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What is daycare insurance?

Daycare insurance is a set of specialized coverages, designed for childcare providers who run a daycare. You’ll often see ‘childcare’ and ‘daycare’ used interchangeably in this context.

Whether you operate your daycare from home or a commercial facility, this insurance covers potential liabilities and other dangers – from a child getting injured on your premises to accusations of professional negligence, to break-ins into your facility.

A robust policy ensures that your business, your finances and your reputation are protected against unforeseen events.

What daycare insurance includes

A standard daycare insurance policy typically bundles several key coverages to provide a strong foundation of protection:

• Commercial general liability (CGL): Since daycares involve public interactions, general liability coverage is invaluable. It covers costs related to third-party bodily injury or property damage that occurs on your premises. For instance, if a child is injured while playing or a parent slips and falls during pickup, general liability insurance can cover the medical and legal expenses. Incidentally, this is why the coverage is often known as ‘slip-and-fall’ insurance.
• Professional liability: Otherwise known as errors and omissions (E&O), professional liability protects you against claims of negligence, errors or failure to provide the expected level of care. If a parent alleges that their child’s development was hindered due to your program's shortcomings, this coverage would help with legal defence costs.
• Commercial property: Commercial property coverage safeguards your physical assets, including the building (if you own it), your equipment, toys and supplies. It provides financial protection against losses from events like fire, theft or vandalism.
• Workers’ compensation: This protects you should an employee get injured during work hours, covering medical expenses and lost wages.

Recommended add-ons for daycare insurance coverage

To create a more comprehensive safety net, consider enhancing your policy with these optional coverages:

• Business interruption: Functioning as an enhancement to your commercial property coverage, this provides income replacement if your facility is forced to close due to a covered event, such as fire or severe weather.
• Cyber liability: If you store sensitive information about children and their families electronically, this protects you from data breaches and cyberattacks.
• Commercial auto: If you use a vehicle for business purposes, such as transporting children, you’ll need this coverage for accidents and liability.

Common types of daycare insurance claims

Understanding common claims can help you see why daycare insurance is so important. Here are some of them:

• Child injury: A child trips over a toy and breaks their arm, leading to a claim for medical expenses. Your general liability coverage will protect you in this instance.
• Allergic reactions: A child with a known allergy is accidentally exposed to an allergen, resulting in a severe reaction and a subsequent lawsuit. Your professional liability coverage would offer with the necessary funds to deal with this.
• Property damage: A fire caused by faulty wiring destroys a significant portion of your play equipment and supplies. Your commercial property coverage would help pay for the necessary repairs and replacement, and if you have business interruption coverage, you’ll also get reimbursed for any lost income.

How much does daycare insurance cost?

On average, small in-home daycares might pay premiums starting at $700 annually, while larger commercial centers could see premiums of $2,000 or more per year. The best way to determine your exact cost is to get a personalized quote or consult with a broker.

Here are some factors that are likely to influence your rates:

• Type of coverage: The number of coverages and the kinds of coverages you have on your policy will partially dictate your rates. Depending on the risks your business faces, some coverages may cost more than others. For instance, if the likelihood of a third party (such as a child) sustaining an injury on your premises is higher than the likelihood of a break-in or fire, then expect to pay more for general liability than property coverage.
• Coverage amount: Higher coverage limits typically result in higher premiums, since filing a claim can result in more money for you (although that will depend on the nature of your claim). If you think your limits are too high, consider lowering them where possible to lower your rates.
• Facility size and capacity: More children and staff increase potential exposure and insurance costs.
• Location: Premiums can vary based on your geographical location. Factors like local claims history and regional risk assessments can impact your rates.
• Safety measures and protocols: Facilities with comprehensive safety programs, security systems and training protocols often qualify for discounts.
• Claims history: A long history of running a daycare without any insurance claims can demonstrate a commitment to safety and may result in lower premiums. Conversely, a history of frequent claims will likely increase your costs.

How to get the cheapest daycare insurance rates

Insurance premiums can, at times, be higher than we expect. Here are some strategies to help you lower them:

• Bundle policies: Purchase multiple insurance products from the same provider to qualify for a discount. For example, if you operate from home and have home insurance, talk to your provider to explore your business insurance options. All your daycare-related coverages – whether it’s professional liability or commercial property – should ideally be with the same provider.
• Increase your deductible: Opting for a higher deductible can lower your annual premium, but make sure it’s an amount you can comfortably pay out of pocket. You don’t want to be caught off guard.
• Maintain a good record: A track record free of claims demonstrates that you run a safe and low-risk operation, which can lead to lower rates.
• Implement a risk management plan: Show insurers you’re proactive by having clear safety protocols, staff training programs and regular equipment maintenance.