Daycare Insurance: Coverage, Top Providers & Costs

Daycare insurance is coverage for businesses in the childcare industry. Policies can cover business-owned property and liability risks that come with caring for children. Depending on the coverage, annual costs of daycare insurance range from $400 to $1,350 for in-home childcare businesses and from $1,000 to $3,500 for commercial daycare centers.

To get your daycare insured quickly and properly, try an online broker like CoverWallet. It uses technology to compare multiple quotes from top carriers quickly and find low-cost options that are right for you. Get started today by filling out a free, no-obligation application online.

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How Daycare Insurance Works

Daycare insurance is a group of business policies childcare providers buy to protect their assets. Each policy protects against a different risk. Most daycares need more than one policy to be fully insured. The two coverages they most often need are general liability and commercial property insurance.

Many carriers offer these fundamental coverages in a business owner’s policy (BOP), giving you two types of coverage in a single policy for a reduced rate. BOPs typically cost about $750 per year for daycare centers.

Who Daycare Insurance Is Right For

Business owners who care for children almost always need insurance. Many states require childcare insurance for commercial daycare facilities and child and adult group homes as well as:

• Religious and nonprofit daycare centers
• After- and before-school programs
• Summer day camps
• Preschool programs

Depending on their state and the number of children in their care, some home-based daycare providers need a license and business insurance too. You can find contact information for the state agency in charge of licensure from the United States Department of Health and Human Services.

The one exception to the guideline that most childcare providers need daycare insurance is the occasional teenage babysitter. Even though they can be sued, teenagers seldom have the resources that make them a target for litigation. This is different from professional nannies who are sometimes considered small business owners and may need nanny insurance.

Types of Daycare Insurance

Different coverages are appropriate for different types of childcare businesses. An at-home daycare provider needs some property insurance, but not as much as a large commercial center. Similarly, a one-person operation won’t need workers’ compensation, but a daycare with staff will. Below are some policies that are common to most daycare businesses.

Most Common Childcare Insurance Policies

General Liability Insurance

General liability insurance covers third-party claims for bodily injury, property damage, and reputational harm, such as a:

• Short in your microwave sparks a fire in the building you rent for your daycare
• A child loses her two front teeth falling off your teeter-totter
• Competitor claims you defamed them on your business’ social media page

These types of liability claims may be your greatest financial risk, which makes general liability a fundamental coverage for daycare businesses. If your business sees a claim like one of these, general liability typically covers your legal costs and may pay the injured third-party’s medical bills or property repairs. Coverage typically extends to harm your employees cause too.

Property Insurance

Property insurance covers your daycare business’ assets, including your building, equipment, and supplies. You can insure your business property for either its actual cash value or replacement cost. In a property claim, actual cash value coverage deducts depreciation from the payout while replacement cost coverage pays what it costs to repair the item, up to the insured limit.

Daycare providers who rent their business spaces can get property insurance that only covers their equipment and supplies. Any damage they cause to the physical structure typically is covered by general liability.

Professional Liability Insurance

Professional liability insurance, also called errors and omissions, covers the cost of your legal defense if you or your staff are accused of causing harm while providing professional services. For example, a professional liability policy often covers parents accusing you or your assistant of:

• Serving peanuts to a severely allergic child
• Failing to teach a toddler how to read as promised
• Teaching parents a new swaddling technique that harms their infants

Because claims like these involve your expertise, they fall under professional liability insurance, which typically pays for legal bills, court costs, and settlements or judgments against your business.

Abuse & Molestation Coverage

Unfortunately, daycare providers have to worry about accusations of sexual misconduct. Such allegations may be rare, but they’re catastrophic if they occur. Abuse and molestation insurance covers these accusations, even if they are meritless, and some also cover corporal punishment. Sometimes, this coverage is included in either your professional or general liability insurance, but standalone policies are also available for business owners who want to ensure adequate coverage.

Childcare businesses get abuse and molestation insurance to cover their business’ legal defense costs if one of their employees is accused of sexual misconduct. Defense costs typically are paid even when you are found liable or negligent in supervising the accused employee. However, the coverage seldom extends to the perpetrator in an intentional act. Some insurers may even require you to repay their costs if your employee is found guilty.

Commercial Auto Insurance

If you use a car, truck, van, or combination of vehicles for your daycare business, then you need commercial auto insurance to cover damages and lawsuits in case of an accident. Most states require business owners to carry at least liability for damage they cause others, but daycare providers may want to add other coverages, such as:

• Medical payments: Pays for injuries sustained by you and your passengers
• Uninsured and underinsured motorist: Pays medical and repair bills if the other driver is at fault but doesn’t have adequate coverage
• Collision: Pays for damage to your car caused by an accident
• Comprehensive: Pays for damage to your car caused by events other than an accident

Daycare providers who drive their personal vehicle for business purposes may also need commercial auto insurance. Most personal auto insurance excludes any business-related driving, so daycare owners and their passengers may be unprotected when they are driving their students in their personal vehicles.

Workers’ Compensation Insurance

Workers’ compensation insurance covers the costs associated with employees’ work-related injuries and illnesses like medical bills and lost wages. Most states require daycare owners to have coverage as soon as they hire even part-time staff who may suffer injuries from:

• Slipping on wet floors
• Lifting children
• Tripping over playground equipment

Workers’ compensation insurance is important for business owners who have employees because neither professional nor general liability covers employees’ injuries, and you can’t add workers’ comp to a BOP. Additionally, in most states, workers’ comp covers your legal fees if the injured employee decides to sue.

Accident Insurance

While not strictly business insurance, accident insurance can be an important part of protecting a daycare. Policies pay a specified benefit to help pay medical expenses after a child suffers an injury under your supervision. Daycare owners usually need two coverages:

• Accidental medical expense (AME): Pays costs such as hospital bills, emergency room costs, and ambulance services
• Accidental death and dismemberment (AD&D): Pays a set benefit amount if a child loses a limb or dies as the result of a covered accident

AME can be purchased as primary or excess coverage. As primary coverage, AME pays the injured party’s costs regardless of any other health insurance that may apply. Excess coverage only pays costs that exceed the injured party’s health insurance.

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Umbrella Liability Insurance

Umbrella liability insurance provides additional coverage when claims exceed the limits of underlying liability policies, including general liability and commercial auto insurance. Legal fees can exceed coverage limits easily on liability policies, and one liability policy can’t make up the difference for another. Umbrella insurance picks up where your other liability policy falls short.

Examples of when a daycare owner may want umbrella insurance include:

• Fear of large liability lawsuits: If a business owner has a general liability limit of $200,000 but is sued for $500,000, an umbrella policy kicks in to pay the remaining $300,000
• Caring for children from high net worth families: Families with more financial resources may be more likely to sue if things go wrong
• Renting a larger space: Commercial landlords may require higher liability limits, and umbrella insurance usually satisfies their requirements
• Hiring additional staff: Umbrella insurance can extend the limits on the portion of worker’s comp that covers employee lawsuits

Umbrella insurance can increase the limits on multiple underlying policies, and it’s often a more cost-effective way to increase the limits on your other liability insurance policies.

Daycare Insurance Providers

Daycare insurance is a niche product, so owners sometimes have a hard time finding providers. For our list of top insurance providers, we looked for well-known and financially stable carriers that have a history of writing specialty coverages. We also included two online agencies that can sell insurance from multiple carriers.

CoverWallet

CoverWallet works with some of the best small business insurance companies, including Liberty Mutual, Chubb, and Progressive, to quote, bind, and issue policies online for businesses in a number of industries. Daycare providers who want fast quotes should consider working with CoverWallet. Not only is the CoverWallet application easy to complete, but it also returns quotes in just seconds. General liability insurance through CoverWallet starts at $468.

Assure Child Care

Assure Child Care is a specialty group program that gives members a cost-effective way to get insurance, including general liability, commercial property, and workers’ compensation coverage. Essentially, Assure Child Care members band together to buy insurance, allowing insurers to charge a lower rate than if each individual business owner applied for coverage on its own. This makes Assure Child Care the best choice for small daycare businesses and at-home providers who struggle to find affordable childcare insurance.

Markel

Markel is an excellent choice for both in-home and large commercial daycare businesses with employees. It offers up to $3 million in coverage on both professional liability and abuse and molestation insurance. In addition to these high coverage limits, Markel partners with employee screening services, sexual misconduct risk management training programs, and safe driving education providers that can help daycare owners reduce the risk of filing claims.

Philadelphia Insurance Companies

Daycare is one of the top industries for the Philadelphia Insurance Companies (PHLY), and it offers an insurance program for nonprofit and for-profit childcare centers. The comprehensive program combines multiple coverages, including directors and officers insurance. This makes PHLY the right choice for nonprofit daycare businesses that want the convenience of having all their daycare insurance with one company.

CyberPolicy

CyberPolicy is a reliable broker that shops and compares quotes on all types of business insurance policies from top carriers, including Progressive Commercial, Chubb, Liberty Mutual, and Nationwide, in all 50 states. This makes it an excellent choice for busy daycare owners who don’t have time to comparison shop. The company does most of the legwork so that you can focus on the children in your care while getting the right coverage for your business at an affordable price.

Daycare Insurance Costs

Daycare insurance costs can range from about $250 per year for home-based daycare businesses to around $2,000 for commercial daycare centers. How much your particular business spends depends largely on the number of policies you purchase, the amount of coverage you select, and the deductibles you pick.

Childcare Insurance Costs & Deductibles by Policy

Commercial daycare centers tend to be larger and have more clients than at-home businesses, which usually translates into more risk and higher insurance costs. However, size isn’t everything when it comes to daycare insurance. Carriers consider several business characteristics and coverage details when they set premiums, including:

• Revenue: Daycare businesses that earn more money often pay higher premiums because insurers assume they have more to lose and may be more likely to get sued.
• Employees: Workers’ compensation insurance rates are based partially on payroll, so more staff often means you pay more for coverage. Employees also increase your liability risk, so you may pay more for general and professional liability insurance.
• Claims history: Insurers need to cover the possibility of paying a claim, so businesses that have a history of filing multiple claims usually pay higher premiums.
• Deductibles: Daycare providers can opt for a higher deductible to lower their premium, but it means they pay more if they end up filing a claim.
• Coverage limits: Choosing higher coverage limits usually increases your daycare insurance costs because the insurer has to pay more if you file a claim.

Bottom Line

Every childcare business, whether it’s an in-home daycare or a commercial daycare center, needs at least some business insurance. Even if you don’t own the building or have valuable business assets to cover, your work with children creates potential liabilities. It’s crucial to protect your business if claims arise.