Interior Designer’s face many challenges during the course of their business career. Aside from the everyday challenges that any business will meet (i.e. prospecting clients, meeting budgets, finding good help, etc.), Interior Designers will need to manage their risk. Risk is the potential for a financial loss to your business via an injury, damage to property or lawsuit due to your professional error or negligence.
There are many ways to manage risk within your business, all of which are part of a sound risk management program. By averting risk, you hope to foresee potential perils before they happen, like having a weekly cleaning of your grill and ventilation system in a restaurant to avert fire. Another way would be to mitigate your risk by having people take ownership of their participation, like having people sign waivers prior to entering an event you’re holding. Lastly, you can defer risk to a third party, via buying an insurance policy. Interior designers should think about an entire risk management program when starting their business, just part of what we do for clients at SDO-Pro (Stagers, Designers, & Organizers Program for Insurance and Risk-Management), however today we are going to discuss the tenants of a sound insurance program for Interior Designers.
What makes up a sound Insurance Program for Designers?
BOP (Business Owner’s Policy): Nearly every business should start with a BOP or commercial package (depending on their industry). The Business Owner’s Policy is packaged product of General Liability and Property coverage that includes many other “bells & whistle” coverages via premium endorsements, or can have other important coverages, like Employment Practices Liability, or Cyber Liability, added at a sublimit for additional premium.
Components of the BOP:
GL: Third party coverage for injury or property damage. This is important coverage for a designer as you will most likely be doing work at another person’s premises. If through your own negligence, cause someone to get hurt (like leaving a tool on the ground that your client trips and falls to injury) you would be covered, not only for your client’s medical bills, but if they should sue you for pain and suffering. You would also be covered should you cause physical damage to your client’s property (like knocking over a china cabinet, or scratching floor and furniture).
Property: Under the property section of you will have first party property coverage to insure your inventory, tools, computers, officer furniture and more. Business Interruption coverage, for losses to your income while your business is shutdown due to a covered peril, also is covered under the property section of your policy.
Other important coverages for Interior Designers:
Interior designers provide professional services. It is now becoming law that some states officially license interior designers before they can advertise themselves as holding this designation.
If you’re sued, not because of bodily injury, but because of a failure in your professional capacity, general liability policies (BOP) won’t cover you. Professional liability, for the most part, covers financial loss to a third part (other than a contingent bodily injury some PL policies contain). If you give bad advice and recommend a floor that’s easily damaged, your general liability policy wouldn’t cover resulting legal costs if you’re sued by the homeowner.
Designers could be sued for:
- Projects that go over budget
- Advice that doesn’t work out
- Mistakes in measuring that add additional costs
- Failing to complete a project on-time or on budget
Professional liability insurance pays for legal defense costs and any judgements or settlements arising out of lawsuits from professional misconduct, errors and omissions. Because there’s the potential for any designer to make mistakes, essentially all decorators and interior designers need this type of coverage.
Other types of Coverages Needed by Interior Designers:
Commercial Auto – depending on whether or not you have a commercial vehicle in your company name, or use your personal vehicle for business you should discuss with your SDO-Pro professional to see if you have exposure.
Worker’s Compensation – If you have employees on your payroll, or even if you are subcontracting the same people everyday (can constitute an employee equivalent from a WC perspective), you will need Worker’s Compensation insurance to cover employees medical and wages should they get injured on the job. Having a business where you are responsible for employees, and not covering them via Worker’s Compensation, is punishable by law and employers can be sued by their employees, fined or jailed.
What are the typical costs for Interior Designer’s Insurance program?
The average cost of insurance for Interior Designer’s Insurance Program can vary on the business structure, their experience in the business, claims history, the amount of property they own, whether or not they have employees or vehicles and other various underwriting criteria. The average cost nationally for a business owner’s policy is about $1200.00 and for Professional Liability you are going spend another $1500- $1700. If you have commercial auto exposure you are looking at spending between $750 to $1400 a vehicle. Worker’s Compensation costs will depend on the number of employees and the resulting annual payroll per classification code. To determine your costs with regards to an insurance plan, it is important that you have an insurance professional that has access to a myriad of carrier options and knows how to bundle packages to provide the most aggressive pricing.
How to go about ‘designing” an insurance plan for Designers?
Interior design may seem like a low hazard class of business, but as with any profession there are perils and pitfalls that can cost you money and assets. It is important to discuss with an insurance professional your business and devise a plan for defer risk via a solid insurance program. An SDO-Program specialist can discuss with your business goals and outline the best and most affordable plan to keep your business and personal assets safe. Moreover, at SDO-Pro, we will do the very best to bundle coverages together, with our specialized programs, to get you the very best coverage and pricing. Please visit our website and ask a professional about our risk management programs: www.pen-ex.com.