Home daycare insurance is the essential business coverage that protects you when a child in your care gets hurt, a parent sues for negligence, or your home daycare property is damaged. If you are running or planning to start a home-based childcare business, this coverage is not optional — it is the difference between a manageable incident and financial catastrophe. Your standard homeowners insurance explicitly excludes commercial childcare activities, leaving you fully exposed without a dedicated policy.
This guide is an independent buyer's resource — not a sales pitch for any single insurer. We compare home daycare insurance providers side by side, break down exactly what each coverage type protects against, and give you real cost numbers based on published rates and industry data. Whether you care for 2 children or 12, operate in a strict-licensing state or a flexible one, this guide covers your specific situation.
What Is Home Daycare Insurance and Why You Need It
Home daycare insurance is a specialized commercial insurance product designed for individuals who provide childcare services in their personal residence. It covers liability for injuries to children in your care, property damage related to your daycare operations, and legal defense costs if a parent files a lawsuit against you.
Why your homeowners insurance is not enough: standard homeowners policies contain a "business pursuits" exclusion clause. This clause specifically denies coverage for any claims arising from a commercial activity conducted on the premises — including childcare. If a child breaks an arm on your playground and the parents sue for $150,000 in medical bills and damages, your homeowners insurer will deny the claim. You would be personally responsible for the full amount, potentially losing your home and savings.
The numbers make the risk clear: according to the Office of Child Care (HHS), there are approximately 1.5 million home-based childcare providers in the US. The average general liability claim against a childcare provider is $35,000-$75,000, and serious injury claims can exceed $500,000. At $25-$125/month, home daycare insurance is one of the most cost-effective risk management investments a small business owner can make.
Types of Coverage Every Home Daycare Provider Needs
- General liability insurance: Covers bodily injury and property damage claims. If a child slips and breaks a wrist, this pays medical bills and legal defense. Recommended minimum: $300,000 per occurrence / $1,000,000 aggregate
- Professional liability (errors & omissions): Covers allegations of negligence, improper supervision, failure to follow safety protocols, or inadequate care. If a parent claims you were negligent in supervising their child, this coverage pays for your legal defense and any settlement
- Abuse & molestation coverage: A critical and often separate coverage that pays legal defense and settlement costs if allegations of abuse are made against you or your staff. Many states require this coverage specifically. It protects you even if allegations are false — legal defense costs alone average $50,000-$100,000
- Accident medical coverage: Pays medical bills for children injured at your daycare regardless of who is at fault, up to a per-person limit (typically $5,000-$25,000). This is "no fault" coverage that pays quickly, often preventing a lawsuit
- Business property/contents: Covers daycare equipment, supplies, furniture, and toys if damaged by fire, theft, or other covered perils. Your homeowners insurance excludes business property
- Hired/non-owned auto: If you or an employee uses a personal vehicle for daycare-related errands (field trips, supply runs), this covers liability for accidents. Your personal auto policy may exclude business use
Average Home Daycare Insurance Cost Breakdown
Home daycare insurance costs vary based on your capacity, location, coverage limits, and claims history. Here are the typical ranges for 2026:
| Coverage Level | Annual Premium | Monthly Cost | Typical Coverage |
|---|---|---|---|
| Basic (1-4 children) | $300-$600 | $25-$50 | $300K liability, basic professional liability |
| Standard (5-8 children) | $600-$1,000 | $50-$83 | $500K-$1M liability, professional liability, accident medical |
| Comprehensive (9-12 children) | $1,000-$1,500 | $83-$125 | $1M+ liability, all coverage types, abuse & molestation |
| Premium (12+ or multiple staff) | $1,500-$2,500+ | $125-$208+ | $2M+ liability, workers' comp, commercial property |
The per-child cost decreases as your capacity increases. A provider with 4 children paying $500/year pays $125 per child annually. A provider with 10 children paying $1,200/year pays only $120 per child — and the broader coverage limits make the larger policy a better value.
Provider Comparison: Premiums, Coverage, and Ratings
These are the major home daycare insurance providers in 2026, compared on the metrics that matter most to home-based childcare providers:
| Provider | Starting Premium | Max Liability | Abuse Coverage | Online Application |
|---|---|---|---|---|
| Markel Insurance | $350/year | $1,000,000 | Included | Yes |
| Next Insurance | $300/year | $2,000,000 | Optional add-on | Yes — instant quote |
| Simply Business | $325/year | $1,000,000 | Optional add-on | Yes — marketplace |
| Hiscox | $400/year | $2,000,000 | Optional add-on | Yes |
| State Farm | $500/year | $1,000,000 | Varies by agent | No — agent required |
| Nationwide | $450/year | $1,000,000 | Optional endorsement | No — agent required |
Markel stands out for including abuse & molestation coverage in their base policy — a critical coverage that other providers charge extra for. Next Insurance offers the easiest application process with instant online quotes and certificates of insurance. For providers who want bundling with homeowners coverage, State Farm and Nationwide offer convenience but at higher premiums.
State Licensing Requirements and How Insurance Fits In
Most states require proof of liability insurance as a prerequisite for obtaining a home daycare license. Requirements vary significantly by state, but generally fall into three categories:
- Insurance required for licensing (majority of states): States like California, New York, Texas, Florida, and Illinois require proof of general liability insurance with minimum coverage of $100,000-$300,000 per occurrence before issuing a childcare license
- Insurance recommended but not legally mandated: A handful of states do not legally require insurance for small home daycares (typically caring for fewer than 4 children), but strongly recommend it. Operating without insurance in these states is legal but extremely risky
- Specific coverage requirements: Some states mandate specific coverages beyond general liability. For example, several states require abuse & molestation coverage, accident medical coverage, or minimum property damage limits
Contact your state's Department of Children and Family Services (or equivalent agency) for exact requirements. The licensing process typically takes 2-6 months, and insurance is one of the easier boxes to check — most providers issue policies within 24-48 hours of application.
How to Determine the Right Coverage Amount
The right coverage amount depends on your specific risk profile. Consider these factors:
- Number of children: More children means more exposure. Each additional child increases the probability of a claim. If you care for 8+ children, $1,000,000 in liability coverage should be your minimum
- Ages of children: Infants and toddlers (under 3) carry higher risk than school-age children due to SIDS liability, choking hazards, and developmental supervision requirements
- Activities offered: Swimming pools, trampolines, field trips, and transportation increase risk significantly. If you have a pool, expect premiums to increase 25-50% and coverage requirements to jump
- Staff size: If you employ assistants or substitute caregivers, you need workers' compensation insurance (required in most states for employees) and your liability limits should be higher
- Your personal assets: If you own a home, savings, or other significant assets, a lawsuit judgment could reach those assets. Choose coverage limits that protect your personal net worth
Claims Scenarios: What Home Daycare Insurance Covers vs Does Not Cover
Covered Claims
- A 3-year-old falls off a swing and breaks a wrist — accident medical pays hospital bills up to the per-person limit, general liability covers any lawsuit
- A parent alleges you were negligent in supervising children during naptime — professional liability covers legal defense and settlement
- A child has an allergic reaction to a snack — general liability and accident medical cover medical costs and potential lawsuit
- False allegations of misconduct are made against you — abuse & molestation coverage pays legal defense costs even if allegations are unfounded
- A fire damages daycare equipment and supplies — business property coverage replaces them
NOT Covered
- Injuries to your own children (they are not "clients" — covered under your health insurance)
- Intentional harm to a child (insurance never covers deliberate acts)
- Vehicle accidents during transportation (requires separate commercial auto or hired/non-owned auto coverage)
- Employee injuries (requires separate workers' compensation insurance)
- Communicable disease outbreaks (typically excluded unless specific endorsement purchased)
Reducing Your Home Daycare Insurance Premium
- Safety certifications: Completing nationally recognized childcare safety courses (Child Development Associate credential, NAEYC accreditation) can qualify you for 5-15% premium discounts
- CPR and first aid training: Most insurers require this, and keeping certifications current avoids surcharges
- Security cameras: Installing visible security cameras in common areas reduces liability risk and can lower premiums by 5-10%
- Fenced outdoor play areas: A fenced yard with age-appropriate equipment reduces injury risk and demonstrates responsible operation
- Higher deductibles: Raising your deductible from $250 to $1,000 can reduce premiums by 10-20%. Only choose higher deductibles if you can afford the out-of-pocket cost in a claim
- Claims-free history: Maintaining a clean claims record for 3+ years qualifies you for experience discounts at most providers
- Bundling: If you carry homeowners or auto insurance with a major carrier, adding a commercial daycare policy may qualify for multi-policy discounts of 5-15%
Steps to Get Licensed and Insured for a Home Daycare
- Research your state's licensing requirements — Contact your state childcare licensing agency for specific training, inspection, and insurance requirements
- Complete required training — CPR certification, first aid, food safety, and any state-mandated childcare courses
- Pass background checks — FBI fingerprint check and state criminal background check (required in all states)
- Prepare your home — Install safety equipment (outlet covers, cabinet locks, smoke detectors, fire extinguishers, fenced play area), remove hazards
- Get insurance quotes — Contact 3-4 providers (Markel, Next Insurance, Simply Business, and your homeowners carrier) for comparison quotes
- Purchase your policy — Select the coverage that meets your state's requirements and your risk profile. Obtain a certificate of insurance
- Schedule home inspection — Your licensing agency will inspect your home for compliance with safety and space requirements
- Submit license application — Include your certificate of insurance, training records, background check results, and inspection report
Bundling vs Standalone: Comparing Home Daycare Insurance Options
You have two main options for structuring your home daycare insurance: a standalone commercial policy or adding a business endorsement to your homeowners insurance.
Standalone policy (recommended): A dedicated commercial childcare policy from specialists like Markel or Next Insurance provides purpose-built coverage with higher limits, included professional liability, and claims adjusters experienced with childcare cases. This is the preferred option for providers caring for 4+ children or operating in states with strict licensing requirements.
Homeowners endorsement: Some homeowners carriers (State Farm, Nationwide, Allstate) offer in-home business endorsements that add limited commercial liability to your homeowners policy. These endorsements typically provide $10,000-$50,000 in liability — far below what a serious childcare claim costs. They may be adequate for informal care (1-2 children, unlicensed) but are insufficient for licensed home daycare operations.
For more on managing business and personal insurance costs, see our urgent care cost guide for understanding medical expenses. Our guide to switching car insurance covers practical tips for finding better coverage at lower premiums across all insurance types. For broader business cost management, explore our personal finance guides. The Office of Child Care at HHS provides additional resources on childcare regulations and financial assistance.
Frequently Asked Questions About Home Daycare Insurance
Home daycare insurance costs $25-$125 per month ($300-$1,500 per year) depending on the number of children, coverage limits, location, and provider. A basic policy for 6 children or fewer starts at $300-$500/year. Comprehensive coverage with professional liability and abuse coverage runs $800-$1,500/year.
Yes. Standard homeowners insurance excludes commercial activities including childcare. If a child is injured and you only have homeowners insurance, the claim will be denied — leaving you personally liable. You need a dedicated home daycare insurance policy or commercial endorsement.
No. Homeowners policies contain a "business pursuits" exclusion that denies coverage for home-based businesses including daycare. Some carriers offer in-home business endorsements, but these provide limited coverage ($10,000-$50,000) that is inadequate for childcare claims.
At minimum: general liability ($300,000-$1,000,000), professional liability, and abuse & molestation coverage. Most states also require accident medical coverage that pays children's medical bills regardless of fault. Property coverage for business equipment is also recommended.
Home daycare insurance covers bodily injury to children in your care, property damage from business operations, legal defense costs, professional liability for negligence allegations, medical payments for injured children regardless of fault, and food-borne illness claims. It does not cover intentional harm, injuries to your own children, or vehicle accidents.
Contact your state's childcare licensing agency, complete required training (CPR, first aid, safety courses), pass background checks, prepare your home for inspection, purchase home daycare insurance meeting state minimums, and submit your license application with proof of insurance. Most states require insurance before issuing the license.
Key Takeaways
- Home daycare insurance costs $300-$1,500/year and is required because homeowners insurance explicitly excludes commercial childcare activities. Operating without it exposes your personal assets to claims averaging $35,000-$75,000.
- Essential coverages include general liability ($300K-$1M minimum), professional liability, and abuse & molestation coverage. Accident medical coverage that pays regardless of fault is required in most states.
- Markel offers the best value for comprehensive coverage (abuse included in base policy). Next Insurance offers the fastest application with instant online quotes. Both are specialists in daycare insurance.
- Most states require proof of insurance to obtain a childcare license. Start the insurance process early — policies can be issued in 24-48 hours, but plan 2-6 months for the full licensing timeline.
- Lower your premiums with safety certifications (5-15% discount), security cameras (5-10%), claims-free history, and higher deductibles. CPR and first aid training is required by most insurers and states.