There are several fundamental building blocks you need to start an interior design business, and insurance is one of them. You need to find the right policy or policies to protect you against anything that could wreak financial havoc on your business, and hiring an insurance consultant who is familiar with the interior design business model is a worthy investment. This person should consult with your lawyer and accountant, as insurance, legal, and accounting considerations will have a lot of overlap.
Here, we have compiled a comprehensive list of the various types of insurance you may need for your interior design business. This list is an abridged version of what is included in a vital book for anyone who wants to start an interior design business: “The Interior Design Business Handbook: A Complete Guide to Profitability,” by Mary V. Knackstedt FASID, FIIDA.
Some will apply to the current size or particular process of your business and others will not, but it’s important to know about each of them because your needs will likely change over time. This list covers all of the types of insurance you may need for your interior design business, but know that insurance that covers damage to property belonging to your clients, whether it is in your possession, in transit, or already installed, are among the most important types of insurance you will need from the earliest days of your business operations. Once you use a client’s money to purchase goods, those goods are considered property of that client. Also, you will need to ensure that anyone working on your project installations, whether employed by you or an external party, has worker’s compensation insurance. Your insurance consultant, with help from your lawyer and accountant, will know which are necessary for your business. Schedule check-in calls with your insurance broker every three to six months, or whenever you make a change to your business operations, to make sure you still have appropriate coverage.
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Types of Insurance Needed by Interior Design Businesses
Category: Business Operations Insurance
These specific types of insurance help protect against liabilities incurred in business operations.
- Comprehensive general liability insurance: This type of insurance protects interior designers in cases where a client is injured by a design or product provided by the designer, even if after the completion of a product. This is separate from workers compensation insurance, covered below, and it is crucial that you purchase both from the same provider. Otherwise, your two insurance providers could sue each other in an attempt to avoid liability.
- Commercial liability: insures against all declared existing hazards except those named in the policy.
- Personal injury: protects against libel, slander, and defamation against you or any employee of the firm.
- Medical payments: pays up to a specified limit to anyone injured as a result of your business operations.
- Product liability and completed operations liability insurance: covers against claims resulting from misuse of products.
- Workers’ compensation: insures all employees for liability resulting from injury or death that occurs in the course of employment. This insurance is mandatory in most states.
- Accounts-receivable policy: protects against loss related to the inability to collect accounts receivable when records have been destroyed or damaged.
- Valuable papers: covers loss/destruction of valuable papers such as mortgages, records, financial data, and any other records imperative to your business operations.
- Transportation damage insurance: This provides coverage for items damaged or destroyed while being transported. What makes it different from the transportation floater is that it is offered by product vendors, not an insurance provider.
- Transportation floater: provides an “all-risk” coverage for the designer's property while in transit. This could be very important as, depending on your business model, you will often be moving valuable merchandise to various project sites. This insurance is typically issued on a per vehicle basis.
- Motor vehicle insurance: If you have a company vehicle, or any vehicle used for company purposes, you must insure it to protect against damage or loss.
- Employer’s nonownership liability: covers the employer in cases where employees use their personal cars for company business.
- Hired car insurance: Covers the use of any hired cars, like delivery trucks that are rented for the short term.
- Collision insurance: Insurance against damage caused by a collision of a vehicle while being used for business purposes.
- Comprehensive automobile insurance: Protects business automobiles against loss, fire, theft, or any physical damage regardless of fault.
- Bailee customer floater: protects against damage done to your clients’ possessions while in your possession.
- Business interruption: reimburses designers for the income lost in the case of an event that would make it impossible to continue operations as normal. Earnings insurance is a similar type of insurance that is appropriate for smaller businesses where income is irregular.
- Professional liability insurance: coverage for claims that are resulting from the commission or omission of professional acts. This insurance is helpful for protecting against frivolous lawsuits that cannot find a more viable category.
- Employment related practice liability: protects you as an employer against allegations of improper treatment or hiring and firing of your employees.
- Disability insurance: protects a business owner in the case they are unable to work and produce an income due to an illness or accident.
- Group life insurance: optional, but as your business grows, you may want to purchase for the benefit of employees.
- Group medical insurance: provides you and your employees with medical coverage for doctors’ visits, hospitalization, surgery, lab testing, and prescription drugs.
- Pensions: not necessary, but offering a retirement savings plan to your employees is a benefit that can make working at your firm an attractive proposition, therefore helping you retain the best talent.
Category: Building Property Insurance
These specific types of insurance protect you against risks to your buildings and properties, which apply to buildings owned by your company, or you personally if you operate your business in that dwelling.
- Building: protects against damage to the named building and its permanent fixtures, such as HVAC systems and elevators.
- Contents and personal property: covers all furniture and fixtures within a building.
- Replacement costs endorsement: provides for the full reimbursement of the actual costs of repair or replacement of a building without any deduction for depreciation
- Removal of coinsurance: Coinsurance in property and casualty coverage is a guarantee by the policyholder that their property was insured to 80 percent of its value on the day of loss. If you do not have the coinsurance waived, you could not only get a coinsurance penalty for being uninsured, it could take much longer to settle your claims and receive your reimbursement checks.
- Comprehensive perils: Places your policy on a comprehensive basis. It provides coverage for all issues except those specifically stated in the policy.
- Flood insurance: Protects against financial loss in the case of flooding. Flood insurance is available in declared areas and coverage can be obtained from your local broker through the National Flood Insurance Program, which is sponsored and subsidized by the federal government
The types of insurance your interior design company needs will change as your business evolves, particularly when you go from being a solopreneur to hiring employees. The American Society of Interior Designers (ASID) is a membership-based hub of information and resources for designers, and provides access to insurance packages that are discounted compared to what you can find on the open market.
Starting an interior design business is complicated, but getting the right insurance will give you peace of mind and will protect you in case anything goes awry. And, of course, we recommend you sign up for a free trial of Design Manager, the leading accounting and project management software solution, to establish organized and efficient business processes from day one of founding your company.