.svg)
As a home daycare owner, ensuring the safety and well-being of the children in your care is a top priority. However, accidents and unforeseen incidents can happen, which is why having the right insurance coverage is essential.
In this article, we will delve into the importance of business insurance for home daycare providers and discuss the different types of insurance policies that you need to be aware of. By understanding the various insurance options available, you can protect your home daycare business and provide peace of mind to both yourself and the families you serve.
What is daycare insurance?
There are a lot of things to consider when starting a childcare business at home. One of the most important things to consider is daycare business insurance.
Daycare insurance, also known as childcare insurance or daycare liability insurance, is a specialized type of business insurance designed to protect home daycare providers from potential risks and liabilities associated with their operations. This insurance coverage offers financial protection in the event of accidents, injuries, property damage, or lawsuits that may arise while children are under your care.
Manage your childcare business and save time with brightwheel, the most secure childcare and preschool software. Manage personal data and online payments with the highest security standards (PCI Level 1) and stay compliant with contactless check-ins, health checks, sleep checks, and room ratios.
Three types of home daycare insurance
The insurance requirements for your daycare will vary based on your state's licensing requirements, the number of children in your program, and the type of daycare business you have. Therefore, it is important to do careful research and choose insurance policies that will meet your business needs and protect you, your business, and your employees from liabilities.
For daycare business owners, understanding the key aspects of daycare insurance is crucial for ensuring adequate protection and mitigating potential risks. Here are three types of home daycare insurance to consider:
Homeowners insurance
Homeowners insurance protects your home daycare business in case of loss or damage to your home, property, assets, and personal belongings. However, not all homeowners insurance policies cover home daycare liabilities.
If your homeowners insurance policy does not extend to home daycare businesses, you will need to purchase an additional policy to protect your daycare business. The additional policy will protect your daycare business from property damage, fire, vandalism, theft, and other risks to your property. The coverage can also extend to protect you if a child is injured or has an accident while in your care.
Liability insurance
Liability insurance is a broad insurance policy that protects your daycare business from financial losses resulting from claims or lawsuits filed against you due to accidents or injuries that occur on your premises. This coverage can help with legal expenses, medical costs, and settlements or judgments if found liable.
Home daycare businesses need general liability coverage, commercial auto liability coverage, and abuse and molestation coverage.
General liability coverage
General liability insurance, also known as "slip and fall" insurance, protects your home daycare business if you are accused of property damage or if a child or family is injured on your premises. General liability insurance also covers potential court costs and legal fees incurred by your home daycare business.
General liability insurance covers:
- Damage to equipment and supplies (such as furniture, toys, appliances)
- Property damage due to natural disasters
- Property damage due to vandalism
- Reputational damage
- Physical injuries that children sustain while in your care
Workers’ Compensation
Workers’ Compensation is vital for protecting employees and employers from financial burdens due to work-related injuries or illnesses. It covers medical expenses and lost wages, reducing stress during recovery. For employers, it minimizes lawsuit risks and shows commitment to employee welfare. In home daycare, it ensures incidents are managed fairly.
Commercial auto liability coverage
If you transport children to and from your home daycare business, you need commercial auto liability insurance to cover the cost of damages and potential lawsuits you may incur if your business's vehicles are in an accident.
Commercial auto liability insurance covers:
- Payment for treatment of your passengers' injuries
- Medical bills and repair bills if the other driver is at fault but is uninsured or underinsured
- Collision damage
- Comprehensive damage to your vehicle that is not directly caused by an accident
Abuse and molestation coverage
Unfortunately, the risk of abuse or molestation allegations is a reality in the daycare industry. To address this risk, daycare insurance policies often include specialized coverage for allegations of abuse, molestation, or misconduct by daycare staff members. This coverage provides financial protection and can help with legal defense costs in the event of such allegations.
Employment Practices Liability Insurance (EPLI)
EPLI is essential for home daycare providers, protecting against employment-related claims like discrimination, wrongful termination, harassment, retaliation, and contract violations. It helps safeguard against financial and reputational damage, ensuring a fair work environment.
Errors and omissions insurance
Errors and omissions (E&O) insurance, also known as professional liability insurance, protects home daycare providers from claims alleging negligence or failure to provide adequate care. This coverage can be crucial in situations where a parent or guardian believes that harm has occurred due to negligence or professional misconduct.
Errors and omissions insurance covers:
- Children's injuries caused by a lack of supervision
- Failure to provide promised services (e.g., promising to teach a toddler to write their name within the first month of attending your program)
- Professional oversights or mistakes (e.g., feeding peanut butter to a child with a peanut allergy)
How much should you spend on home daycare insurance?
The cost of home daycare insurance can vary widely depending on factors like location, coverage options, and the size of your business. It's crucial for daycare business owners to understand the general expenses and considerations involved in securing insurance coverage.
In the U.S., the typical cost for daycare business insurance can range from $250 to over $2,000 per year or more for a separate business insurance policy. For in-home childcare, general liability policies typically range from $495 to $1,480. Commercial property insurance costs between $28 and $62 per month on average. Additionally, annual premiums for general liability insurance can range from $450 to $2,000. It's important to note that these figures are estimates and individual costs may vary depending on the factors mentioned above. It's always advisable to consult with insurance providers and stay informed about the latest trends and regulations in the daycare insurance industry.
Determining the right amount to spend on daycare insurance can be complex, as there is no universal formula. To help daycare business owners set a suitable insurance budget, consider the following steps:
Evaluate Risks and Coverage Needs
Understanding the coverage options available and assessing the specific risks faced by your daycare business will help you determine the appropriate level of coverage required.
Start by identifying the specific risks associated with your daycare operations, such as potential child injuries, property damage, or allegations of abuse or neglect. Understanding these risks is essential for selecting the appropriate insurance coverage.
Once you have a clear understanding of the risks, choose insurance policies that provide comprehensive coverage for these potential issues. Refer to the "Three types of home daycare insurance" section above for essential types of coverage to consider.
Calculate Business Revenue
A general guideline is to allocate between 1-5% of your annual revenue toward insurance costs. Businesses with higher risk profiles may need to allocate a larger portion of their budget to insurance. For example, a daycare generating $300,000 in annual revenue, it may be prudent to set aside between $3,000 and $15,000 for insurance, depending on the specific coverage needs and risk factors.
State and local regulations
Home daycare providers must comply with state and local regulations, which may include insurance requirements and minimum coverage levels. Some states may mandate specific insurance riders (optional add-ons), such as coverage for abuse or molestation. It's essential to familiarize yourself with the specific requirements in your area to ensure compliance and adequate coverage.
Consider Business Size and Scale
The scale of your daycare operation significantly impacts insurance needs. Home-based daycare centers typically require less coverage than larger commercial facilities, due to fewer children and smaller operations. A larger staff increases payroll and workers’ compensation costs, which can affect insurance premiums. High-value property or specialized equipment may necessitate higher property insurance premiums to ensure adequate protection.
Evaluate Deductibles and Premiums
When selecting insurance policies, consider the trade-off between deductibles and premiums. Higher deductibles can lower monthly premiums but increase out-of-pocket costs in the event of a claim. It's important to assess what you can afford to pay upfront. For example, opting for a $1,000 deductible may result in lower monthly premiums compared to a $500 deductible, but it requires a higher initial payment if a claim arises.
Factor in Financial Protection
Allocating a portion of your budget for insurance is a proactive measure to protect your business from unforeseen financial losses, ensuring long-term stability and peace of mind. Consider exploring Business Owner’s Policies (BOP), which may offer cost-effective packages that combine multiple types of insurance coverage, providing comprehensive protection at a reduced cost.
Additional factors
Other factors that can influence the cost of home daycare insurance include the number of children under your care, the size of your facility, the age range of the children, and any additional services offered. These factors may impact the level of risk associated with your daycare business and, consequently, the cost of insurance coverage.
Safeguard yourself and your business with home daycare insurance
Obtaining the right insurance coverage for your home daycare is essential for protecting your business, yourself, and the children in your care. By carefully evaluating these factors and consulting with insurance professionals, daycare business owners can make informed decisions about their insurance needs, ensuring they have the appropriate coverage to safeguard their business, employees, and the children in their care.
Brightwheel is the complete solution for early education providers, enabling you to streamline your center’s operations and build a stand-out reputation. Brightwheel connects the most critical aspects of running your center—including sign in and out, parent communications, tuition billing, and licensing and compliance—in one easy-to-use tool, along with providing best-in-class customer support and coaching. Brightwheel is trusted by thousands of early education centers and millions of parents. Learn more at mybrightwheel.com.
