You've found the perfect location, negotiated the lease, and ordered your pressing equipment. Now comes the part that every new dry cleaner owner dreads: insurance. Here's what most people get wrong—they think of insurance as a one-time checkbox before opening day. In reality, your insurance needs evolve as your business grows, and getting the timing right can save you thousands of dollars in both premiums and uncovered losses.
This guide walks you through exactly which coverages you need at each stage—from day one through expansion—so you're never paying for protection you don't need yet, but never exposed to risks you can't afford.
Day One: Essential Coverage Before You Open Your Doors
Before you turn that 'Open' sign around, you need three non-negotiable coverages. Your landlord probably requires them anyway, but even if they don't, these are the policies that keep a single incident from bankrupting your startup.
General liability insurance is your first line of defense. A customer trips over a rug at your counter and breaks their ankle? That's a general liability claim. You accidentally tear a hole in someone's expensive suit during cleaning? Also general liability. Most dry cleaners start with $1 million per occurrence and $2 million aggregate, which typically costs between $500 and $1,200 annually for a small operation. That might sound expensive until you realize a single lawsuit can easily exceed $100,000.
Property insurance protects your equipment and inventory. A commercial dry cleaning machine costs $15,000 to $50,000, and that's before you add pressing equipment, boilers, and finishing stations. But here's what catches people off guard: you also need coverage for customer property in your care, custody, and control. Industry data shows the average dry cleaner has between $20,000 and $75,000 worth of customer garments on premises at any given time. A fire or flood doesn't just destroy your equipment—it destroys items you're legally responsible for returning.
Workers' compensation insurance becomes mandatory the moment you hire your first employee in most states. Dry cleaning involves repetitive motion, hot equipment, and chemical exposure—all factors that increase injury risk. Workers' comp rates for dry cleaners typically range from $2.00 to $4.50 per $100 of payroll, depending on your state and claims history. In California, for example, the 2025 rate is approximately $3.28 per $100 of payroll for dry cleaning establishments.
The Coverage Most Dry Cleaners Skip (But Shouldn't)
If you're using perchloroethylene—and about 28,000 dry cleaners in the U.S. still do—environmental liability insurance isn't optional. Perc is classified as a hazardous air pollutant and probable carcinogen by the EPA. A leak or spill can contaminate soil and groundwater, triggering cleanup costs that routinely exceed $250,000.
Here's the problem: standard property and liability policies explicitly exclude pollution-related claims. You need a separate environmental policy, often called pollution liability or environmental impairment coverage. Premiums vary widely based on your cleaning methods, storage practices, and location, but expect to pay $1,500 to $5,000 annually for a small to mid-sized operation. That sounds steep until you consider that EPA cleanup orders can bankrupt a business overnight. Even if you're transitioning to wet cleaning or hydrocarbon solvents, you may still need environmental coverage for legacy contamination from previous operations or prior occupants of your space.
Growth Triggers: When to Add More Coverage
Your insurance needs don't stay static. Here are the specific moments when you should revisit your coverage:
When you add delivery service: The moment you put your logo on a vehicle and start picking up or delivering garments, you need commercial auto insurance. Personal auto policies don't cover business use. You'll need both liability coverage (for accidents you cause) and physical damage coverage (for your vehicle), plus coverage for customer property in transit. Budget $1,200 to $2,500 annually per vehicle.
When you install a point-of-sale system: Once you're storing customer credit card data, names, addresses, and cleaning preferences digitally, you're exposed to cyber liability. A data breach affecting even 500 customers can trigger notification requirements, credit monitoring obligations, and regulatory fines. Cyber liability policies for small businesses start around $500 to $1,500 annually and cover breach response costs, legal fees, and regulatory penalties.
When revenue becomes predictable: After your first year, once you have reliable revenue data, add business interruption insurance. This coverage replaces lost income if you're forced to close temporarily due to a covered loss like a fire or equipment breakdown. If your dry cleaner generates $30,000 monthly in revenue and a boiler explosion forces you to close for six weeks, business interruption insurance covers that $45,000 gap—minus your deductible and waiting period. Premiums typically add 10-20% to your property insurance cost.
Common Mistakes That Cost Dry Cleaners Thousands
Underinsuring customer property. Your policy limit for customer goods should reflect your actual exposure. Track your peak inventory periods—holidays, wedding season, winter coat season—and make sure your coverage reflects those highs, not your average. A single wedding party can represent $5,000 to $10,000 in garments on your racks.
Skipping equipment breakdown coverage. Standard property policies cover fire and theft, but mechanical breakdown of your dry cleaning equipment usually requires a separate equipment breakdown endorsement or boiler and machinery coverage. When a $40,000 dry cleaning machine fails due to a short circuit or mechanical malfunction, you want that repair or replacement covered.
Misclassifying workers. Calling someone an independent contractor when they're legally an employee doesn't just create tax problems—it voids your workers' compensation coverage when they get hurt. If your state audits your payroll and finds misclassified workers, you'll owe back premiums plus penalties, and you could face fines for operating without required coverage.
How to Get Started and Keep Costs Manageable
Most dry cleaners benefit from a Business Owner's Policy (BOP), which bundles general liability, property, and business interruption into one package at a lower price than buying each separately. BOPs for dry cleaners typically range from $2,500 to $6,000 annually, depending on your location, revenue, and coverage limits.
Work with an insurance agent who specializes in dry cleaners or small commercial businesses—they'll know which carriers offer the best coverage for solvent-based operations and which ones exclude dry cleaners entirely. Ask about loss prevention programs; some insurers offer premium discounts of 5-15% if you install leak detection systems, upgrade to safer solvents, or complete safety training.
Review your coverage annually. As your revenue grows, as you add services, or as you upgrade equipment, your insurance needs change. An annual check-in with your agent ensures you're neither overpaying for coverage you've outgrown nor exposed to risks you've added. The dry cleaning business you open and the one you're running two years later are rarely the same operation—your insurance should evolve with you.
