Daycare Liability Insurance 101: What You Need to Know to Protect Your Business 

Thang Truong
Thang Truong
Updated on:

Caring for other people’s children is a huge responsibility. Whether you run a daycare out of your home or in a commercial space, there’s always the chance of a child being injured and property getting damaged. Daycare liability insurance provides financial protection from work-related injuries and accidents and resulting lawsuits.

This article explains what you need to know to get liability insurance protection — along with other coverage — for your daycare operation.

What is daycare liability insurance?

Daycare liability insurance is a type of insurance that provides coverage for a daycare business in the event of a lawsuit stemming from an accident or incident that occurs at the daycare. It’s a specific type of insurance that is designed to protect home daycare providers from financial loss in case they are held liable for damages or injuries caused by their negligence. This type of insurance can help cover the costs of legal defense, as well as any settlements or judgments that may result from a lawsuit.

Daycare liability insurance typically includes several types of coverage, such as:

  • General liability coverage: This type of coverage can help protect the business financially in the event of a lawsuit stemming from a child’s injury or property damage that occurs on the daycare property.
  • Professional liability coverage: This type of coverage can help protect the business financially in the event of a lawsuit stemming from errors or omissions on the part of the daycare provider.
  • Abuse and molestation coverage: This type of coverage can help protect the business financially in the event of a lawsuit stemming from abuse or molestation of a child in their care by the daycare provider or another employee.

It’s important to note that liability insurance policies typically have limits, which are the maximum amount of money that the insurance company will pay out in the event of a claim. It’s important to have enough coverage to protect your business, and also to understand the limits of your policy.

What types of liability insurance coverage do daycare businesses need?

Daycare businesses typically secure the following two types of liability insurance coverage:

1. General liability insurance for daycare businesses 

General liability insurance covers primary daycare business risks, including accidental injuries that happen on your business property, which are common occurrences at daycare centers. It also pays for damage to other people’s property while conducting business, for instance, harm to a parent’s computer because you knock her bag over while picking up a child.

General liability insurance pays for:

  • Medical care for injuries that happen at your daycare center and the area around it to others (non-employees) and associated legal costs and settlements.
  • Repair and replacement of damage you or your employees cause to other people’s property while conducting business and related legal and settlement costs.
  • Libel and slander lawsuits if you’re sued because you say or write something offensive or untrue about a competitor.

Tip: It’s often easier and cheaper to bundle general liability insurance with property coverage in a business owner’s policy (BOP). A BOP also makes it simpler for daycare providers to get the other types of insurance protection they need.

2. Professional liability insurance for daycare businesses 

This coverage is also called errors and omissions (E&O) insurance. It covers legal defense and settlement costs if you’re sued over a mistake or misjudgment, such as not providing adequate supervision that results in an injury. Professional liability insurance can help pay for:

  • Legal and settlement costs when you’re sued over an injury a parent believes you could have prevented had you demonstrated better professional judgment.
  • Legal, repair, and replacement costs if you’re sued over property damage that happened because you or an employee didn’t take reasonable care to protect the property.
  • Costs to make things right when something goes wrong because you or an employee provides bad advice or doesn’t show adequate professionalism.

3. Abuse and molestation coverage for daycare businesses 

Abuse and molestation coverage is a specific type of liability insurance that is designed to protect home daycare businesses in the event of a lawsuit stemming from allegations of abuse or molestation of a child in their care. This type of coverage can help cover the costs of legal defense, as well as any settlements or judgments that may result from a lawsuit.

The coverage typically provides protection against claims arising from physical, sexual, or emotional abuse, as well as molestation, exploitation, or any other form of abuse that may occur in the daycare setting. It also provides coverage for false accusations of abuse or molestation that may happen as well.

This type of coverage can be important for home daycare businesses because they are responsible for the care and well-being of children, and any allegations of abuse or molestation can result in significant financial losses for the business, as well as damage to their reputation. Without this coverage, a home daycare business may have to bear the financial burden of a lawsuit on their own.

It’s important to note that abuse and molestation coverage may have some exclusions and limitations, such as a limit on the amount of money that the insurance company will pay out in the event of a claim. It’s important to have enough coverage to protect your business, and also to understand the limits of your policy.

Home daycare insurance

If you run a home daycare business, your home daycare insurance must at least include the liability coverage mentioned above and that could be sufficient.

You may also need commercial auto insurance and commercial property insurance coverage for your home daycare business.

Commercial auto coverage

If the daycare provider uses a vehicle for transportation, then commercial auto coverage is important to have. It can provide coverage for damage to the vehicle, as well as for any injuries or fatalities that may occur. It also provides liability coverage in case the accident is determined to be the fault of the daycare provider.

Commercial property coverage

Commercial property coverage is also important for a home daycare business. This type of coverage can help protect the business financially in the event that the facility or equipment is damaged or destroyed by a covered event such as fire or theft. It can also help to cover the cost of replacing any lost or stolen equipment.

If you run a commercial daycare center, you may need additional coverages:

What other types of insurance do daycare centers get?

Here are some additional coverages many daycare centers purchase.

Directors and Officers (D&O) Insurance for daycare centers 

D&O coverage is sometimes considered a part of the liability insurance family. It covers legal expenses for daycare center directors and leaders if they’re sued over a business decision they made on behalf of a childcare business that resulted in negative consequences. Some examples include:

  • Accusations of mismanaged funds
  • Failure to meet regulatory standards
  • Failure to perform official duties.

An experienced business insurance agent or company representative can help you identify the proper liability insurance protection for your daycare operation at a price you can afford.

Business Owners Policy (BOP) for daycare centers 

A BOP bundles general liability and property insurance (and sometimes lost income coverage) in a single plan. A BOP is often the most cost-effective way to get these coverages and easily add others you may need.

Workers’ compensation insurance for daycare centers 

Most states require workers’ comp for childcare centers that have employees. It provides benefits if you or an employee becomes ill or is injured for work-related reasons, something that’s common in the rough-and-tumble world of daycare. It can pay for healthcare expenses, lost wages, disability, job retraining, death benefits, and more. It also protects sole proprietor childcare workers from work-related injury and illness costs that health insurance might deny.

How much does daycare liability insurance cost?

The average cost of daycare liability insurance is $70 per month, or $840 per year. This is for both general liability and professional liability insurance policies for an average daycare business. 

Below are the average costs of each liability policy: 

Daycare liability insurance coverageAverage costs
General liability insurance $50 per month
Professional liability insurance$20 per month

These are just the averages. Your rates will be different. Be sure to shop around with a few companies or work with a broker like InsurePro, Simply Business, or CoverWallet to compare several quotes to find the cheapest one for you home daycare business.

What affects daycare liability insurance cost?

The home daycare liability insurance costs vary and are dependent on many factors, including the size of the operation, number of children cared for, equipment and other assets, coverages and levels, whether it’s home-based or run out of a more prominent rented location, number of children cared for, hours open, staff experience, claims made on insurance policies, how the insurer calculates premium costs and more. 

Here are some general guidelines:

  • All things being equal, a home daycare center will pay less for insurance than a larger business.
  • Operations that offer enhanced services such as sports programs or field trips can expect to pay more than those that do not.
  • A bigger number of children supervised will result in higher premium prices.
  • If you have employees, you’ll pay more for coverage.
  • If you have a seasoned professional staff with clean records, you’ll have lower insurance costs than if you hire newbies or compromised staff members.

What’s critical is that you get several daycare liability quotes from different agents, insurance companies, and other providers. Then compare coverages and costs to get the best policy to cover your daycare operation’s risks.

Best daycare insurance companies

If you are looking for business insurance coverage for your home daycare business, we have researched more than 30 companies offering such coverage, and recommend the top providers of daycare insurance for your consideration.

To find cheap home daycare liability coverage, you should at least shop around with a few companies or work with a broker like Simply Business or CoverWallet to compare several quotes to find the cheapest one for your home daycare business.

Thang Truong
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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