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A home daycare can be a lucrative and fulfilling business, but it comes with a fair amount of liability risk. Homeowners insurance covers personal liability in the event that you or a resident of your home are found legally responsible for an injury, but that coverage doesn’t extend to businesses like home daycares.
The insurance, safety, and licensing requirements that come with running a home daycare vary from state to state, but most states require you to have a separate liability insurance policy for your daycare.
Depending on your insurance company, you may be able to extend a limited amount of liability coverage to your home daycare by adding an endorsement to your policy, but bear in mind that this may not be enough coverage if you’re involved in an expensive lawsuit. It’s also possible that your state will require you to get daycare insurance, which is a type of business liability coverage.
A standard homeowners insurance policy does not cover home daycares
You may be able to add coverage to your homeowners insurance to extend protection to your home daycare
Depending on your state, you may be required to purchase a standalone liability insurance policy to run a home daycare
A standard homeowners insurance policy does not extend liability coverage to your home daycare or any in-home business. The only scenario in which childcare would be covered by homeowners insurance is if it's not for economic gain, like if you babysat your nieces or nephews for free.
Homeowners insurance typically only offers up to $2,500 in home business property protection, and doesn’t extend liability protection to in-home businesses. That means if a child is hurt at your home daycare, and you don’t have any additional coverage, you’d be on the hook for any legal fees or medical expenses. Depending on your state and insurer, you may be able to add coverage to extend your policy’s liability protection to your home daycare, but coverage is typically capped at $500,000, which may not be enough.
Depending on your insurance company, your insurer could potentially not renew your policy if you decide to run a daycare out of your home, even if you are a licensed caretaker through your state. Caring for multiple children that are not your own comes with a lot of responsibility, and although you may be qualified to do so, some insurance companies may not want to take on the added risk.
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Home daycare insurance is a type of business liability coverage that is designed specifically for daycares. Daycare insurance policies offer a variety of coverage options so that you can customize your policy to suit your coverage needs. Below are common types of liability coverage included in a daycare insurance policy.
General liability coverage protects you in the event that a third party damages property or gets injured while on your property. If a child is injured at your home daycare, general liability coverage can help pay for legal fees or medical expenses.
Professional liability coverage protects your business in the event that you are sued because of something one of your employees did. For example, if your employee shows negligence by accidentally giving a child peanuts when they are allergic, professional liability coverage would protect you in the event that the parent filed a lawsuit against your daycare.
If you use a car as part of your daycare business, whether you pick the children up or take them on field trips, you’ll need a commercial auto insurance policy to protect you in the event of an accident. Most personal auto insurance policies exclude coverage for business use.
Corporal punishment is the use of physical punishment. If one of your staff members spanks or hits a child, your business could be found liable. Corporal punishment liability insurance can help pay legal fees if you face a lawsuit.
Some insurance companies may offer additional coverage in the form of in-home business or childcare coverage that you can add on to your homeowners insurance policy. Adding a childcare or in-home business endorsement to your homeowners insurance extends business property coverage and liability coverage to your home daycare. Your insurance company may only offer coverage for your home daycare if you meet certain criteria, like only enrolling a maximum of three children.
Although this type of coverage is better than nothing, a home daycare add-on may not be enough coverage to pay out in the event of an expensive accident. It’s also worth noting that in-home business coverage only provides protection for accidents that happen on your property. That means if you took children in your daycare to the local playground and one were to get injured, you wouldn’t be covered for liability expenses arising from the accident.
If you run a home daycare of less than three children, adding childcare coverage to your homeowners insurance may be a suitable option. But keep in mind that depending on your state, you may be legally required to obtain more coverage. Check with your state insurance bureau to learn more about your business liability requirements.
If you're worried that daycare insurance doesn't offer enough protecton, you may want to consider adding supplemental insurance to your policy. Supplemental insurance can fill in some of the coverage gaps left by your daycare insurance. Below are additional common insurance options for home daycares.
If you have employees that work at your home daycare, you may want to consider workers compensation insurance. Workers compensation covers the cost of lost wages and medical expenses if an employee is injured on the job.
Errors & omission coverage, also called malpractice insurance, protects you and your home daycare if you are accused of malpractice or if you get into a legal disagreement with a client.
Loss of income insurance can help pay employee salaries and business expenses if your daycare is forced to temporarily close due to a covered incident.
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