What type of insurance does a home-based day care business require?

Going without the proper amount of insurance when you run a home-based day care business leaves you wide open for financial disaster. A day care business involves all sorts of liability issues: What if a child is injured while under your care? What if you're accused of abuse? What if the house burns down and all your day care equipment is destroyed?

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A standard home insurance policy does not protect you from business liability and typically provides only $2,500 coverage for business equipment, according to the Insurance Information Institute. Some home-based business owners can get the additional coverage they need by purchasing an endorsement to a home insurance policy. But a liability endorsement is usually available only to businesses that have few visitors, which wouldn't be the case with a day care.

What does the insurance cover?

You need to purchase a standalone in-home business policy or business-owners policy. Specialty insurers and some home insurance companies sell in-home business insurance. The policies generally:

• Cover business property.
• Pay for income loss in case your home is damaged or destroyed and cannot be used for a period of time.
• Cover additional expenses for operating out of a temporary location.
• Provide liability protection.

The next step up in insurance is a business owners policy, which provides the most comprehensive coverage for a home-based business.

Shop around among companies and insurance brokers who specialize in insurance for home-based businesses. Find a skilled agent who has experience serving clients who run day care businesses and is willing to take the time to understand your unique needs. Once you purchase a policy, keep in touch with the agent and update your policy to keep up with your needs as the business changes.