About General Liability Insurance
All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren’t legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR AN INTERIOR DESIGNER
Example 1: You install a heavy new dresser in your studio, screwing it into the wall for safety. The wall is not suited for maintaining that level of weight, and the dresser comes loose, tipping forward and landing on a visiting client. She has several broken bones and opts to sue. General liability insurance could probably help cover medical expenses ordered by the court or a settlement decided on by your business and the plaintiff.
Example 2: You are replacing an outdated light fixture in order to bring a new look to your client’s living room. However, as you do so, you accidentally produce a short in the electrical system, sparking a fire and badly damaging half of the home before firefighters can get it under control. The homeowner sues you for these pricy damages. General liability insurance would likely help your business cover court-ordered payments or a settlement.
Example 3: As you explore a client’s home gathering ideas, you back into an expensive statuette—a work of art purchased for several thousand dollars. The statuette cracks on the floor. If liable for these damages, general liability insurance could help your business cover anything owed from a lawsuit or a settlement.
Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It’s always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.
COST OF GENERAL LIABILITY INSURANCE
The average interior designer in America spends between $400-$1,500 per year for $1 million in general liability coverage.
Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
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OTHER TYPES OF COVERAGE INTERIOR DESIGNERS NEED
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all interior designers should obtain:
Professional Liability Insurance
As an interior designer, you will be responsible for advising clients on how to decorate their homes, bringing style and beauty to living spaces in need of an upgrade. If for any reason your advice is regarded by clients as a serious failure, or the sum total of your services is rejected by clients as sub-par, professional liability insurance can help cover damages owed.
If, for example, your floor measurements for the replacement flooring are grossly inaccurate, resulting in a highly unprofessional and unacceptable new floor, professional liability insurance can help to cover any damages you are found to owe.
Business Interruption Insurance
If your business is interrupted by an unpredictable disaster, such as a massive fire or a tornado, business interruption insurance can help cover the damages estimated due to loss of profit during company inactivity. Without this policy, a serious interruption can represent an extremely costly undertaking in the form of repairs and relocation. Business interruption policies can sometimes also assist in covering the costs of relocating your studio and paying for a temporary place of operation while permanent real estate is pursued.
TYPES OF COVERAGE SOME INTERIOR DESIGNERS MAY NEED
In addition to the policies outlined above, there are a few other types of coverage your interior design business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Workers' Compensation Insurance
By hiring talented interior design assistants and artists, you can substantially increase the reach of your business, developing a wider awareness of your services as well as drawing more revenue. If your interior design business is gearing up to expand beyond yourself, any part-time or full-time employees will legally require you to obtain workers’ compensation insurance.
This policy will cover accidental injuries sustained by your employees while on the job. It will also provide disability benefits related to work injuries, as well as death benefits for your workers’ families.
Data Breach Insurance
Your design studio may well keep its confidential client data in digital format, but with the storage of sensitive personal info comes the danger of theft. Data breaches may steal bank account info, home addresses, or other personal info that can be sold or used in order to profit at your clients’ expense—or even yours.
Protect your company from lawsuits resulting from data breaches. In the event your business is unable to protect sensitive user data, this policy can help cover damages owed from any lawsuits in which your business is found liable.
ADDITIONAL STEPS TO PROTECT YOUR BUSINESS
Although it’s easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business’ financial losses after an incident occurs, but it’s much better to avoid losses altogether.
With this in mind, here are three things you can do to better protect your business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
- Streamline your business’ internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.
FREQUENTLY ASKED QUESTIONS
What is included in a business owner’s policy?
A typical business owner’s policy includes general liability, business interruption, and property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
What is the difference between business insurance and general liability insurance?
“Business insurance” is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Do I need insurance before I start a business?
You should invest in coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.
Will insurance protect my business from everything?
Not necessarily. Certain exceptions may be written directly into your policy, and some perils may be entirely uninsurable. Be sure to discuss the scope of your policy in-depth with your agent to avoid being blindsided by holes in your coverage.