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Tomato or Tomatoe?

Recently I had a conversation with a school owner about using her facility for birthday parties on weekends.  She had two reasons she was considering this plan.  First, many of her local competitors had begun renting their facility out for birthday parties in off hours.  She found that this was a draw for many parents, knowing that they would not have to give any thought at all to their kids' parties.  Her second reason for considering this plan was the additional revenue it would generate.

Let's face it.  The past 6 years have been a struggle for just about everyone.  We are all still standing, but there is the constant concern about how to build income.  This particular school owner sees the use of her school during off hours as a way to boost income while keeping her program in tact Monday – Friday.

So, she called me and asked me if her insurance would cover this use.  Sadly, the answer is no.  The insurance purchased for early childhood education schools is limited to the business of early childhood education.  When you begin to use your school for other activities {e.g. birthday parties, dance classes that are not a part of your curriculum, gymnastics classes, other social events} your liability insurance does not give you any protection.  YIKES!

Will Loss Of Income Coverage Protect Me?

Many people have asked me, recently, if they are protected for a loss of income if parents' anxiety results in them pulling children out of early childhood education.  I believe this is an issue many more of you have thought about over the past several weeks.  This article will attempt to answer this question. 
 
The first step is to discuss the only coverage that might apply: loss of income.  Loss of income or business interruption is designed to replace your net income for a period of time due to a covered loss to your physical property (such as fire).  In order to determine if you even have any loss of income coverage I suggest you either call your agent or review the property portion of your policy.
 
Bear in mind, even if you have this coverage, it is not triggered unless you have a loss to your property.  In the event of an Ebola outbreak, there is no damage to your property so there would be no loss of income coverage triggered.

 Leasing Your School Can Make You Responsible For It

I bet many of  you are in a leased facility.  I wonder if you've read your lease carefully.  Did you share it with your insurance agent?  If not, you might get some nasty surprises. 

Most commercial leases today hold the tenant responsible for the air conditioning unit.  That's a part of the building.  As a tenant, you don't typically insure the building.  Getting that AC unit insured can be tricky, but if you don't get it insured, you can get left holding the bag on a $7,000 - $10,000 bill.

So, why is it tricky to insure an AC unit?  The first issue is insurable interest.  This is a principle that applies to all insurance that says "You can't insure it, if you don't have an interest in it".  This is why you can't insure your neighbor's house and profit if it goes up in flames.  You have no insurable interest.  In the case of the AC unit, you don't own it, but you are contractually obligated for it financially.  So, we established insurable interest there. 

Now we have to figure out how to insure it on a property policy.  You cannot insure it as personal property, because it is a permanent part of the building.  You cannot insure it as tennant's improvements and betterments because that coverage says you had to personally purchase the improvement and betterment.  Usually the AC unit is already in the building when you move in, so you didn't personally purchase it.

Is Childcare Insurance Required?

From time to time I'm asked: am I required to buy insurance. The answer is yes and no. Liability insurance requirements vary from state to state so it is important to know your particular state's stance on this issue. Some states say yes, you must have liability insurance; other states do not require you purchase liability insurance but do require you post a notice for parents if you don't purchase liability insurance and yet other states do not even comment on whether or not you purchase liability insurance. Having said that, all states require you purchase liability insurance if you are accepting state subsidies for child care. With or without a requirement to buy insurance, you can be held financially responsible for the injuries others suffer (whether you were negligent or not) at your school. Insurance moves that financial burden to the insurance company.

Uniformly, states require you purchase auto insurance if you are transporting children. The amount of coverage and specific coverages vary from state to state. Professional insurance agents are able to help you verify you are purchasing at the very least the minimum state requirements. I urge you to buy more than the minimum amount of liability insurance for automobiles. If your state has a minimum liability limit of $10,000 that sure won't go far at all if you have 15 - 30 kids injured in an accident.

I've not found a single state that requires a childcare center or school to purchase property insurance. That requirement will consistently come from your mortgage company. They want you to insure the property so that they are certain to be paid even if you suffer a loss to your building. For those of you that rent your building, you don't have a mortgage company imposing the property insurance requirement. It is still a great idea to insure your contents! You'll need to be able to replace everything to get your school re-opened after a fire, windstorm or similar calamity.

Each state requires workers compensation insurance for employers with X number of employees. The X varies from state to state. Your department of labor can tell you what number X is in your state. A professional insurance agent can also answer that question for you. Remember, if you are not legally required to buy work comp and choose not to do so, you are held responsible for the medical bills and lost wages of your injured employees. That responsibility applies EVEN if the employee's injuries are due to their own negligence.

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Please be advised that information contained in this site may be dated. No insurance coverage can be bound, deleted, modified or in any other manner effected through this website. Complete information regarding coverage and exclusions can be found in policy documents. The information contained in this website is summary in nature.