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What Types of Insurance Does a Daycare Need?

What Types of Insurance Does a Daycare Need?

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What Types of Insurance Does a Daycare Need?

Daycare Insurance Quotes

Costs for business insurance can vary greatly, and getting insurance quotes from multiple companies is recommended in order to get the best pricing.

Coverwallet and Hiscox offer easy business insurance quotes at affordable prices.

What Types of Insurance Does a Daycare Need?

Caring for children in a safe and friendly environment is essential for daycares, and parents are often picky when choosing the right place for their children. Undoubtedly, safety is of utmost importance and contributes to the success of the daycare business. Although daycares can take action to lessen their risks, insurance coverage is necessary to protect the daycare from an accident.

Related: Guide to starting a daycare

What Are Some Risks for a Daycare?

From playgrounds to craft time, drop-offs to pick-ups, hazards pop up and can create financial hardships for large daycares to home daycare providers alike. Some of the risks that childcare providers encounter include the following:

  • Child injuries
  • Claims of abuse
  • Fire and water damage
  • Sudden loss of business
  • Employee injuries

Child Injuries

Daycare centers offer a wide variety of activities to entertain and educate the children in their care. However, the various activities include some risks that can lead to injury. For example, playground equipment is typical in outdoor play areas, but the play equipment may lead to sprains, cuts, or broken bones. 

Additionally, slips, trips, and falls are common injury claims and occur both outside on play equipment and inside. For example, slippery, cluttered, or uneven flooring can contribute to the risk of slip and fall injuries. Further, toppling toys, equipment, or furniture can also threaten a child’s safety.

Illness is another concern in daycares. For instance, unsanitary conditions and access to harmful substances can lead to illness. Illness may also occur from contracting illnesses from other children or workers.

Claims of Abuse

Daycare centers may encounter situations where a parent claims the business has either neglected or abused their child. Claims of these sorts are severe and should be carefully prepared for. Extensive employee vetting and training can help prevent abuse claims by hiring qualified employees and performing background checks.

Abuse claims can occur if a parent asserts an employee has been too harsh or negligent in watching their child. For instance, a physical or sexual abuse claim may arise if a parent alleges an employee has acted inappropriately towards their child. Additionally, a lack of vigilance, which can result from an under-staffed daycare, may cause a negligence claim against the business.

Fire and Water Damage

The daycare building and items are at risk of damage from several causes, but the two of the more prevalent causes occur from fire and water damage. A fire can begin from malfunctioning wiring and faulty equipment. Further, kitchen areas have additional fire sources, such as ovens, microwaves, stoves, and toasters.

Water damage is another source of extensive damage, especially to walls, floors, and furniture. For example, water damage stems from leaking roofs and clogged toilets. In addition, sink faucets and bathtubs left on by children can also be a source of water overflow and ensuing damage. Water damage may also lead to other issues such as mold and mildew, leading to closures and lengthy repairs.

Sudden Loss of Business

Daycares rely on an open location to maintain the flow of business. A loss that requires closure for repairs means a halt to business and a probable loss of income and customers. Although relocations are possible and daycare equipment is easy to replace, a location change jeopardizes the daycare’s clients. Many families choose their daycare based on specific locations.

Closures are generally caused by a loss, such as fire or vandalism damage. However, after repairs, daycare closures can be extended due to delays in getting permits and inspections to ensure the location is safe for children to return.

Employee Injuries

Daycare employees have a few workplace hazards that may lead to injury or illness. For example, slips, trips, and falls can result in strains, sprains, or broken bones. Employees may also suffer back or knee injuries from lifting and carrying children. Other injuries include bites, scratches, and contact with thrown toys. In addition, unwell children may spread illness to employees, and there is a risk that employees may be exposed to bloodborne illnesses like HIV or hepatitis B.

Hiscox.com

What Insurance Policies Should a Daycare Consider?

In an ideal setting, risks are low and never become a concern. However, when an accident happens, despite all the precautions in place, insurance is an essential tool to help recover from the incident and protect the business from expensive lawsuits or repairs. Some of the insurance policies that a daycare should consider include the following:

  • General liability insurance
  • Professional liability insurance
  • Property insurance
  • Business interruption insurance
  • Workers’ compensation insurance
  • Commercial auto insurance

General Liability Insurance

A general liability policy for premises and operations is crucial for daycares due to their numerous liability hazards. For instance, this liability insurance policy covers bodily injury and property damage claims that occur on-site or due to the business’s operations; it offers protection for when children are injured at the daycare.

For example, the general liability policy would cover the claim for a child injured on play equipment. A general liability policy offers coverage for several claim-related expenses, such as the following:

  • Payment of medical expenses
  • Repairs to damaged property
  • Coverage for legal defense costs
  • Payment of settlements

Professional Liability Insurance

A professional liability policy (also referred to as corporal punishment liability or molestation liability) covers legal expenses for the business due to claims of negligence or errors that result in damages, such as injury or harm. For instance, professional liability coverage would pay legal expenses for the daycare over claims of abuse or lack of supervision that results in injury.

Since there is a possibility of overlap between a general liability policy and a professional liability policy, it is advisable to have one insurance company cover both policies with equal coverage limits. Using one insurance company prevents coverage disputes and helps ensure that claims will be covered promptly.

Commercial Property Insurance

A property insurance policy covers business-owned structures and items against perils that cause loss or damage. Although property insurance policies vary in the number of covered perils, most property insurance policies cover the following hazards:

  • Fire 
  • Explosion
  • Wind or hail
  • Falling objects
  • Vandalism or theft
  • Water damage from leaking pipes

Business-owned structures are covered for their rebuilding cost, up to an agreed limit. The rebuilding cost is based on the size and condition of the building to ensure that one of like quality could be rebuilt in a total loss.

Business items, such as furniture, equipment, diapers, blankets, food, and toys, are also covered up to an agreed limit. Damaged or lost items are typically covered on a replacement cost basis or an actual cash value basis. An actual cash value policy covers items for their value at the time of loss, meaning that depreciation, wear, and tear are subtracted from the replacement cost.

Business Interruption Insurance 

Business interruption insurance covers daycares when the business is closed following a loss. This line of coverage helps prevent financial losses during a closure. For example, business interruption insurance covers the following expenses:

  • Lost income
  • Employee wages
  • Payments on existing loans and bills
  • Temporary relocations

Usually, a business interruption insurance policy is an add-on coverage for a business owner’s policy or insurance package and is not sold as a standalone policy.  

Workers’ Compensation Insurance

A workers’ compensation policy covers claims of work-related injuries that occur during work. For example, this policy would cover the claim of a daycare worker who is burned while cooking in the daycare’s kitchen. An injured employee may accumulate several expenses following an injury, such as medical bills and a loss of income. 

Fortunately, a workers’ compensation policy offers coverage for several claim-related expenses for employees, such as 

  • Medical bills
  • Court costs
  • Lost income
  • Rehabilitation care
  • Disability income
  • Funeral expenses

In many states, this coverage is required for businesses with employees. However, workers’ compensation coverage is important even if it is not required because it offers financial assistance to injured employees while also protecting the business against potential lawsuits. 

Commercial Auto Insurance

Commercial auto liability insurance is needed if vehicles are being used to transport children to and from the schools such as home drop-off, field trips, etc.  A daycare business can be held liable for injuries or property damage if the driver gets into an accident and can cover both company-owned vehicles and privately owned vehicles when they are being used for company business. 

How Much Does Insurance Cost for a Daycare?

Insurance policies for childcare centers vary in cost, determined by the amount of coverage on the insurance policies. Moreover, higher risks may mean that the policy will cost more. As a result, each daycare business will fluctuate in insurance costs. For example, a small daycare that rents space and has few employees and children has lower risks and needs lower coverage than a large, multi-building daycare with numerous employees and children. 

Daycare businesses have several factors that influence coverage amounts and risk exposures, including:
– The size and condition of the building
– The condition and safety of equipment, especially playground equipment
– Safety precautions and injury prevention, such as closed-circuit video recording
– The number of employees on the payroll
– Employee vetting, background checks, training, and certification
– Fire suppression systems
– Any past or current lawsuits or insurance claims

The best way to determine insurance costs is to contact an insurance company for a quote. Ideally, you would want to get multiple quotes to compare coverages, bundle discounts, and pricing to pick a package that best fits your daycare’s needs.

What Types of Insurance Does a Daycare Need?

What Types of Insurance Does a Daycare Need?

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