The economy is tough right now. Many two income families have found cut backs and job lay offs having a serious impact on their financial situation. As a result, many women (yes, this is a woman dominated industry) have started a day care in their home. They’ve done this for a variety of reasons but essentially it is to supplement earnings and reduce their expenses. A huge mistake made by many of these new entrepreneurs is assuming their homeowners insurance will cover any risks from the day care. This cannot be farther from the truth.
In states where day care businesses must be licensed, proof of insurance is generally required for the license. However, some states don’t require licensing, and others have a size requirement which allow many day care businesses to operate unlicensed. Anyone operating a daycare business is exposing themselves to huge risk. An accident, no matter its unintentional, exposes you to great loss. If you are found guilty or negligent, you can be held personally responsible for all legal fees and judgments. Settling this type of judgment can put a huge burden on you, your business, and your family. In fact, it could cost the day care operator everything, including the family home and savings.
In many states, it doesn’t take a lot of children to be required to have additional staff. If you have employees, chances are pretty good you need to have worker’s compensation insurance for your daycare business. Your licensed insurance professional and state department of insurance should be consulted to determine your specific requirements.
Many insurance carriers provide daycare (sometimes called child care) insurance. The biggest component is the Liability aspect of the coverage. This Liability coverage will protect your business even in the event you are found negligent and responsible for damages or loss. Liability insurance will cover legal fees and defense costs as well as any settlements or awards up to the policy limit. Many daycare policies offer an abuse and sexual molestation as optional coverage. The reality of today’s world makes this coverage option worth taking a hard look at. In addition, ask about a commercial liability insurance umbrella. These policies offer additional protection in the event of a liability claim against your daycare business.
The most important recommendation we can make if you operate a daycare in your home or elsewhere to review coverage and risk exposure with a licensed insurance professional. Don’t make the mistake of assuming your homeowner’s policy will cover you. Don’t expose yourself, the family home, and peace of mind by ignoring the fact that you are running a business which needs its own insurance coverage.