Liability insurance

Child care business owners already have so many expenses. Should they also pay for business liability insurance? The short answer is yes, liability insurance is a necessity, even for the smallest of businesses.  

Unexpected events can happen to the children in your care, their families, or anyone on your property. A child could be injured on a play structure, or someone visiting your program could trip and fall. You need to take steps to protect yourself and your business from scenarios that could result in someone being injured. 

In cases where children or others are hurt, they may need compensation for medical care. They may also need compensation for pain and suffering. These events can lead to lawsuits that can quickly cost hundreds of thousand of dollars. Such legal actions could cause significant financial damage to your child care business. If you are a home-based provider, your homeowner’s or renter’s insurance will not cover these types of lawsuits. This is because they related to your business and not your home. 

There are usually two types of liability insurance: general and professional. General liability insurance covers physical risks. For example, someone being hit by a book falling from a shelf, or a child getting cut on a piece of playground equipment. Professional liability insurance covers circumstances when you don’t do something right or make an error. For example, overheating a bottle of milk for an infant.  

When you pick liability coverage, think about the different costs you might need insurance for. Look for policies that cover key costs such as: 

• Attorney’s fees for defending against lawsuits, as well as legal expenses incurred from representation for administrative hearings with government agencies, such as licensing
• Medical expenses for the injured party
• Judgments regarding allegations of abuse and neglect
• Issues with food preparation or the distribution of medication
• Accidents occurring due to swimming pools, play structures, or toys
• Injuries from any animals the children may come into contact with
• The actions of all employees and volunteers 

In addition to general and professional liability insurance, you can also purchase secondary insurance. This will cover  the amount you have to pay before your insurance starts paying (this is called a deductible). The extra insurance will help limit your financial risk. Deductibles are often overlooked and can be very high. Secondary insurance will keep you from having to pay anything before your insurance coverage starts paying. 

When you choose your insurance coverage, know the occurrence and aggregate limits. The occurrence limit is the amount the insurance will pay for each event. The aggregate limit is the total amount the insurance will pay over multiple incidents. For example, if a child is cut by something sharp, the occurrence limit tells you the maximum amount the insurance will pay. If a child was hurt last week and two others were hurt this week, you need to think about the coverage for each occurrence and for the total amount of the three occurrences. 

You can start by contacting your current insurance agent. You might get a discount for having more than one policy with them. You can also get a couple of different quotes to compare. It might be helpful to find an agent who works with child care providers because they will understand the unique needs of your business and the types of incidents that can occur. When you pick your policy, make sure the agent clearly explains what is and what isn’t covered. Think about possible situations and talk about whether the policy would cover them. 

Disclaimer 

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.