January 30, 2008
Bonded vs. Insured Stagers
This is a follow up post to the previous post #1 Question You Should Ask Your New Stager (special thanks to Carnival of Real Estate for the headlined mention!)
I have encountered stagers who have bonds but not insurance, which is really less than ideal in my opinion. Let’s look at what is bond first: (info courtesy of JW Surety Bonds)
What is a surety bond?
In the simplest terms, a surety bond is a guarantee. What the bond guarantees varies depending on the language of the bond. It is a form of credit, not insurance.
How do surety bonds work?
The principal (you) pays a percentage of the bond amount called a bond premium. In return, the surety extends “surety credit” to make the required guarantee (the bond). A claim can arise when the principal does not abide by the terms of the bond. In the event of a claim, the surety will investigate to ensure it is valid. If the claim is valid, the surety will look to the principal for payment of the claim and any associated legal fees.
What good is a bond if I have to pay for claims?
A bond is not insurance, it is a form of credit where the principal (you) are responsible to pay any claims. The alternative to a bond is to post cash or a letter of credit. Surety bonds are advantageous, as they typically require no collateral, which frees up capital. Bond premiums are also similar to fees for letters of credit and are typically less than one would earn making conservative investments with the available capital.
Note the repeated sentence “A bond is not insurance.” In the event that something is damaged at a client’s home because of the stager’s mistake, just because the stager has a bond does not mean the homeowner will receive compensations for the damage. Bond simply acts as a letter of credit for the principal, i.e. the stager in this case, it does not protect home sellers nor the owners for accidental damages.
In a follow up blog, I will feature an interview with an insurance agent on the subject matter. In the meanwhile, jot down your thoughts and 2 cents in the comments area below.
Cheers,
Cindy
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