In a 2011 survey conducted by the U.S. Census Bureau, it was found that 61% of children under 5 years old needed childcare assistance. The majority of these children were cared for by relatives, but 32.9% (roughly 6.7 million children) were cared for in a nursery, day care center, in-home care facility, or Head Start program.
More and more couples are finding it necessary to have two incomes in order to make ends meet. Some can turn to family members to watch their children during the day, but many rely on daycare centers for their childcare needs. Because of the large demand for these services, many upstart companies are finding it easy to compete in this growing market. As with any business, however, daycare owners face many risks that can threaten their growing business. Daycare insurance can help.
Childcare Services in America: A Snapshot
- Approximately 44% of new mothers return to the workforce within 12 months of giving birth
- There are more than 117,000 childcare centers in the United States
- On average, pre-school aged children with working parents spend 35 hours a week in daycare centers
What Is Daycare Insurance?
Daycare insurance is a specific type of business insurance that was designed to meet the unique needs of childcare businesses. It provides business owners with much-needed daycare liability insurance coverage as well as business property coverage. Many policies come with a varied set of coverage options that allow business owners to build an insurance policy that caters to their daycare’s particular needs.
Who Needs Daycare Insurance?
Whether you operate your daycare business out of your home or have an established center dedicated to this service, you will want to consider daycare insurance. In many cases, this coverage is required.
Childcare centers and nursery schools are required to carry daycare liability insurance in order to be licensed by the Department of Health and Human Services (DHHS), and most states require this licensure in order for the businesses to legally operate. While the DHHS has strict guidelines that your business must adhere to, your insurance company may have even more stringent requirements that will affect your daycare insurance costs. These requirements are put in place to limit your exposure to liability lawsuits.
DHHS does not require liability insurance to license home-based daycare businesses. However, you may be required by your homeowners insurance policy to carry a business insurance policy or to purchase specific endorsements to protect your business. Do not expect that your home policy will cover you for liability charges or property damage stemming from your home business. Your insurer many even refuse to renew your policy if they discover that you have been running a business out of your home without home daycare insurance.
Daycare Business Insurance Offers Liability Protection
We live in a litigious society. There are many instances wherein your daycare business may face a liability lawsuit. Even if the charges are dropped, the ensuing legal defense fees can be quite expensive. Liability insurance provides coverage for any court costs and legal fees associated with any covered event.
- General liability: This insurance is necessary for any business that welcomes the public onto its property. This provides coverage for property damage or personal injuries suffered by third-parties while they are in your place of business. This is particularly important when dealing with children as they have a tendency to get injured. In most cases, the injuries will be minor, but if an injury is severe enough to require medical attention, your facility may be liable for the expenses.
- Premises liability: This provides coverage for the area surrounding your daycare facility including the parking lot and play areas. If anyone is injured due to your failure to properly maintain a safe environment, your business may be held liable for any ensuing medical bills or property damage.
- Professional liability: This insurance covers your teachers and childcare workers. If your business is sued because a member of your staff has shown negligence or indifference to the children’s needs and safety, your business can be sued. Lawsuits can spring from mental, physical or emotional abuse of the children.
- Commercial vehicle liability: This is required if your daycare business has company owned vehicles that are used to transport children to and from schools.
- Non-owned or for hire auto liability: If you or any of your workers are likely to be driving children in privately owned vehicles for the purposes of field-trips or other outings, your business can be held liable for injuries or property damage if the driver is in an accident. This insurance covers privately owned vehicles when they are being used for company business.
- Corporal punishment liability: If one of your employees strikes a child or is accused of administering corporal punishment, your business can be held liable. This insurance option provides financial protection if you face a claim.
- Abuse and molestation liability: If an employee of your daycare turns out to be sexually or otherwise abusive, your business can be liable for extremely expensive fines and medical payments. This insurance coverage will protect your business from severe financial losses.
- Umbrella liability protection: This coverage provides additional liability protection beyond the limits of your insurance policy's liability limits. Larger daycare facilities may benefit from this added coverage.
Daycare Business Insurance Offers Property Insurance
Daycare business operations often invest a lot of capital into equipment to keep the children entertained during the day. A daycare insurance policy can provide you with compensation if your business property is lost or damaged. Coverage needs are slightly different for those that own businesses establishment and those that run a service out of their homes.
- Building coverage: This provides coverage for damages to the structure of the building in which your business is housed. It provides compensation for damages caused by fire, severe weather, falling objects and property crimes. Additional insurance may be necessary for damages caused by such things as floods and earthquakes.
- If you rent your business space, you will not need this insurance coverage.
- If you are working out of your home and you have a dedicated space for your daycare operation, you may need to add a small rider to your homeowners insurance policy.
- If you own a daycare building, you will want to be certain that you protect your investment with this insurance.
- Contents coverage: This provides coverage for damages to indoor items you use for childcare purposes. This can include cribs, toys, books, sound systems, and electronics. If any of your business property is lost or damaged by fire, extreme weather, vandalism or theft, you may be able to receive reimbursement for your loss.
- Outdoor equipment coverage: Most daycare establishments include outdoor equipment such as swing-sets, sandboxes and sports equipment. In many cases coverage for loss or damage to this property will be included in your contents coverage, but some insurers will require you to purchase a separate endorsement for outdoor equipment.
Daycare Insurance Providers Offer Additional Coverage
Daycare insurance providers will offer other insurance options that may be beneficial to your childcare business; among them are:
- Field trip insurance: This provides liability and property damage coverage while you are providing childcare services off-site.
- Special events liability coverage: If your facility hosts a special event such as a holiday party, a fundraiser or a pageant, this one-time insurance policy can provide liability protection during the event.
- Lost income insurance: If your facility is forced to temporally close its doors because of a covered event, this insurance will provide a continuation of income so that you can continue paying employee salaries and monthly expenses until your business is able to reopen.
- Workers compensation: This provides medical coverage for your employees if they are injured on the job. Every state has its own laws pertaining to workers compensation insurance, so you will need to make certain your daycare business is compliant. Many daycare insurance companies allow you to purchase this coverage as an addendum to your policy.
Adding options to your policy often increases the cost only marginally, and you can benefit from the added protection.
Learn More About Daycare Insurance
As you're starting your daycare operation, make sure you know what the demands are in your area. A little market reseach will go a long way, and will help you understand what kind of daycare would be most profitable. After you've determined what the structure of your business is and how many children (and of what age) you want to take in, it's time to consider coverage.
When you apply for permits and register your childcare business with your state government, you'll pay a tax to get unemployment insurance. However, getting liscensed and acquiring permits isn't the end of your journey. Finding the right coverage that meets your needs and fits in your budget is also important. It's a good idea to contact your State Insurance Commissions office for general overview information on what you'll need to carry.