Typical & Extensive Commercial Daycare Insurance Coverages
Operating a successful daycare business requires a lot of work while also having a broad range of inherent exposures. Because certain risks are specific to Daycares that many other business may not have, many daycare owners are missing a lot of critical information relating to their coverage that may end up costing them thousands of dollars down the line.
For example: Although a home daycare may have a home insurance policy with liability coverage, a lot of people fail to realize that there are many gaps in this policy that leave the daycare owner open to lawsuits and other undesirable risks.
What are the primary coverages of a daycare insurance policy?
Property, liability, and related common exposures can be covered with a Business Owner Policy (BOP) or by combining Commercial General Liability (CGL) & Commercial General Property (CGP) Policies. A BOP is oftentimes the least expensive insurance bundle for small businesses and is seen as a broad basked of coverages that a covers common business risks.
(CGL vs CGP)
It is very important for many daycares that in order to even rent a facility, most landlords require daycare tenants to retain coverage protecting landlord exposures including damage to premises, fire, etc. Landlords may require Certificates of Insurance naming the landlord as an Additional Insured. In simple terms, this means the landlord may have a financial interest in the insurance policy. The last of the common primary coverages is Professional Liability.
What are some other coverages I should consider for my daycare insurance?
Workers’ compensation or WC for short is a type of insurance policy that is required in most states that protect both employers and employees in the case that an employee gets injured on the job. In states that require WC insurance, not having appropriate coverage may be considered criminal rather than just civil exposure. Properly classifying employees is also extremely important. Many small businesses mess up at these employee classifications and don’t realize that they open themselves up to major lawsuits or other undesirable risks that could destroy their business.
Another common issue we may see with daycare businesses is misclassifying employees in order to reduce their workers’ compensation rates. This not only allows insurance carriers to potentially deny claims and void the insurance contract, but it opens up the business to countless risks and heft penalties. As if it couldn’t get any more complicated, WC for the same duties may have different classifications in different states. Be sure to work with an experienced professional WC agent/broker to mitigate that risk. If you can’t find anyone capable of answering your questions, feel free to ask us, we don’t charge any money to give people advice.
Why might commercial vehicle coverage be useful for daycare businesses? and what are its benefits?
Believe it or not, some daycares get big enough to the point that they own buses and vans that transport people. These businesses need to have commercial vehicle coverage in case there are any accidents or claims. Depending on circumstances, personal vehicles may be used for commercial purposes if the insurance carrier has added that exposure onto the policy. In this case, Hired/Nonowned vehicle coverage helps protect the daycare if anyone uses or rents vehicles on behalf of the business, since most personal auto policies specifically exclude claims when personal vehicles are used for business purposes.
Why might a daycare need sexual abuse and molestation insurance coverage? and what are its benefits?
Believe it or not, whether an accusation is legitimate or not, all daycares have exposure to accusations made against them. Whether the claim is valid or not, contingency attorneys can readily accept plaintiffs with the costs of litigation running into the hundreds of thousands of dollars even before a trial has initiated. Losing a case may require the daycare to not only pay damages, pay court costs, but also pay legal fees of the winning plaintiff.
Why might a daycare need student accidental death & disability insurance coverage? and what are its benefits?
Despite well intentions, sometimes accidents happen at daycares. This insurance coverage is usually not included in other policies. Sometimes parents must buy into the group policy coverage as a requirement for enrollment.
How may commercial umbrella & excess limit insurance be useful for a daycare business? and what are its benefits?
The daycare might purchase umbrella or excess limits to add millions of dollars worth of coverage to all their underlying policies. Umbrella coverage may also fill gaps where there is not underlying coverage. Interestingly enough, this might be less expensive and more comprehensive than raising the limits on each individual exposure. For this reason, it is important to find a licensed agent that is familiar with daycare insurance if you want to not only save on some areas of your insurance policy, but also stretch the amount of coverage you may get for every dollar of premium you pay.
Why might a daycare need cyber exposure & identity theft insurance coverage? and what are its benefits?
Daycare businesses can be easy targets by tech savvy criminals due to the amount of private personal information, financial information, and videos. From what we have observed, many businesses retain cyber exposure that may not sufficiently protect this private information. Typical applications require substantial Personal Identifiable Information (PII) including names, birthdates, addresses, emails, credit cards, financial information, etc. This information may be kept in filing cabinets, computers, or cloud storage, all of which may not be properly encrypted. As we all know, businesses with sophisticated and dedicated security departments are routinely hacked. Daycares are much easier targets because liability, reputation, and customer dissertation can easily kill these small businesses.
How may catastrophic insurance coverage be useful for daycares? and what are its benefits?
Few businesses prepare for disasters, natural or otherwise. Depending on the location, there could be exposure to flood, earthquake, tornado, and more. FEMA.gov has many guides, but just know that all it takes is a single “once-in-a-lifetime disaster” to destroy years of hard work growing a small business due to being underinsured.
The next step
As you can see, the range and scope of exposures is high. It is strongly recommended that daycare operators obtain the appropriate coverages at reasonable rates by working with experienced insurance professionals because this type of insurance policy is far to important and costly if done haphazardly. Make sure whoever you work with has experience and is appointed with top carriers. If you have any questions feel free to reach out to us. Our goal is to provide education and relieve people of insurance-related stress by making insurance simpler!
