As more families have two working parents, more people need to rely on things like daycare to raise their children. More than 33% of children in the US require daycare service, so opening a daycare can be a lucrative venture. Like every business though, If you run a daycare, then you need to buy daycare insurance.
Generally speaking, daycare insurance can start at as little as $30 a month. General liability insurance costs around $500-700 per year, while professional liability coverage may cost an extra 4%-8%, depending on the specific policy that you get. Also, workers’ compensation insurance usually costs around $1.25 per $100 of payroll. Keep in mind that these figures are averages and may differ depending on your state, the size of your daycare location, and the total number of employees that you have.
There are lots of specifics about daycare insurance that you should know. So we put together this comprehensive article on daycare insurance costs.
What Kind of Insurance Do I Need for My Daycare?
Since you will be taking care of children, there are many chances that something can go wrong. As such, you need to have the right kinds of insurance to make sure you and your business are protected. Some types of insurance that a daycare owner needs include
- General Liability. General liability insurance provides coverage against mishaps that may happen at your place of business, such as injuries General liability insurance for daycares can cover any problems that occur on-site or on field trips. Also, most states legally require daycares to hold general liability insurance so you have to get it.
- Professional Liability. Professional liability insurance gives daycare owners coverage liability protection for issues and mishaps specifically related to running a daycare, such as a child neglect or child abuse from employees. Daycares usually are not legally required to have professional liability insurance but it can be very helpful.
- Workers Compensation. Workers comp insurance will cover you in case one of your employees gets hurt on the worksite. Most states also require childcare providers to have workers’ compensation insurance.
- Property/Homeowners. If you run your daycare out of your primary residence, then you may be able to get your business covered by your homeowners’ or renters’ insurance policy. Most insurance companies do not offer this kind of coverage with homeowners’ or renters’ policies, though. If your homeowners or rental policy does cover your business, the coverage might be limited. Homeowners/renters insurance can also protect your income by covering any damages to your place of work so you don’t have to pay for them.
Daycare Insurance Costs
Overall, balanced insurance coverage for a daycare can start at as low as $500 a month. Daycare insurance often refers to various types of insurance coverage that are usually included in the context of childcare. Some companies offer policies that include any of the following types of insurance policies.
General Liability Insurance Costs
Let’s start with general liability insurance. Typically, general liability insurance costs will differ depending on if you run your daycare out of a commercial location or your home. Liability insurance for a commercial daycare is usually more expensive, whereas it is cheaper for a residential daycare.
Generally, the average prices of a $1 million liability policy range from $45-$60 a month for most businesses. For commercial daycares, that price might be slightly higher, simply because of the greater risk in working with children. Liability insurance costs may also differ based on your location, age of business, and previous insurance claim history. For example, if you have made liability insurance claims in the past, then your policy will likely be more expensive.
Liability insurance costs for a daycare run out of your home might be cheaper. The average cost for a $1 million general liability policy for a home-based daycare is about $35 to $55 per month. Again, these prices depend on location, payroll, and previous insurance claims history For the most part, general liability policies do not have a deductible, but if they do, it is around $500.
Professional Liability Insurance Costs
Professional liability is separate from general liability, although mast insurance companies offer both in a business insurance package, especially for something like a daycare. Generally speaking, professional liability insurance costs an extra percentage on top of your general liability coverage. Usually, most daycare operators spend an extra 4%-8% on professional liability coverage.
So for example, if your general liability policy costs $50 a month, then professional liability coverage would cost approximately $2-$4 extra a month. Most professional liability policies also have a deductible that differs depending on the issue. For example, some policies charge a $10 per child deductible for abuse or molestation cases, while they have a $500 deductible for other issues.
Make sure you understand the specific deductibles you have to pay before buying your professional policy. You do not want to be caught off guard with a deductible you did not know about.
Child Abuse & Molestation Coverage
Unfortunately, daycare providers may have to deal with allegations of sexual abuse or child molestation. Child abuse and molestation coverage can protect you from legal damages and, in some cases, corporal punishment.
Some insurance companies will provide child abuse and molestation coverage in a general or professional liability policy. If they do not offer it, then you will have to buy a standalone policy to cover those things. Child abuse and molestation coverage is generally an extra percentage of your general liability policy costs.
Worker’s Compensation Insurance Costs
Daycares also need workers’ compensation in case of any employee injuries on site. Workers’ compensation will cover any civil suits and medical expenses of employees injured on the job. The cost of workers’ compensation usually depends on your total payroll expense.
The average cost of worker’s comp insurance for daycares is about $1.25 per every $100 on the payroll. So for example, if your total payroll expenses are $3,000 per month, then you can expect to pay about $1.25 x 30 = $37 per month. As you can see, the more employees you have, the larger your payroll and the more you will have to pay for workers comp insurance.
Property/Homeowners Insurance
Most states do not require daycares to have property insurance, but it is in your best interest to get some. Property insurance will cover and damage to your place of business whether it is through wear and tear, impact, or natural disaster. Commercial property insurance for a small business usually costs about $60 a month, or about $700 a year. Most commercial property policies have a $1,000 deductible.
If you run your daycare out of your personal residence, then it is a good idea to get homeowners insurance. Some insurance companies will include coverage for your business in your homeowners’ policy, but not all will. The average homeowners’ policy costs approximately $109 per month or just over $1,300 per year.
Other Types of Insurance
The above are the major types of insurance that most daycares will need. But there are some other kinds of insurance that you might need.
Auto Insurance
If your daycare uses any cars or other kinds of transportation, then you will need commercial auto insurance. The average cost of a $1 million commercial vehicle insurance is $140 or just under $1,700 per year. Auto insurance depends on the make\, model, year, and other features of the vehicle.
Accident Insurance
Accident insurance is similar to general liability insurance but covers more things. Accident insurance might be a good idea for a daycare business since you will be working with small children. Accident insurance is split into two kinds:
- Accidental death and dismemberment
- Accidental medical expense
These two policies are often offered as extra coverage and are not necessarily required. But they are a good idea to have. The typical AME policy costs between $6 to $20 a month, so it is worth considering.
Umbrella liability insurance
Umbrella liability insurance is a kind of “catch-all” policy in addition to general liability insurance. There are several things that general liability insurance may not cover, so an extra umbrella policy can fill the gaps of a liability policy. Umbrella liability insurance policies can also act as an additional limit to your general liability insurance.
The typical $1 million umbrella liability policy costs an extra $450 a month. Umbrella liability insurance is not required, but it can be a good idea for unexpected emergencies.
Corporal punishment insurance
Corporal punishment insurance, also sometimes called teacher liability or educator’s liability, is a specialized type of professional insurance that will protect you in case one of your workers strikes a child or issues corporal punishment. Corporal punishment might be covered by a general liability policy.
Frequently Asked Questions
Do I need insurance for my daycare?
Yes, in most states in the US, you are legally required to have some kind of general liability insurance to open a daycare. Some states may have further insurance requirements so make sure that you understand the relevant laws in your state.
What does daycare insurance include?
Generally speaking, daycare owners should get some kind of general liability insurance and professional liability insurance. These two types of insurance policies should protect you from most legal issues that might arise in the context of running a daycare.
How much does daycare insurance cost?
It depends on the location and size of your business, but you can expect to pay anywhere between $500-$700 per year for general liability insurance for a small to medium-sized daycare. Workers’ compensation insurance typically costs about $1.25 per $100 of payroll.
What does general liability insurance for a daycare cover?
General liability insurance covers
- Bodily injury
- Advertising harm
- Medical payments
- Property damage (ex.. you break a child’s toy)
- Professional liability
General liability coverage may not apply to all mishaps or issues in your daycare. That is why umbrella liability policies and supplemental insurance exist.
How much money can I make running a daycare?
As of 2020, the median income for a daycare owner in the US was around $10 per hour. The top 10% of daycare owners earn over $15 an hour. Daycare may not make as much money as other kinds of businesses, but they have relatively low startup costs, and employees do not require much training. Also, many people find fulfillment in taking care of the next generation.
Popular Daycare Insurance Providers
Some companies provide insurance packages tailored specifically for daycares and other childcare businesses. Here are some of the more popular insurance companies that provide daycare coverage.
Assure Childcare
Assure Childcare offers specialty insurance packages for daycares and includes general liability, commercial property, and worker’s comp insurance. Assure Childcare members team up so they can give affordable policies to childcare workers.
CyberPolicy
CyberPolicy provides insurance packages across all 50 states. Their packages group together quotes on various national insurance agencies like Nationwide, Chubb, Liberty, and more. So, CyberPolicy is a good option if you do not have time to research and pick different insurance products. CyberPolicy insurance plans start at as little as $500 annually
NextInsurance
NextInsurance offers a daycare policy that includes general liability professional liability, commercial auto, workers’ compensation, and commercial property insurance all in one. Basic limits for general liability and workers’ compensation coverage are $500,000 and $100, respectively. Most NextInsurance plans start at as little as $450 annually.
Hartford
The Hartford offers daycare insurance and provides general liability coverage for all daycare activities and commercial auto insurance. Hartford policies cover all employees and they only offer plans to certified daycares.
Conclusions
Daycares are a necessity in today’s world where more and more parents are working to support their children. So opening a daycare is a lucrative opportunity. However, make sure that you have the appropriate insurance requirements. Insurance is not only legally required but can protect you in case of mishaps in the workplace. So make sure that you are abiding by all insurance regulations and that you research to find the best insurance products.