Why Have Business Liability Insurance?

Your child care assistant is playing with several of the day care children when one of the children falls down and suffers a cut on her forehead.

You take the child to the emergency room where the doctor recommends that the child have two stitches to reduce the chances there will be a lingering scar.

The child’s parent is extremely upset and hires a lawyer who sues you and your assistant for existing as well as any future medical expenses to help the child recover. They also sue for thousands of dollars of damages for the pain suffered by the child.

Now What?

This was the situation a family child care provider described to me on the phone today.

If a day care child is injured while in your program, you are ultimately responsible.

To protect yourself, you need to have business liability insurance. If a child is injured, your insurance company will hire a lawyer to defend you against the lawsuit. Your insurance policy will also likely pay for the child’s medical bills.

In this case, the provider had let her business liability insurance policy lapse, so she had to hire her own lawyer to defend herself. If the case goes to trial, the provider will likely lose and owe the parents thousands of dollars.

This provider, like most providers, does not have much in the way of personal assets. But, when the parent wins in court, they can put a lien on her house and garnish her wages if she decides to take another job in the future. It’s a financial cloud that is likely to hang over her for the rest of her life.

Business Liability Insurance

Despite the real risks they face caring for children, a majority of family child care providers do not have business liability insurance. The reason why most do not are varied:

  • I don’t consider myself a business and so I don’t need insurance.
  • My homeowners insurance will protect me. It won’t.
  • I’ve never been sued in the past, so I won’t be sued in the future.
  • The insurance is too expensive.

None of these reasons are compelling enough to forego purchasing business liability insurance. It should be viewed as a cost of doing business. Without it, you are subject to a great financial risk if a child is ever injured.

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Tom Copeland

I've been the nation's leading trainer, author, and advocate on the business of family child care since 1981. I'm a licensed attorney and have presented hundreds of business workshops for family child care providers across the country. I answer thousands of calls and emails each year to help providers, tax professionals and trainers understand complex business and tax issues. Call me at 651-280-5991. Email me at tomcopeland@live.com. Visit me on Facebook. From 1981 to 2009 I worked at Resources for Child Caring in Minnesota (now called Think Small), where I was director of Redleaf National Institute for 15 years. I've written nine books on the business of family child care published by Redleaf Press, a division of Resources for Child Caring. I was on the board of directors of First Children's Finance, a non-profit organization providing low interest loans and consulting and technical assistance to help family child care providers suceed as a business. They operate in Minnesota, Iowa, Michigan, North and South Dakota, Kansas, Missouri, and Texas. Here are some YouTube videos of me talking about my work with this organization and the business of family child care. I graduated from Macalester College (BA) in 1972 and from William Mitchell College of Law (JD) in 1980. I live in St. Paul, Minnesota with my wife Diane and two cats, Duke and Ella.