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A Consumer's Guide To... Day Care Liability Insurance Published by the Maine Bureau of Insurance 2006 Mila Kofman
DO I NEED DAY CARE INSURANCE? If you've been thinking about providing day care for other people's children, you've probably also wondered whether you need some kind of insurance. Day care centers and nursery schools must have liability insurance to become licensed by the Department of Health and Human Services (DHHS). Home care providers are not required by DHHS to have liability insurance to become licensed. Although DHHS does not require liability insurance, home care providers may be required to have special liability coverage by their homeowners’ or renters insurance company. A home day care provider is defined by Health and Human Services as a person who receives some type of payment to provide child care in his or her own home on a regular basis for 3 to 12 children under 13 years old, who are not the provider’s own children. If you are receiving payment for providing child care on a regular basis, you must notify the insurance company who insures your home to buy special liability coverage. The Department of Health and Human Services defines a children’s day care facility as “a house or other place in which a person maintains or otherwise carries out a regular program, for consideration, for any part of a day providing care and protection for 3 or more children under 13 years of age.” Nursery schools carry out or maintain, for consideration, during the day a regular program which provides care for 3 or more children with: no session for the children longer than 3.5 hours in length; no more than 2 sessions conducted per day; no child attending more than one session at the nursery school per day; and no hot meal served to the children. DO I NEED A SPECIAL POLICY IF I ALREADY HAVE RENTER’S OR HOMEOWNER’S INSURANCE? If you decide you want insurance, you must consider the kind of policy and how much coverage you will need. Consulting with one or more insurance producers, other day care providers, and/or an attorney can provide you with different perspectives and the knowledge you need to make an informed decision. The following guidelines are general and will help you understand some key points. However, your individual needs may be different. If you plan to provide care in a home you own, rent, or lease, you may already have a homeowner’s or renter’s policy. This is a basic policy that covers your property in case of fire or a number of other perils. It also gives you some protection against accidents to others while they are on the property you own or rent. Such a homeowner’s or renter’s policy by itself will not cover your day care activities if you receive payment for them. If you own a homeowner’s or renter’s policy, there is a slight possibility (because of availability) that you may be able to get an endorsement, or supplemental rider, added to your policy. This rider will provide liability coverage for a limited number of children while they are under your paid care. This rider is usually limited to three children, not including your own, though some insurers will write riders for more than this number. While the rider will add to the cost of your insurance, it will be the least expensive coverage you can buy, as long as you plan to care for only the number of children it allows. be aware: your insurance company could legally cancel your homeowner’s policy or even refuse to pay a claim if you do not notify them that you are operating a business (however informally), in your home. If you decide to care for a larger number of children than your insurer allows under a rider, you may have to buy another type of insurance policy. For example: 1. A separate day care liability policy, or 2. A "commercial package" policy that provides day care liability coverage combined with coverage for damage or theft of your property. In both cases, the number of children you care for will be a factor in the amount of premium charged by the insurer. Be aware that if you plan to be a licensed provider, your premium will be based on the number of children for which your facility is licensed, not the number actually receiving care. You can save money if you make sure that you are not licensed for more children than you have under active care! HOW MUCH COVERAGE DO I NEED? The other major factor that will affect the amount of your premium is the dollar amount of coverage, or the "limit" you decide to buy. The minimum limits required by the Maine Department of Health and Human Services for a licensed child care facility are $l00,000 per person and $300,000 per occurrence for bodily injury. If you provide transportation, vehicle liability insurance is required for all day care providers. As of July 1, 1998, Maine’s minimum requirement for all vehicle liability insurance is $50,000 per person and $100,000 per occurrence for bodily injury. The Department of Health and Human Services may have different requirements. Please note: doubling the insurance limits does not mean doubling the premium, however, so you may feel that added protection is worth the difference in cost. Again, you should talk to several producers and experienced day care providers before deciding. SHOULD I WORRY ABOUT LEAD PAINT? Lead paint may become an issue with insurers if you provide day care for children other than your own. Most buildings constructed in the United States before 1978 were painted with lead-based paint. Lead-based paint is considered a major environmental health hazard, especially to children. Therefore, if the building where your facility is located was built before 1978, many insurers may be unwilling to issue liability insurance coverage to you unless you have a lead-safe certification from a licensed inspector. You may also obtain liability insurance from “surplus lines” or “excess” insurers. Coverage obtained through the surplus lines market will likely be expensive. Also, this coverage may have non-standard exclusions for lead and other liability exposures as well as restrictions not found in a standard policy. The Department of Health and Human Services Child Care Licensing Unit has rules concerning lead paint. Contact them at (207) 287-5060 for more information. WHAT CAN I DO TO GET AFFORDABLE LIABILITY INSURANCE? So far we have assumed that you will have little or no difficulty finding an insurer willing to provide you with the coverage you need. However, you can’t be sure that an insurer will always agree to provide day care liability at a price you think you can afford. Insurers are becoming less willing to provide day care liability and some may require that you insure both your home and the day care with them. There are several things you can do to increase your chances of successfully obtaining liability insurance. The most important is to know an insurer's minimum requirements regarding the physical environment, staff training and experience, and child-to-provider ratios of day care facilities. While general information is available from the Maine Department of Health and Human Services, their main interest is in establishing minimum requirements for certification. Insurers may have stricter requirements. Don't hesitate to ask insurance producers if the companies they represent have specific requirements before they will issue a day care liability policy. Try to bring your facility in line with these requirements. It may mean putting off the swimming pool for a few years, fencing in a play area (and fencing out the family dog), hiring an experienced helper, installing some fire extinguishers and smoke alarms, or filling in a drainage ditch in the back yard. These things will not only make it easier to get insurance, they will also reduce the amount of money you have to pay. Day care providers can help keep insurance affordable by continuing to provide safe and responsible care in a clean and healthy risk-free environment. Quality day care is good for children and good for your insurance budget. If you ever have problems with an improper cancellation of your policy, or with a claim, the Maine Bureau of Insurance is available to help you. We can be reached at: THE MAINE BUREAU
OF INSURANCE The Bureau of Insurance, within the Department of Professional and Financial Regulation, regulates the insurance industry for solvency and consumer protection. It does so through its examining and licensing procedures of insurance companies, by licensing producers, by reviewing rates and coverage forms, conducting audits, and by sponsoring programs that enhance awareness of and compliance with State laws. The Bureau has statutory authority to enforce the State’s laws and rules pertaining to insurance, and it initiates investigations and holds hearings concerning possible infractions of them.
Printed Under Appropriation #01402A3041012 February 2006 Last Updated: July 16, 2008 |
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