Child Care Insurance for Family Day Care Providers
What is Liability Insurance?
Liability insurance protects you and your business in case you are sued because of an accident related to your work as a child care provider. When you buy liability insurance you agree to pay the company a “premium” every year you want to be insured. In exchange, the company takes responsibility for damages and lawyers’ fees that result from a lawsuit, up to the liability limit of your policy.
Do I Need Liability Insurance?
Every child care provider should seriously consider buying liability insurance for her business. By taking care of other people’s children, a family day care provider puts herself at risk of being sued if something goes wrong. A provider can be sued because of an accident or something done by another person, even if the provider could not have prevented the problem.
The costs of being sued can be enormous. A provider who owns her own home, car or other valuable possessions could lose much of what she owns. A provider who doesn’t have these assets can still be forced to pay a part of her future wages if she loses in court. Even if you eventually win a lawsuit, paying a lawyer to defend you can be very expensive.
Most child care providers will never be sued. However, if you are unfortunate enough to be brought to court, liability insurance will be money very well spent.
What Do I Get from Liability Insurance?
Liability insurance is a way to lessen the risks you take on by caring for children in your home. If you are sued because of an accident and have insured yourself, the insurance company will pay the cost of hiring a lawyer for you. If you then lose in court, your insurance company will pay any amount you owe up to the “liability limit” you paid for. Many liability insurance policies will also pay the medical expenses for a child who is hurt while in your care. Most companies provide these protections for accidents that occur both in and outside of your home.
What is the Liability Limit?
The “liability limit” is the maximum amount that the insurance company will pay if you lose a lawsuit. The more you pay the insurance company in premiums the higher your liability limit will be. For example, if you buy a policy that has a liability limit of $100,000 and you lose a suit and are ordered to pay $150,000, the insurance company will pay up to the $100,000 limit. You would then have to pay the remaining $50,000.
How Much Does Liability Insurance Cost?
The cost depends on the amount of coverage you want, the number of children you care for, and the company that you buy from. In general, the more you pay in premiums the more you are covered in case of an accident. However, premiums vary from company to company for the same coverage, so it pays to shop around.
The maximum coverage is about $1,000,000, and can cost from $784 for family day care to $1,560 for group family day care per year. The lowest amount of coverage is usually $25,000, and costs from about $335 for family to $480 for group per year. The less expensive options will still pay your lawyers’ fees if you are sued, but will give you less protection if you lose in court.
What Should I Look For in a Policy?
Before you buy insurance, read the policy carefully to be sure that you understand what it will and will not cover. If anything is not clear, ask your insurance company or broker. Here are some important things to look for:
Form of Insurance
There are two types of liability coverage: “claims made” and “occurrence” form. Be sure to buy “occurrence” form! This type of insurance will cover you for any incident that happened during the period that you were paying the premiums, even if you are sued years after you stopped paying for the insurance or providing care. As long as you were covered when the accident happened, you will be covered no matter when the claim is made. This is important because parents can sue you anytime until the child turns 18.
“Claims made” form only covers you for claims that come in while you are still paying the premiums. This insurance will not cover you if an incident happens while you are paying the premiums but you are sued after you have stopped paying for the insurance. You should not buy “claims made” form.
Third Party or Additional Insured Coverage
Make sure that your policy includes this! It covers other people who may be involved in an incident, such as your assistant, substitute, landlord, other children, or family members. You must pay an additional fee for this coverage, usually about $30.
Sexual Abuse Coverage
Your policy should say specifically that you will be covered if you or your assistant are accused of abusing a child.
Off Site Coverage
Be sure that your insurance will cover you if a child is hurt in your care outside of your home (at the park, store, library, etc., but not in a car).
Does My Homeowner’s Insurance Cover My Business?
In general, you should not rely on your homeowner’s insurance to cover your family day care business. The only way to be sure you will be covered is to buy liability insurance that is specifically designed for your business.
Some insurance companies will not cover a homeowner if child care is provided in the home. While South Brooklyn Legal Services cannot recommend one company over another, we are aware of one company that offers homeowner’s insurance to family and group family providers in New York: Marshall & Sterling. For information about Marshall & Sterling policies, call: 1-800-724-0695, or visit http://www.marshallsterling.com/home/index.asp. You will still need to keep your business liability insurance even if you have this type of homeowner’s insurance.
If I Am In An ACS-Contracted Program, Am I Already Insured?
ACS provides liability insurance to some providers for those children whom they care for through an ACS-contracted program. Talk to your program to find out whether you are insured through ACS and if so, what the insurance covers. This insurance does not cover children in your care with ACS vouchers or private pay children.
What are My Insurance Options?
South Brooklyn Legal Services cannot recommend one company over another. However, THOMCO and Adult and Children’s Alliance (ACA) are two companies that specialize in day care insurance and offer a pre-written child care liability policy in New York City. For more information about THOMCO insurance call: 1-800-476-4940, or visit http://www.afds.com. For more information about ACA call: 1-800-433-8108 or visit http://www.acainc.org.
Other Options
If you choose to look for other insurance, you may have to go through an insurance broker, who can write a policy for you. Several insurance companies will work through a broker. If you are interested in purchasing liability insurance, take the time to look into all of your options, and choose the company that best meets your needs.
Accident Insurance
“Accident insurance” is another insurance option for family day care providers. It is much cheaper than liability insurance, but offers much less protection. It will cover medical costs for a child hurt while in your care, but it will not protect you at all if a parent decides to sue you.
If you need assistance or have a question, call the Child Care Project hotline at 718-237-5540.
This article was posted May 06, 2009
