How to insure home-based daycare operations

Caring for other people's children at home is a business, and insurance treats it as one. A homeowners policy is written for a household, and its liability section excludes injuries arising out of business pursuits, often with a specific home day care exclusion added. A child who falls from a climbing frame, is bitten by the family dog, chokes at lunch, or is hurt on a trip to the park may leave the provider with no coverage at all under the home policy. The same gap can apply to the equipment, the family car used for school runs, and the assistant who helps in the afternoons.

The fix is straightforward once the gaps are identified, and it also answers what parents and state licensing agencies expect. This guide covers the steps for home-based child care in Arizona, Nevada, Utah and Idaho, where licensing rules differ but the insurance mechanics are the same.

What to gather

The carrier will want a clear description of the operation.

• The number of children cared for at one time, their ages, and the hours and days of operation.
• Your state licence, certification or registration, or the reason you are exempt, and any city business licence.
• The name and role of anyone who helps, paid or unpaid, including family members.
• A description of the space: rooms used, fenced yard, play equipment, pools, trampolines, pets.
• Whether you transport children, and in which vehicle.
• Your homeowners and auto declarations pages, and any parent contract or enrolment form you use.

Step one: find out what the homeowners policy does

Call the homeowners carrier and describe the daycare accurately. Carriers respond in one of three ways. Some offer a home day care endorsement that extends liability to a small number of children for an additional premium, often with a lower limit and exclusions for abuse, transportation and pool injuries. Some exclude home day care entirely and will insure the home only if the business is covered elsewhere. A few will non-renew a homeowners policy when a daycare operates in the home. Knowing which applies is the first decision.

Do not keep the daycare quiet. If a child is injured and the carrier learns of an undisclosed business, it can deny the claim and, in some cases, void the homeowners policy, which puts the house's own coverage at risk as well as the daycare's.

Step two: buy liability written for child care

For anything beyond a very small operation, a dedicated child care liability policy is usually the stronger answer. These policies combine general liability for injuries to children and parents on the premises with coverages that ordinary liability excludes.

• Abuse and molestation coverage, which defends the provider against allegations of abuse. Nearly every general liability and homeowners policy excludes it, and it is the claim providers fear most.
• Professional liability for errors in supervision, care, feeding or medication.
• Medical payments coverage for children's injuries regardless of fault, which can resolve minor accidents quickly.
• Corporal punishment coverage, where offered, for allegations related to discipline.
• Coverage for field trips and activities away from the home.
• Business personal property for cribs, toys, learning materials and kitchen equipment, which the homeowners policy limits for business use.

Step three: account for vehicles and helpers

Transporting children for the daycare, whether to school, the park or home, is business use of a vehicle. A personal auto policy may exclude it or require it to be rated for business use, and a provider who carries children for a fee should ask the auto carrier directly and consider higher liability limits given the number of passengers. If a helper drives their own car for the daycare, their personal policy responds first and the provider may need hired and non-owned auto liability.

An assistant who is paid is an employee, and state workers compensation rules then apply, with thresholds and exemptions that differ across the four states; in Utah, the Utah Labor Commission publishes them. Where workers compensation is not required, an injured helper can still bring a claim, and the child care liability policy may exclude injuries to workers. Check both before the first day.

Step four: meet licensing and keep the paperwork

State agencies license or certify home-based child care above a set number of unrelated children, and some require proof of liability insurance or a notice to parents if none is carried, and the state's child care licensing agency can say which rules apply to a given home. Cities may add zoning and business licence rules. Licensing is not insurance, but carriers ask about it and some will only insure licensed providers.

Paperwork is part of the protection. Keep signed parent agreements, emergency contact and medical authorisation forms, allergy and medication records, attendance logs, and incident reports for every injury, however minor. Record safety measures such as outlet covers, locked cleaning supplies, pool barriers and the separation of pets from children. A well-documented incident is easier to defend and to settle.

Common mistakes

Home daycare providers most often run into these.

• Relying on the homeowners policy without telling the carrier about the daycare.
• Buying a policy without abuse and molestation coverage.
• Driving children on a personal auto policy rated for commuting only.
• Paying a helper in cash without addressing workers compensation.
• Letting children use a pool or trampoline the policy excludes.
• Skipping incident reports for small injuries that later become claims.

A worked example

Suppose a provider in Nampa cares for six children in her home with a part-time paid assistant. Her homeowners carrier excludes home day care, so she buys a child care liability policy with $1,000,000 of liability, abuse and molestation coverage, $10,000 of medical payments and $15,000 of business property for $1,100 a year, and adds business use to her auto policy for $180. A child trips on the back step and breaks a wrist, with $6,000 of medical bills. The medical payments coverage pays the bills directly and the parents, satisfied, make no further claim. Had the only coverage been the homeowners policy, the bills and any lawsuit would have been hers alone, and the undisclosed business could have put the home policy itself at risk. The figures are hypothetical; the disclosure and the dedicated policy are what made the injury a routine claim.

How to use this

Send us a description of the daycare and your homeowners and auto declarations pages. We will tell you what your home carrier allows, compare child care liability, auto and workers compensation options across the carriers we represent in Arizona, Nevada, Utah and Idaho, and list the documents carriers and licensing agencies will ask for. If a home day care endorsement on your current policy fits a small operation, we will say so.