Should hired household help be bonded and insured?

Should my housekeeper be bonded and insured?

Yes, you should look for a housekeeper who is bonded and insured for extra protection, and also look at your own insurance. Insurance and bonds help protect both the employer and the employee if something were to go wrong during work hours or after hours – this includes liability and medical coverage as well.

The risk posed by an uninsured housekeeper may be low, but when something goes wrong, it can be very costly. Experts recommend weighing the risk.

"It's a value judgment people have to make on their own," says William K. Austin, co-founder of Austin & Stanovich Risk Managers LLC, an independent risk management consulting and insurance advisory company with offices in Massachusetts and Rhode Island.

But he and other insurance experts say it’s crucial to have the right insurance in place on both your side and the service provider’s to ensure it covers what might happen.

If you are injured accidentally by a hired person your health insurance should cover your medical care; for example, if someone is mowing your lawn and a rick flies up and hits you in the head.

If the babysitter who comes occasionally falls down your stairs and is injured, it would generally be covered under the liability and medical payments portions of your homeowners insurance policy. However, if it's a live-in or everyday nanny who is injured, your homeowners may deny the claim due to the person's status as a regular employee.

"There's a good chance these workers will be covered by your homeowners or renters policy, but each company treats things a little differently," says Randy Petro, vice president of claims for Mercury Insurance in Orange County, California.

Even if the injury or damage is covered, a significant claim on your homeowners policy can have a big impact on what you pay for coverage. It’s also good to remember that if the damage is significant enough, it might exceed the coverage limits your insurance company will pay out.

What does bonded and insured household help mean?

Bonded and insured means the person you have hired carries a bond that provides financial protection in case of theft or breach of contract and insurance to cover injuries and liability.

What does it mean to be bonded?

Bonding provides financial protection if a person or company you hire doesn’t fulfill a contract, doesn’t do the work that was agreed upon or steals from your home. If any of these things were to happen after you’ve hired help, you could file a claim against the company (or other household employees) with the bonding company.

A bonding company holds money that has been secured from the company and will pay out your claim after an investigation. It acts as a neutral third party to settle disputes between a company and its clients.

If you deal with a company or person that is not bonded, there is no claim process to resolve disputes. You will have to rely on the goodwill of the helper you’ve hired. But the problem is that they can ignore your complaints, refuse to refund your money, or cut off communication. Your only option would be to sue them, which can quickly get expensive.

What insurance should household help have?

Insurance for hired household help should include liability and medical coverage. The hired person's insurance policy will cover any injuries, health problems or damage done during their work at your home. If the company is uninsured, the financial repercussions will fall on you or your homeowners insurance.

For example, if a house cleaner is injured on your property, they would file a claim with their insurance company to cover their medical bills and lost wages. These are covered by health insurance or workers' comp. If the house cleaner leaves a faucet running that floods your bathroom floor and does significant damage to your home, their liability insurance will cover the cost of repairs.

On the other hand, if you hire an uninsured cleaning company, you may end up on the hook for these types of expenses and, in a worst-case scenario, find yourself being sued by the uninsured cleaner you hired. While you can certainly make a claim on your homeowners insurance, it may be denied depending on the circumstances, and even if they pay out, you'll still have to pay your deductible. Your rates will climb, so the accident will end up costing you money one way or another.

Do different workers need different insurance?

Yes. The type of household worker you are hiring will determine what financial protection you need. While your homeowners policy will most likely cover occasional workers, you may need another solution if you have full-time employees coming into your home regularly.

Occasional workers

If you hire an occasional babysitter or a neighborhood kid to rake your leaves, shovel your walk, or clean out the garage, your homeowners or renters insurance should be sufficient. Homeowners insurance provides a couple of different protections:

Medical payments. This coverage will protect you if a guest (or occasional employee such as a babysitter) is injured in your home, regardless of who was at fault. This coverage is designed for small claims. Coverage levels vary, but they usually start around $1,000 and go up to $5,000, which is generally sufficient to cover small accidents.

Liability coverage. The liability portion of your homeowners or renters policy will also cover injuries on your property, but it comes with much higher coverage levels. A standard homeowners policy comes with $100,000 in liability coverage. Most experts recommend carrying at least $300,000 in liability coverage.

Contract worker appointed by an agency

If you need to hire a household worker; for example, a nurse, cook or a housekeeper, you may use an agency to provide the service. In this case, you should verify that the company insures and bonds employees.

Ask for a copy of the certificates of insurance. Check the policies' effective dates to make sure they are current and consider calling the insurance company to verify the coverage is still in place. Phony certificates of coverage certainly crop up, so it is best to check directly.

Permanent full-time or part-time employees

If you have permanent home workers that work in your home every day or on a regular basis, you need coverage. Consider purchasing workers' compensation insurance.

Workers' comp insurance covers medical bills and physical rehabilitation for an employee injured on the job. This coverage also pays lost wages if the employee is severely hurt and can no longer work. Check your state regulations to see whether they require workers' compensation for the type of employees you're hiring.

If your state requires workers' comp for household employees, don’t ignore the law.

Which insurance solution is best for people hiring several household employees?

If you have significant assets or employ several household employees, you may want to consider an umbrella policy to up your liability coverage. While many homeowners policies offer liability coverage of up to $500,000, an umbrella policy can push your liability coverage up to $5 million.

An umbrella policy offers additional protection beyond your standard home insurance.

FAQ: Insurance for household help

How do you get bonded and insured?

To get bonded and insured, first, research bonding and insurance companies in your area. Then, apply for a surety bond through a bonding company and purchase a suitable insurance policy from an insurer. Provide necessary information and undergo any required background checks. Once approved, pay the premiums for both the bond and insurance. Finally, stay compliant with bonding and insurance requirements to remain bonded and insured.

Does my cleaning lady have to be insured?

No, it's generally not legally required for your cleaning lady to be insured, but it's a good idea to ensure she has liability insurance. This protects both you and her if an accident or damage occurs while she's working in your home. If she doesn't have insurance, you could be liable for any injuries or property damage. So, it's wise to ask about insurance coverage or add a rider to your homeowners insurance to cover potential incidents during her work.