In a previous post, I talked about why it is important for professional organizers to get insurance — and the right insurance. But what about hiring others? Are your contractors or employees covered by your normal business insurance? I wondered about this for my own business, Metropolitan Organizing.
Do You Need Extra Insurance When Hiring Contractors?
I asked my insurance agent for his professional opinion. He said, “By insurance definitions, an independent contractor is a separate company. That company should be able to show proof that they have their own business insurance. Insurance for independent contractors varies by company and is regulated state by state.”
This type of coverage is considered an endorsement or expansion of your base coverage and is not normally included automatically. If the person you’re hiring, however, is treated like a part-time employee, then you need to make sure your policy extends to all your part-time and full-time employees at possibly no extra cost. Check your current policy. See if 1) it does cover part-time or full-time employees, and 2) what coverage is offered. Policies may or may not include employees or may charge per employee.
Why is it Important to Insure Independent Contractors and Employees?
What if someone you’ve hired breaks something while they’re on your job? Does your business insurance or the client’s homeowner insurance cover the loss? According to my agent, if something is damaged in the home, the homeowner policy should provide coverage.
However, since the professional organizer is being paid to provide a service and they caused the loss, this could be questioned. Many times when the homeowner policy pays a claim, the homeowner policy’s insurance company may come after the organizer’s business to get reimbursement for the claim they paid. This is called subrogation.
My agent explained that subrogation is common. For example, in instances like automobile accidents the health insurer might pay the emergency room bill. Then they would go to the guilty party of the automobile accident to get reimbursed. An example in our business would be, if someone in your employ drops something of low value — like one of their client’s daily dishes — you should consider it your cost of doing business and replace it.
However, if you drop a box containing all of your client’s hard-to-match china plates and you have, let’s say, a $6,000 loss, then you would pay your deductible and the insurance company would pay the difference. If your insurance policy has Care, Custody, and Control Coverage, then it should respond to these incidences. It is important to ask for the coverage you need, and to ask your insurance agent to give you examples of how the various coverage will work so you understand. There is typically a deductible that starts at $500, as with any homeowner’s policy.
Should Your Organizing Company be Bonded?
According to my insurance agent, bonding protects your company if an employee is convicted of stealing a client’s goods. Some insurance companies offer bonding as an option. Even though bonding insurance may protect the business against employees, it may exclude the owner and only activates if an employee is convicted of stealing a client’s goods.
My agent recommends bonding coverage and describes it as more of a marketing expense. It is a “warm and fuzzy” add-on to increase a potential customer’s comfort level. Clients may ask you to provide proof that you have insurance and are bonded before they let you into their house. Coverage is generally good for 12 months and doesn’t normally cover contractors.
Great Advice for When You Need Extra Help with an Organizing Job
Sooner or later you are going to get a bigger job than you can handle alone. I recommend that the business owner go to their local NAPO chapter and ask another NAPO member to help them out. Just make sure that the NAPO member can show proof that they have their own insurance.
If you hire or take along a friend to help, your insurance will officially treat them as an independent contractor. Your insurance does nothing to protect your business liability-wise if something happens on the job.
Also, if you are in a position where you are asked to sub-contract to another NAPO member or professional organizer, make sure you know your legal rights regarding what can and can’t be asked of you on the job. Also, ensure that you have the proper coverages to protect yourself.
Getting the right insurance protects you, your employees, and any contractors you might hire. It’s all about treating your business as a business, not a hobby.