Does Your Homeowners Insurance Still Cover You?

Thesurprising answer for many family child care providers is “probably not.”

Homeowners insurance is personal insurance and is not meant to cover risks associated with any business, including caring for children.

Homeownersinsurance covers three basic things:

1. Your house and other structures on your property (garage)

2. The contents of your home, and

3. Some personal liability protection.

When you start using your home for your family child care business, you may lose some of the insurance protection you once had. This can come as a shock when you make a claim against your homeowners insurance policy and find out that the claim is not covered!

Your home

Some homeowners insurance policies say "no coverage for any claiming arising out of or in connection with a business." If your policy says this and your house is damaged in a hurricane you may get nothing! If your policy says "family child care covered up to four children" and you have five children in care and a fire damages your kitchen, you may get nothing! Although such policies are rare, they do exist. A provider in Minnesota once had hail damage on her roof. When the insurance company found out she did child care, they stopped the contractors from finishing the repairs.

Thecontents of your home

Homeowners insurance policies insure the contents of your home to the tune of hundreds of thousands of dollars. This covers damage or destruction of your furniture, appliance, clothing, and everything you brought into your home. However, most policies only cover "business property" up to $2,000.

The key question is what the policy means by "business property." In one case, a provider's home was entirely destroyed in a tornado. Her policy only paid out $2,000 for all the contents of her home because they said property that is ever used in a business is considered "business property" subject to the $2,000 limit. Because almost everything in your home is used for your business (washer, dryer, tables, chairs, television, rugs, etc.), you need to know the extent of your coverage.

What to do?

Youmust contact your homeowners insurance agent and tell him/her you are a familychild care provider caring for ___ number of children. Ask if your home and itscontents care covered under your policy. If your agent says you are covered,ask for her to send you a letter stating this. Unless you have something inwriting, you should assume your policy does not fully cover you.

I've talked to a number of providers over the years who were told by their insurance agent that they were covered, only to find out later that the insurance company would not cover them. This is why it is critical to get in writing stating something to the effect that “the insurance company is aware of the child care business in your home and this has no adverse effect on the level of your protection under your homeowners policy.”

If your homeowners policy does not cover your business at all, you will need to purchase a commercial insurance policy (or shop around for another insurance company). If your policy does not cover your contents you need to purchase a business property insurance policy. Your homeowners agent should be able to get this insurance for you. The cost will not be large. Some business liability insurance policies may offer some business property insurance coverage, but it's unlikely it will adequately cover all of your business property.

Personal liability protection

Your homeowners insurance policy will not pay claims or defend you if a child or parent in your program is injured. You need business liability insurance to cover you for the liability risks of operating your child care business; primarily for bodily injury claims and lawsuits.

I developed an insurance directory where you may be able to find homeowners insurance that will protect you. Also, read my article, "Ten Questions to Ask Before Purchasing Business Liability Insurance."

Thanks to Elizabeth Downs from New England Insurance Services and Debe Marofsky from Affiliated Insurance Services.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://pix4free.org/photo/5971/homeowners-insurance.html

For more information about all aspects of insurance for your business, see my book Family Child Care Legal & Insurance Guide.