commercial auto insurance is important to consider if your pawn shop offers pick-up or delivery services or if employees often use company vehicles to run errands. Commercial auto insurance covers third-party bodily injury and property damage if you or an employee are at fault in an accident involving a company vehicle. This policy also covers the value of your company vehicle if it is damaged by a collision or another covered peril such as theft or vandalism.

Pricing and Quotes

Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a pawn shop with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for pawn shops:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Final Word

It’s important to consider all of the liabilities you will be exposed to while owning and operating a pawn shop. Unexpected disasters and lawsuits from injured customers are just a few of the many possible incidents that may make it difficult to continue operating your business. By obtaining a wide range of business insurance, your pawn shop can better cope with unforeseen events and keep you financially protected.