Child Care Business Insurance

Every child care business needs insurance. Knowing which type of insurance you need and the best place to get it is the next step.

This article will cover the main types of business insurance and help you find the best child care business insurance.

Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for a Child Care Business

The most common and comprehensive type of child care business insurance is general liability insurance. We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While a child care business may not be legally required to carry general liability insurance, operating without it is extremely risky. If your child care business is sued, you could face fees totaling hundreds of thousands of dollars (or more).

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Cost of General Liability Insurance

The cost of your child care business’s general liability insurance will highly depend on the size of the business. The average child care professionals in America spend $650–$950 per year for general liability insurance coverage.

Compare the average cost of general liability insurance for child care business to other professional industries using the graph below:

chart showing average yearly premium for General Liability Policy

Several factors can determine the price of your insurance policy. These include your:

  • Location
  • Deductible
  • Size of child care facilities
  • Services offered
  • Number of children cared for
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

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Common Situations That General Liability Insurance May Cover for a Child Care Business

Example 1: A parent leans against a wobbly railing and falls and breaks their arm, requiring surgery. They sue you for (and expect you to pay) their medical expenses and compensation for their missed time at work. Your company's general liability insurance may pay for the injured parent’s medical bills or any settlement money if you are found liable.

Example 2: A pothole opens up in your parking lot, and a parent hits it with their car, causing minor injuries and moderate damage to the car. General liability insurance would likely assist your business in settling with the customer to cover the cost of any medical treatment and to repair the damage to the car and any other damage resulting from this incident.

Example 3: A parent hears a damaging rumor about themself and believes that you must have heard it from their child and that you spread the rumor. They sue you for libel and reputational harm. Your general liability insurance may assist your business in covering some of your legal costs and part of any court order or settlement.

Check out our review of the Best Small Business Insurance Companies.

Other Types of Coverage Child Care Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of.

Commercial Property Insurance

If your child care business owns any type of property worth $10,000 or more, you will need to invest in a commercial property insurance policy to insure your business’s assets. Many child care businesses quickly rack up this amount in fixtures, furniture, equipment, and inventory.

Commercial property insurance helps cover the costs of replacing/repairing inventory, equipment, real estate, and more in the event of unexpected damage.

Commercial Umbrella Insurance

For many child care businesses, commercial umbrella insurance is an important policy to take out. Commercial umbrella insurance exists to cover those gaps beyond existing policies, ensuring that your child care business doesn’t find itself crippled by an extreme and unpredictable loss.

Commercial Auto Insurance

If your child care business owns a vehicle to pick up or drop off children, go on trips, make pickups or deliveries, or for any other business-related reason, you will also need a commercial auto insurance policy. This insurance policy will cover automotive damages incurred if your automobile or delivery vehicle is damaged on the road.

Cyber Liability Insurance

Another type of insurance that child care businesses may want to consider is cyber liability insurance. In the event of a data breach or other cyber security incident, any business dealing with sensitive information, such as people’s personal or health information, should have cyber liability insurance in place to cover the costs associated with the breach as well as any additional losses the firm may incur.

Home-Based Business Insurance

If your child care business is run from home, your normal home insurance policies may not cover accident damage related to your business.

Home-based business insurance is designed with this in mind, and it is often available through a business owner’s policy or as a rider extension for existing homeowner insurance.

Speciality Insurances

Child care businesses will also want to look into a number of specialty insurance options, depending on the exact nature of your work. Specialty insurances for child care businesses may include insurance specifically tailored to preschools and daycares, such as “daycare insurance,” insurance for accidents at your child care center or in your home, insurance to protect you against alleged abuse and molestation liability, and more.

Worker’s Compensation Insurance

In most states, if you have any employees other than yourself (and sometimes family members), you will need to purchase workers’ compensation insurance. Workers' compensation insurance, or "worker’s comp” for short, is a type of insurance that covers accidents, injuries, and illnesses that employees may suffer on the job. Worker’s compensation coverage aids with the payment of medical expenses, missed wages, and other costs associated with illness or injury, no matter who was at fault.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your child care business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Business Insurance is the Best Way to Protect Your Business

If you're starting a new business, then you need business insurance. It's as simple as that. The protection offered by an LLC will protect your personal assets, but your business's assets are still open to liability in the case of a lawsuit or other loss.

Be sure that everything you've built is safe by getting business insurance.

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Child Care Business Insurance FAQ

Can I buy business insurance online for my child care business?

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

What is included in a business owner’s policy?

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

What is the difference between business insurance and general liability insurance?

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Do I need insurance before I start a child care business?

You should invest in business insurance coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand-new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.

Will insurance protect my child care business from everything?

Not necessarily. Certain exceptions may be written directly into your child care business insurance policy, and some perils may be entirely uninsurable.

Is general liability the same as business owners?

A general liability insurance policy covers only liability losses. A business owner's policy covers both liability and property losses.

How do I choose the best general liability insurance?

The best general liability coverage for your business really depends on the amount of coverage you’re comfortable with and how often you expect to file a claim. A relatively safe business with a very low risk of accident or legal liability could opt for lower premiums with higher deductibles. 

However, if you are in an accident or injury-prone industry or are making advertising claims about the effectiveness of your service or product, you may wish to consider more extensive coverage. We recommend using a digital insurance provider like Next Insurance.

Do I need business insurance if I already have an LLC?

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.