Home Staging Business Insurance
Home Staging is turning into a major growth industry and in this article we will outline how any professional business in this sector should protect their operation by having the proper and necessary Home Staging business insurance cover.
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Sales of homes across the US have boomed since the beginning of this year, not only thanks to rising prices but also due to increasing volumes.
One of the contributors to this has been an increase in the use of Home Staging professionals (also called “stagers”) who work with homeowners and realtors to get maximum value of the property from buyers.
What does a home stager do?
Home stagers work with home vendors and their realtors by sprucing up homes before they go onto the market.
Fixing up houses for sale by improving the appearance will get the house to sell faster for a higher price than if it is simply placed on market with a “for sale” sign outside, or listed in the realtor’s website.
There is a wide range of different activities that stagers can do, from very basic actions such as deodorizing rooms that have less-than pleasant smells all the way through to completely refurbishing the home with rented furniture for the time it’s on show.
The basic process is to emphasize the positive features of the home, and to minimize anything that may cause potential buyers to think twice.
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This doesn’t mean that a professional stager will “paper over the cracks” of flaws and faults, which in many states would be illegal, but a good stager can use tools like good lighting and furnishings to draw people’s attention away from parts of a house that may be less attractive and draw them to focus on the positive features that will sell the home.
Is home staging a recognized business?
Home staging, or simply staging, has grown exponentially over the years.
The National Association of Realtors reported in 2020 that one-third of sellers’ agents engaged in professional staging to improve their properties on offer.
Worldwide, throughout North America, Australia, South Africa, the UK, Malta and Japan, home staging has become a regular feature of the house vending cycle.
There are even staging “Oscars” awarded at the annual Real Estate Staging Association gathering in Las Vegas, honoring the best in a wide range of categories, such as Best Stager, Best Rising Star, Vacant Category and many more.
What does a home staging professional do for homeowners?
A professional home stager is aiming to achieve two benefits simultaneously on behalf of the homeowner.
Firstly, the objective is to get the highest possible price for the property in the current market.
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It has been reported that the U.S. Department of Housing and Urban Development said in 2019 that staged homes sell for approximately 17% more than non-staged homes.
As well, a professional and experienced stager should be able to advise the vendor of what the proper price expectations are, so that they do not set unreasonable expectations and then fail to make any sale.
Secondly, an objective is to sell the property as quickly as possible without unnecessary concessions.
By increasing the level of interest from more potential buyers, the general effect is to raise a feeling of “now or never” amongst them and they will offer to purchase faster for fear of losing out altogether.
What other services does a home stager provide?
Many home stagers rely on associated service providers who will do special work when it comes to physical improvements of the property.
Typically, these will be:
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- Handyman services
- Solar panel contractors
- Roofing contractors
- Fencing installers
- General Contractors
- Groundskeeping and Landscaping services
- Concrete contractors
As well, home stagers frequently make use of Professional Photographers who can help promote their own business and to advise home vendors on the best methods to advertise their properties with visuals and videos.
How do home staging businesses earn their revenue?
Home stagers usually work hand-in-glove with the realtors who are managing the sale.
They have an agreement on who pays for the staging of a house.
They normally have a budget that is agreed on which is the amount of time and material that the vendor is prepared to pay, and the client will, in turn, agree to pay a fixed percentage of the price achieved for the property, which will represent a good profit for the home stager.
This means that the business is incentivized.
A good stager should be able to achieve a better price at lower costs and thus make more money on each deal.
What is a good example of how a professional home staging operator helped a vendor to maximize her selling price?
Some major well-known people in the arts and entertainment business have recently handed their fabulous properties over for major rehabilitation in order to achieve top dollar in a pending sale.
The house staging businesses taking on these operations are themselves big enterprises, with multiple offices in cities across the country and several hundred employees.
One house in Beverly Hills, California was recently refurbished from top-to-bottom with borrowed and rented furniture and eye-catchers, such as a replica Triumph motorcycle.
It sold for a mind-boggling $70 million to a top gaming software entrepreneur, which was nearly ten percent ($7 million) more than the realtor had told the vendor to expect!.
Why does a home staging business need liability insurance?
Like any business, just by being active you are taking on several legal liabilities, and unless you have the proper insurance, you could be exposing yourself to very high risks if something goes wrong.
When you work as a home stager, it means that you are becoming involved physically and financially in a customer’s life and valuable home.
Accidents can happen that may harm your customers and their family and friends, damage their property, or spoil their lives.
Like any business that is providing some kind of service to the public, your business is at risk of being sued if some unexpected event happens. There are several specific risks relevant for you, such as :
- Accidental injury to a member of the public (including a customer, a member of his or her family, friends or visitors) at locations where you are doing some activity related to their home
- Accidental damage to some property where you are doing some activity
- Improper or inadequate provision of your services.
For any such possibility, you need to take out public liability insurance and errors & omissions (professional liability) insurance.
What General Liability insurance does a home staging business need?
Public liability insurance helps protect you and your business from claims in case there’s some accidental bodily injury or property damage to someone, and they sue you for compensation.
There are two types of legal damages people may sue you for that are typically covered by a general liability policy:
- Compensatory damages: financial losses they claim to have suffered as a result of your actions. They may also be able to claim for future losses that they might suffer resulting from an injury.
- General damages: indirect losses the injured party suffers, such as “pain and suffering” or “mental anguish.”
The policy also pays for legal costs associated with your defense of a lawsuit related to the claim.
There are many possible scenarios in which your activity in a customer’s home can cause a claim.
Just a few such examples are:
- You have agreed to move some furniture around between rooms, but didn’t notice that a sofa was covering a broken floor tile. After the shift, the owner’s father steps on the broken tile, falls through the floor and breaks his hip. You could be sued for medical costs and damages for not properly leaving the room safe while you were working there
- In the same scenario, when you were moving a heavy piece of furniture, you accidentally knocked over an antique vase worth thousands of dollars. You could be sued for full replacement cost
- During a general clean-up of the home, while one of your workers was washing the floors, a visitor to the house slipped on a wet patch, fell and broke his nose. All medical costs and other associated losses, such as loss of income while being treated etc, could be claimed.
We have written lots more about the needs for public liability insurance and the possible costs.
The bottom line is that as a business, you have a legal liability to prevent loss or damage to third-parties, and if you don’t have insurance, the liability is attributable to you and any claim awarded by a court comes out of your own pocket.
Why does a home staging business need Errors & Omissions insurance?
If a customer claims that you were in some way negligent in the performance of your job and they suffered some monetary damage, you need E&O insurance, sometimes called professional liability insurance.
An example could be when you are responsible for a home staging operation that has to be completed by a specific date because the realtor set a deadline owing to a major release of new homes competing on the market in the same area that will certainly reduce the demand for this property.
If for any reason you are unable to finish on time and the home either fails to sell at all, or gets a “best-offer” lower than your own estimate, then the customer could claim all of the losses, and the realtor could sue for damages for loss of reputation and other such ancillary losses.
In the same way as for general liability insurance, if a court decides against you, you will have to find the money out of your own pocket.
Sometimes a very friendly client or associate can turn into an angry and aggrieved person in front of a judge and testify against you in court if there is any dispute about any aspect of the project.
These are highly subjective complaints, and if you let it get before a judge, relying on your own opinion that you did nothing wrong, then you could be in for some very expensive surprises. Insurance is the way you protect yourself and your bank account.
Most significantly, with E&O insurance, you are guaranteed to have proper legal representation all the way through any court process.
The insurance company is obliged to defend your case with its own team of lawyers regardless of whether or not you were actually at fault.
Is there a need for specific car insurance for home staging businesses?
If running a vehicle of any kind is going to be part of your work, then you must understand that your existing private vehicle insurance will not cover you if anything happens while you are actively engaged in work-related activity.
In fact, all protection is lost, and if by chance you have an accident and someone else is injured, you could be up for the total amount of hospital treatment, rehabilitation damages and everything else that the court awards the other party – you could potentially be facing hundreds of thousands of dollars in claims which would mean total ruin and loss of your home.
The only way to ensure that your vehicle is insured for both its own value, and the valuable contents, is by a proper commercial vehicle insurance package.
Beware – most car insurance companies do not cover the theft and damage to private vehicles used for business purposes, so you definitely need to add on commercial coverage, or take out separate insurance if part of the home staging business involves moving furniture, artwork or ancillaries into and from the vendors’ homes.
What does Home Staging Insurance cost?
You can select to take general Liability policies sufficient for most small businesses to cover you for up to $1 million for a single incident, with the total limit for one year at $2 million.
For general liability cover of $1 million / $2 million, you should expect to pay around $70 – $90 per month.
In a few states, some companies offer rates as low as $60-$65 per month, so it’s worthwhile doing a thorough internet search.
E&O insurance of $25,000 single claim / $50,000 full year should cost around $45-$50 per month.
Many insurance companies offer a package called the Business Owner’s Policy (BOP).
Most business owner policies combine the two liability covers, plus commercial property insurance, for around $100 per month, but that depends on the value of the property and the insurance levels chosen.
Vehicle insurance costs will depend entirely on the value of whatever is being insured.
If you employ any full-time or casual workers, you must by law in most states pay workers compensation insurance.
The rate is based primarily on your payroll, as it is calculated at a basic rate per $100 of monthly pay of each covered worker, adjusted for the level of risk in your industry. Different states each have different basic rates.
Can a part-time home staging business be insured?
Short-term business insurance by the day or month may be a good option for you if you are working in home staging on a part-time basis.
Some stagers take on periodic work in the peak months when home sales are at their highest, and so they don’t have enough continuous business activity to justify full insurance cover for a whole year.
Several insurance companies offer special policies where you can nominate a specific period when you want to be covered.
By only paying for the period of cover that you need it for, you will save by having lower premium costs while still having the same risk cover.
The key feature of short-term insurance is that you purchase the cover for a specific and defined period – a date on the calendar, or a week starting on a specific date, or a month – for example for 30 days beginning on the specified date.
Insurance for “mornings only” or such is not available.
Temporary insurance coverage can provide you with all the liability insurance that regular annual policies cover.
So it’s essential to find a policy that covers all of the risks that you are taking on when you start the work.