What Kind of Insurance Should a Childcare Provider Carry?

Child care businesses face risks that ordinary home, personal auto, or general small-business policies may not fully cover.

A child may be injured. An employee may be hurt lifting equipment. A van may be involved in an accident. A parent may allege negligent supervision. A storm may close the building. A payment system may expose family data. A former employee may bring a workplace claim.

No single policy automatically covers all of these situations.

The right insurance package depends on:

• Program type
• Number and ages of children
• Center-based or home-based operation
• Property ownership or lease
• Employees
• Transportation
• Swimming or field trips
• Medication administration
• Food service
• Special-needs care
• Overnight care
• Animals
• Playground equipment
• Revenue
• State and local requirements
• Contracts
• Licensing rules
• Lender or landlord requirements

A provider should work with an insurance professional who understands child care operations and can explain the policy language, exclusions, limits, deductibles, and reporting duties.

Insurance and Licensing Are Different

Child care licensing establishes minimum health and safety requirements.

Insurance transfers certain financial risks to an insurer under the terms of a contract.

A program may be:

• Properly licensed but underinsured
• Insured but operating without a required license
• Exempt from licensing but still needing business insurance
• Required to disclose insurance status
• Required by a landlord, lender, subsidy agency, or contract to maintain certain coverage

Insurance does not make an unsafe practice lawful.

Licensing compliance does not guarantee that an insurance claim will be covered.

Start With a Risk Inventory

Before requesting quotes, list every major exposure.

Children and services

• Ages served
• Maximum enrollment
• Infant care
• School-age care
• Children with medical needs
• Medication administration
• Special diets
• Overnight care
• Drop-in care
• Sick-child care
• Therapy or clinical services

Property

• Owned or rented building
• Home-based operation
• Outdoor playground
• Pool
• Trampoline
• Fencing
• Detached structures
• Kitchen
• Computers
• Furniture
• Supplies

Transportation and activities

• Company vehicles
• Personal vehicles
• School pickup
• Field trips
• Walking trips
• Swimming
• Water play
• Animals
• Sports
• Off-site events

Employees

• Teachers
• Assistants
• Drivers
• Volunteers
• Contractors
• Interns
• Household members
• Substitute staff

Data and money

• Tuition processing
• Payroll
• Medical records
• Child photographs
• Parent contact information
• Electronic attendance
• Cloud software
• Online enrollment

An insurer can evaluate only the information it receives.

General Liability Insurance

General liability is one of the core business coverages.

It may cover claims involving:

• Bodily injury
• Property damage
• Premises liability
• Certain personal and advertising injuries
• Legal defense
• Settlements or judgments within policy limits

Examples might include:

• A parent slips in the entryway
• A child is injured on playground equipment
• A visitor’s property is damaged
• The program damages rented space

General liability does not cover every event.

Possible exclusions may involve:

• Professional services
• Abuse or molestation
• Employee injuries
• Auto accidents
• Intentional acts
• Pollution
• Cyber incidents
• Certain animals
• Pools or trampolines
• Unreported activities

Ask whether child care operations are specifically included.

Professional Liability Insurance

Professional liability may also be called:

• Errors and omissions
• Negligent acts coverage
• Educators liability
• Professional services liability

It may address allegations that the provider failed to perform professional duties appropriately.

Examples may include claims involving:

• Negligent supervision
• Failure to follow a care plan
• Improper release of a child
• Failure to communicate an incident
• Inadequate emergency response
• Failure to follow written procedures

The distinction between general and professional liability varies by policy.

A claim may involve both.

Providers should ask whether professional liability is included, endorsed, or sold separately.

Abuse and Molestation Coverage

General liability policies may exclude or severely limit claims involving:

• Sexual abuse
• Physical abuse
• Molestation
• Corporal punishment
• Exploitation
• Failure to prevent abuse
• Negligent hiring
• Negligent supervision
• Failure to report

Child care providers should ask specifically about abuse and molestation coverage.

Important questions include:

• Are allegations covered even before liability is proven?
• Does the policy pay defense costs?
• Are employees, volunteers, owners, and household members included?
• Are claims-made or occurrence terms used?
• Is negligent hiring or supervision included?
• Are criminal acts excluded?
• Are defense costs inside or outside the policy limit?
• Is there a separate sublimit?
• Does coverage continue after the policy ends?

Accident Medical Insurance

Accident medical coverage may help pay certain medical expenses after a child is injured while participating in the program.

It may operate:

• Regardless of fault
• As excess coverage after the family’s health insurance
• With a per-child or per-incident limit
• For specified activities
• Subject to exclusions

This coverage can help address smaller medical costs without first proving negligence.

It does not replace general liability.

Ask:

• Is coverage primary or excess?
• Is there a deductible?
• What activities are excluded?
• Are field trips covered?
• Are dental injuries covered?
• What is the reporting deadline?
• Does it cover children during transportation?

Commercial Property Insurance

Commercial property insurance may cover business-owned property such as:

• Furniture
• Classroom equipment
• Computers
• Toys
• Kitchen equipment
• Supplies
• Outdoor equipment
• Tenant improvements
• Records
• Signage

Covered causes of loss depend on the policy.

Possible events include:

• Fire
• Theft
• Wind
• Vandalism
• Certain water damage
• Lightning

Common exclusions or limitations may include:

• Flood
• Earthquake
• Mold
• Wear and tear
• Sewer backup
• Equipment breakdown
• Named-storm deductibles
• Unoccupied buildings

A provider should know whether property is insured for:

• Replacement cost
• Actual cash value
• Agreed value

Replacement cost and actual cash value can produce very different claim payments.

Building Coverage

A provider that owns the building may need coverage for:

• Structure
• Roof
• HVAC
• Electrical systems
• Plumbing
• Attached improvements
• Outdoor structures

A tenant generally insures business property and tenant improvements rather than the landlord’s entire building.

Review the lease.

It may require:

• Specific liability limits
• Additional insured status
• Property insurance
• Waiver of subrogation
• Business interruption
• Proof of coverage

Do not rely on the landlord’s policy to protect the child care business.

Business Owner’s Policy

A business owner’s policy, or BOP, may combine:

• General liability
• Commercial property
• Certain business interruption coverage

A BOP can be convenient, but the package must still be reviewed for child care-specific exclusions.

Possible add-ons may include:

• Professional liability
• Abuse coverage
• Cyber
• Equipment breakdown
• Employment practices
• Hired and non-owned auto
• Umbrella
• Spoilage

A low-cost package is not a bargain if it excludes the program’s main risks.

Business Interruption Insurance

Business interruption may help replace lost net income and certain continuing expenses after a covered property loss forces the business to close.

It may help with:

• Rent or mortgage
• Payroll
• Loan payments
• Taxes
• Temporary location
• Lost net income
• Extra operating expenses

Coverage typically requires a covered physical loss.

It may not cover closure caused only by:

• Loss of license
• Staff shortage
• Pandemic
• Government order without covered property damage
• Utility interruption outside the premises
• Flood or earthquake unless endorsed

The National Association of Insurance Commissioners notes that business interruption commonly applies while repairs are underway after covered damage and may exclude losses unrelated to property damage.

Ask about:

• Waiting period
• Maximum restoration period
• Payroll coverage
• Extra expense
• Civil authority
• Utility interruption
• Dependent property
• Tuition records needed to prove loss

Equipment Breakdown

Equipment breakdown coverage may address sudden mechanical or electrical failure involving:

• HVAC
• Refrigeration
• Electrical panels
• Boilers
• Kitchen equipment
• Security systems
• Computers

Standard property coverage may not pay for internal mechanical failure.

This coverage can be important when a refrigerator failure destroys food or an HVAC breakdown forces temporary closure.

Spoilage Coverage

Programs storing:

• Food
• Infant formula
• Breast milk
• Medication
• Vaccines or other temperature-sensitive items

may need spoilage or refrigerated-property coverage.

Ask whether the policy covers:

• Power outage
• Equipment failure
• Utility interruption
• Contamination
• Required disposal

Follow health and licensing rules even when insurance may reimburse the loss.

Commercial Auto Insurance

A personal auto policy may exclude or limit business use.

Commercial auto coverage may be needed when the program owns or regularly uses vehicles for:

• School pickup
• Field trips
• Child transportation
• Supply delivery
• Staff errands
• Emergency relocation

Coverage may include:

• Liability
• Collision
• Comprehensive
• Medical payments
• Uninsured or underinsured motorist
• Vehicle damage
• Hired vehicles
• Non-owned vehicles

Ask whether the policy specifically covers transporting children.

Do not assume a commercial policy automatically includes every driver or vehicle.

Hired and Non-Owned Auto

Hired and non-owned auto coverage may help protect the business when:

• A vehicle is rented
• An employee uses a personal vehicle for business
• A staff member transports supplies
• A director drives to a field trip location
• A personal vehicle is used for emergency transportation

This coverage generally protects the business’s liability exposure.

It may not pay for damage to the employee’s personal vehicle.

The employee should maintain appropriate personal auto insurance and disclose business use to the insurer.

Workers’ Compensation

Workers’ compensation generally addresses employee injuries or occupational illnesses.

Examples include:

• Back injury
• Slip and fall
• Bite
• Needlestick
• Chemical exposure
• Repetitive strain
• Vehicle injury during work
• Workplace violence

Requirements vary by state, employer size, worker type, and industry.

The U.S. Department of Labor directs private-sector employees and employers to the appropriate state workers’ compensation authority.

Workers’ compensation may cover:

• Medical care
• Wage replacement
• Disability benefits
• Rehabilitation
• Death benefits

Employers may also need employers liability coverage.

Do not assume employees can waive workers’ compensation rights through a private agreement.

Employer’s Liability Insurance

Employer’s liability is often paired with workers’ compensation.

It may address certain employee injury lawsuits not covered exclusively by the workers’ compensation system.

Review:

• Limits
• Exclusions
• State requirements
• Umbrella compatibility

Employment Practices Liability Insurance

Employment practices liability insurance, or EPLI, may cover certain claims from employees or applicants involving:

• Discrimination
• Harassment
• Wrongful termination
• Retaliation
• Failure to hire
• Wage-related allegations when endorsed
• Employment-related privacy claims

Standard liability policies often exclude employment claims.

Child care businesses should also maintain:

• Written policies
• Complaint procedures
• Training
• Accurate payroll
• Performance documentation
• Lawful hiring practices

Insurance does not replace employment-law compliance.

Cyber Liability Insurance

Child care providers increasingly store:

• Parent names
• Addresses
• Payment information
• Medical information
• Emergency contacts
• Child photographs
• Attendance records
• Employee data

Cyber coverage may address:

• Data breach response
• Notification
• Forensics
• Credit monitoring
• Ransomware
• Data restoration
• Business interruption
• Privacy claims
• Regulatory response
• Payment fraud

Ask whether the policy covers:

• Cloud software
• Third-party vendors
• Lost devices
• Employee mistakes
• Social engineering
• Funds-transfer fraud
• Ransom payments
• Unencrypted data

Use strong security even when insured.

Crime and Employee Dishonesty Coverage

Crime coverage may address losses involving:

• Employee theft
• Forgery
• Funds-transfer fraud
• Robbery
• Computer fraud
• Deposit theft

A standard property policy may not cover internal theft.

Providers should also use financial controls:

• Separate bank accounts
• Dual approval
• Reconciliations
• Limited access
• Background checks
• Payroll review
• Secure tuition systems

Umbrella or Excess Liability

An umbrella or excess policy may provide additional limits above underlying policies.

It may sit over:

• General liability
• Commercial auto
• Employers liability
• Other scheduled policies

Ask whether it also extends over:

• Professional liability
• Abuse coverage
• Hired and non-owned auto

Umbrella policies often exclude risks that are excluded from the underlying policy.

Higher limits do not correct missing coverage.

Directors and Officers Insurance

A nonprofit child care organization, board-governed center, association, or larger company may consider directors and officers coverage.

It may address claims involving:

• Governance
• Fiduciary decisions
• Mismanagement allegations
• Board actions
• Certain regulatory matters

This coverage is different from general liability.

Fidelity Bonds

A bond may be required by:

• Grant
• Contract
• Government program
• Landlord
• Lender
• Subsidy administrator

Bonds can protect another party against specified misconduct or failure.

A bond is not the same as liability insurance.

Home-Based Child Care Insurance

Home-based providers should not assume that homeowners or renters insurance covers child care operations.

Home policies often exclude or limit business-related claims.

The National Association of Insurance Commissioners advises consumers to ask whether a homeowners policy covers a home business such as daycare and whether additional liability coverage is needed.

Possible solutions include:

• Home daycare endorsement
• Business endorsement
• Separate in-home child care policy
• Commercial general liability
• Business property coverage
• Umbrella designed to include the daycare risk

Ask specifically whether the policy covers:

• Number of children
• Ages
• Employees
• Household members
• Playground
• Pool
• Animals
• Field trips
• Transportation
• Overnight care
• Food service
• Abuse allegations
• Professional liability

Renters Insurance and Home Daycare

A renter operating child care may need:

• Landlord permission
• Zoning approval
• Licensing approval
• Business liability
• Coverage for business property
• Commercial endorsement
• Lease compliance

Renters insurance may exclude business operations just as homeowners insurance can.

The landlord may require proof of insurance and additional insured status.

Property Features That Affect Coverage

Tell the insurer about:

• Swimming pool
• Trampoline
• Dog
• Playground
• Treehouse
• Fireplace
• Wood stove
• Detached building
• Water feature
• Firearm on premises
• Commercial kitchen
• Basement care space
• Overnight care

An insurer may:

• Exclude the feature
• Require safeguards
• Increase premium
• Decline coverage
• Require a different policy

Do not hide a feature to obtain a lower quote.

Additional Insured Status

A landlord, lender, school, municipality, or partner may ask to be added as an additional insured.

Additional insured status may provide certain protection under the provider’s liability policy for claims connected to the provider’s operations.

It does not mean the additional insured owns the policy or receives every protection.

Confirm:

• Which endorsement is used
• Whether coverage is ongoing or event-specific
• Primary and noncontributory wording
• Completed operations
• Notice of cancellation
• Contract requirements

A certificate of insurance alone may not change the policy.

Certificates of Insurance

A certificate summarizes insurance information at a point in time.

It is not the policy itself.

It generally does not:

• Create coverage
• Change exclusions
• Guarantee future coverage
• Prove a claim will be paid
• Replace an endorsement

Providers should keep:

• Full policy
• Declarations
• Endorsements
• Certificates
• Renewal documents
• Claim contacts

Claims-Made Versus Occurrence Coverage

Occurrence policy

Generally responds based on when the covered event occurred, even if the claim is made later, subject to policy terms.

Claims-made policy

Generally requires the claim to be made and reported while the policy or applicable extended reporting period is active.

Professional liability, abuse coverage, cyber, and employment practices policies may use claims-made forms.

Ask about:

• Retroactive date
• Reporting deadline
• Prior acts
• Tail coverage
• Continuity when changing insurers

A gap in claims-made coverage can be serious.

Policy Limits

Common limit terms include:

• Per occurrence
• Per claim
• General aggregate
• Products-completed operations aggregate
• Abuse sublimit
• Medical payments
• Auto accident limit
• Employee injury limits
• Cyber aggregate

A low sublimit may be far smaller than the headline policy limit.

Ask the agent to explain how limits apply when:

• Several children are injured in one event
• Multiple claims arise during the year
• Defense costs reduce limits
• Abuse allegations involve more than one claimant
• An umbrella is expected to respond

Deductibles and Self-Insured Retentions

A deductible is the amount the insured pays before or as part of the claim.

A self-insured retention may require the business to handle and fund a larger initial portion.

Compare:

• Amount
• Per claim or per occurrence
• Defense-cost treatment
• Cash-flow impact
• Claims administration

A high deductible can make a policy unaffordable during a real incident even if the premium is low.

Common Exclusions

Review exclusions for:

• Abuse or molestation
• Corporal punishment
• Professional services
• Auto
• Employees
• Volunteers
• Pools
• Trampolines
• Animals
• Overnight care
• Field trips
• Watercraft
• Pollution
• Mold
• Communicable disease
• Cyber events
• Flood
• Earthquake
• Lead
• Firearms
• Contractual liability
• Punitive damages
• Unlicensed operation

Ask what endorsement, separate policy, or risk-control measure may address important gaps.

Waivers and Parent Agreements

A parent waiver may explain risk and program rules, but it does not replace insurance.

Courts may refuse to enforce a waiver depending on:

• State law
• Wording
• Public policy
• Type of negligence
• Child’s rights
• Circumstances

Do not design the insurance plan around the assumption that every waiver will prevent a claim.

Use qualified legal advice for contracts.

Incident Reporting to the Insurer

Insurance policies often require prompt notice.

Reportable events may include:

• Serious injury
• Emergency medical care
• Abuse allegation
• Missing child
• Vehicle accident
• Threat of lawsuit
• Attorney letter
• Government investigation
• Data breach
• Employee injury
• Property loss

Do not wait for a lawsuit before contacting the insurer if the policy requires earlier notice.

Preserve:

• Incident reports
• Attendance
• Staff schedules
• Video
• Photos
• Medical communications
• Parent messages
• Equipment
• Training records
• Inspection records

Do not alter original records.

Choosing an Insurance Agent or Broker

Look for someone who:

• Understands child care
• Has access to appropriate insurers
• Reviews licensing and contract requirements
• Explains exclusions
• Provides written comparisons
• Helps with certificates
• Supports claims
• Reviews coverage annually

Ask:

• How many child care clients do you serve?
• Which activities are excluded?
• Is abuse coverage included?
• Is professional liability included?
• Is transportation covered?
• Does the policy cover volunteers?
• Does it cover substitute staff?
• Does it cover field trips?
• What happens after closure?
• Which insurer handles claims?
• Is the insurer licensed in the state?
• What is the financial-strength rating?

Comparing Quotes

Compare policies line by line.

Do not choose based only on annual premium.

Annual Insurance Review

Review coverage when:

• Enrollment changes
• Infant care begins
• Employees are hired
• A vehicle is purchased
• Transportation starts
• A pool is added
• A new site opens
• Overnight care begins
• Revenue changes
• A lease changes
• The business moves
• New software stores sensitive data
• Services expand
• Ownership changes

Also review after:

• Claim
• Licensing violation
• Major renovation
• New contract
• Change in law

Questions Parents May Ask

Parents may reasonably ask:

• Does the program carry liability insurance?
• Is transportation insured?
• Is accident medical coverage available?
• How are injuries reported?
• How are claims handled?
• Is the program licensed?
• Is there insurance for field trips?

A provider should answer accurately without overstating what the policy guarantees.

The existence of insurance does not prove the program is safe.

The absence of required or promised insurance deserves concern.

Frequently Asked Questions

Related Resources

• Business-Building Tips for Childcare Providers
• Funding Sources for New Childcare Businesses
• Forms Childcare Providers Should Keep On File
• Incident Reports: Documenting Accidents and Behavioral Issues
• Daycare Contracts: What Should Be Covered?
• Meeting Staffing Requirements for Daycare Providers
• Why Are Childcare Providers Licensed?

Sources

• U.S. Small Business Administration: Get Business Insurance
• U.S. Small Business Administration: Risk Management Strategies
• National Association of Insurance Commissioners: Consumer Insurance Resources
• National Association of Insurance Commissioners: Business Interruption and Business Owner’s Policies
• National Association of Insurance Commissioners: Homeowners Insurance Shopping Tool
• U.S. Department of Labor: Workers’ Compensation
• U.S. Department of Labor: State Workers’ Compensation Officials
• ChildCare.gov: Child Care Licensing
• ChildCare.gov: Health and Safety Requirements

ChildCareCenter.us is an independent directory and educational resource. Insurance requirements, policy terms, exclusions, limits, licensing, workers’ compensation, transportation, contracts, and liability laws vary by state, insurer, program, and activity and may change. This article is not legal, insurance, tax, financial, or licensing advice. Review actual policy documents and consult licensed insurance, legal, accounting, and regulatory professionals.