Nanny Insurance: Required & Optional Coverages for Domestic Employees

According to Payscale.com, the average nanny salary in Boston stands at $19.14 per hour. Whether you’re planning to pay more or less for your private caregiver, don’t forget to factor in the cost of nanny insurance—a combination of optional and required coverages that have broader implications for your family’s overall financial plan.

What is nanny insurance?

While “nanny insurance” isn’t exactly a technical term, we assume most folks searching for information are wondering about workers’ compensation for nannies, and possibly other related coverages designed to protect family assets. If you’re in this group, keep reading the first half of this article, where we address required and optional coverages for you: the nanny employer.

If you’re looking for “nanny insurance” from the perspective of being a caregiver, the first half of this article should still interest you. As you’re exploring different job opportunities, you may find it useful to know (and ask about) which coverages prospective employers will provide. Farther below, we will then address insurance coverages that nannies may wish to purchase for themselves.

Who needs nanny insurance?

Families who employ a full-time or part-time nanny (at least 16 hours per week, on a regular basis) are required by the state of Massachusetts to purchase workers’ compensation for their household employee. This same requirement extends to other types of domestic employees, including caregivers for seniors, personal chefs, or housekeepers. While workers’ comp is the only required coverage among the list below, other types of policies or endorsements are often highly recommended for families who invest in private childcare. More on those below.

Who doesn’t need nanny insurance?

If you hire the occasional babysitter or mother’s helper, or if your regular nanny works in your home fewer than 16 hours per week, you do not meet the state’s criteria for required workers’ comp. Again though, it’s still a good idea to review the other types of policies and endorsements that could protect your assets in the event of a caretaking-related loss.

Nanny Insurance for Employers to Buy:

Workers Compensation (required)
Employment Practices Liability Insurance (highly recommended)
Auto Insurance with Nanny Added (highly recommended; required for a live-in nanny)
Umbrella Insurance (highly recommended)
Health Insurance (optional)

In the sections below, we’ll look at each type of coverage and estimated costs, individually. Continue reading to learn more about how to purchase these coverages, along with other related information.

What is workers’ compensation for nannies?

Workers’ comp is insurance that compensates injured workers for their medical expenses and/or wage replacement while they are unable to work. It can also protect employers from costly lawsuits. In Massachusetts, if you employ a nanny or babysitter in your home for 16 hours per week or more, you are required to buy it.

Here’s an example: Your nanny is playing basketball in the driveway with your kids. She twists her ankle and cannot walk without crutches for at least four weeks. Workers’ comp would likely step in to cover her medical bills and any lost wages, assuming you hired a replacement to fill in for the month.

How much does workers’ comp insurance for nannies cost?

The cost of insurance for a nanny depends on two main factors: her schedule and the coverage limits you want. For insurance purposes, if your nanny works more than 20 hours per week, she is considered a “full-time” employee. This will marginally increase your rates, compared to part-time employment. You will also be asked if you want “standard” limits of liability (usually around $100,000 in coverage) or something higher.

Even if you employ a full-time nanny and opt for higher coverage limits (e.g. $500,000), the premium for nanny insurance is usually somewhere around $300 per year—well worth the expense when you consider all the things that could wrong and the high cost of today’s medical bills.

Call our team at 508.339.2951 for a quick, personalized quote. You will be asked to supply information about your nanny’s salary, but this figure is not a rating factor in the price of the coverage. In other words, whether you pay your nanny $30,000 per year or $100,000, the cost of her worker’s comp will be the same. (NOTE: When insuring a senior caregiver or other domestic employees who provide physical assistance, salary may be a rating factor.)

What is Employment Practices Liability Insurance (EPLI) for household employers?

EPLI is a type of insurance that protects employers from incidents (actual or alleged) involving wrongful employment practice. Keep in mind: these are practices that would NOT be covered by your home insurance or even an umbrella policy (because at 16 hours/week you are officially an employer now, and not just someone with a guest in your home).

You may be confident you would never engage in any unfair practices, but that doesn’t eliminate the possibility of your nanny making such a claim. EPLI can help cover the cost of your legal defense and/or settlement. Some types of wrongful employment practices include:

Discrimination
Wrongful Termination
Breach of Contract
Harassment or Assault
Invasion of Privacy

Here’s an example: You terminate your nanny for performance reasons, and replace her with someone younger or of a different race. She files a lawsuit claiming age-related or racial discrimination. EPLI would step in to address the lawsuit.

What is auto insurance for nannies?

In this case, we are not talking about a separate auto insurance policy, but rather a change to your existing policy. Many families rely on their nanny to drive children to school and other activities. If the nanny is using a vehicle that you own for this purpose, it’s important she be added onto your policy as another household driver.

What does it cost to add a nanny as a household driver?

The cost of adding a nanny to your auto insurance can vary quite a bit. It will depend on factors like:

The quality of her driving record
How many years she’s been driving
The value of the car(s) she has access to
The number of household drivers already assigned to the car(s)

For an experienced driver with a good driving record, the added cost might be somewhere between $600 and $800 per year. Meanwhile, insuring a less experienced driver might add $1,600 or more to your current premium. Here’s a more detailed article on car insurance for a nanny, including how to research a prospective nanny’s driving record, and how to address a situation where your nanny uses her own car to drive your children.

How does umbrella insurance cover nannies?

Many people incorrectly assume that umbrella insurance only impacts wealthy households; this is not true. Umbrella insurance is an important topic for all families to consider, whether or not you are hiring a nanny. But while we’re on the subject of nannies, let’s look at some ways umbrella coverage could be relevant:

Example 1: Your nanny causes a car accident in your car (or even in her own car, while she’s working for you). The medical bills exceed your auto policy limits by $2 million. Umbrella insurance could step in to bridge the gap.

Example 2: Your live-in nanny is using your swimming pool on her day off. She hits her head on the diving board, incurring serious injuries. Worker’s comp may not apply because technically she is not working. And your homeowner’s policy limits fall short in covering the damages. Umbrella insurance could step in to bridge the gap.

Bottom line: you don’t need to be a millionaire to be sued for a million dollars. And you don’t need to be a millionaire for a judge to require that you pay out a million dollars… or much more. Certain settlements can put on lien on your home or garnish your wages for however many years it takes. This is why it’s important to discuss insurance for nannies as part of a much larger conversation about your overall household coverage.

What about health insurance for nannies?

In Massachusetts, you are not required to provide health insurance for your nanny. However, given the high demand for qualified help, it might be a smart idea to build some form of this coverage into your employment offer. Some families use their nanny compensation plan to leverage a specific tax advantage, by putting a portion of the nanny’s wages toward a health insurance premium (which is non-taxable compensation). That said, we are not tax advisors, nor do we specialize in health insurance. If you’re considering a health insurance benefit, consult with your accountant or tax planner for the most accurate, up-to-date answers.

How and where do you buy nanny insurance?

It’s actually really easy. Let’s break it down into three steps:

1. The first step is securing your Employer Identification Number (EIN) from the IRS. If you don’t yet have an EIN you can proceed to Step 2 and use your Social Security number, but you will need the EIN eventually. Here’s more on how to apply for an EIN, along with the IRS’ most recent Household Employer’s Tax Guide. Remember: you will need an EIN not just to get a quote for workers’ comp, but also for the purpose of reporting your nanny’s taxable income, and ensuring the appropriate taxes are deducted.
2. Contact a Massachusetts insurance agency that specializes in both workers’ comp and personal insurance for households like yours. Not to brag, but we happen to be a pretty terrific local option—with four offices in the Boston suburbs; you can reach our team at 508.339.2951. We understand that bringing a new person into your home can be a super stressful experience. So we’re always happy to answer your questions and provide personalized advice, as you work through it.
3. Complete the application over the phone or via email. At this point, you may not know the name of the nanny you are going to hire; that’s okay. You can still proceed in securing coverage. Typically, it only takes one or two business days to get your policy bound (in place). You will probably be required to pay your annual premium upfront, in full.

Does “nanny insurance” cover events that happen outside the home?

In most cases, yes. When you purchase a policy, you will be required to list your home as the primary place of employment, but coverage typically follows your caregiver and family members to other places—including sports fields, parks, or in the car.

Do I need to buy insurance if my neighbors and I have a “nanny share” arrangement?

It’s tough to say definitively without knowing your exact situation, but in most cases, yes—both families involved in the nanny share would be considered separate employers, and both would need to purchase their own workers’ compensation policy for the caregiver.

This is becoming a more common issue, especially as more people are using nannies to supplement school schedules during the COVID-19 pandemic. It’s very important to be honest about the nature of the work your nanny will perform and the number of children who will be in her care. We are seeing some pushback from our underwriters in cases where the nanny is not just a childcare provider, but also an academic instructor in a neighborhood “learning pod,” tasked with teaching kids from multiple households. The risk profile is different in each of these cases, and they need to be addressed on an individual basis.

What if my nanny (or personal caregiver) works less than 16 hours per week? What type of insurance should I have?

If you hire babysitters infrequently or for less than 16 hours/week on average, your homeowner’s policy would likely cover the medical expenses of an injured sitter (up to a few thousand dollars, depending on your policy limits). If the employee wanted to claim greater damages, he or she could potentially sue you, but would have to prove you were legally liable for the injury. Here again, an umbrella insurance policy might come in handy.

**Does any household employee require workers’ comp?**

Under Massachusetts workers’ compensation law, if an employee works in your home for 16 hours per week or more, then yes, he or she requires coverage. This includes senior citizen caregivers, housekeepers, personal chefs, drivers, gardeners, etc.

What happens if I don’t have workers’ comp insurance for my nanny?

If you don’t purchase workers’ comp insurance for a qualifying domestic worker, you could be slapped with serious fines or even criminal penalties. You could also be held liable for all related medical bills and lost wages, in the event of a qualifying injury.

Hopefully you aren’t arriving at this post after an injury or illness has already occurred. If so, and your employer did not have workers’ comp in place, contact the Massachusetts Department of Industrial Accidents. You may be eligible for medical care/lost wages compensation.

What else do I need to know about employment law for nannies or other domestic workers?

Remember: your nanny is considered an employee, not an independent contractor. That makes you an employer. And it also means you are subject to certain state and federal labor laws that you may not have thought about when you relied on the teenager next door for one night of babysitting.

Specifically, you need to be aware of the Massachusetts Bill of Rights for Domestic Workers. Take some time to review the Domestic Workers Bill of Rights, which covers topics like minimum wage, timesheets and payroll records, meal breaks, sick time, vacations, maternity leave, causes for termination, and other state-mandated employment provisions.

Also, don’t forget to create an employment agreement, so these terms are in writing and understood before you bring an employee into your home.

Nanny Insurance for Nannies to Buy:

Commercial Auto Insurance (required if your personal vehicle is used to drive clients)
General Liability (optional)
Professional Liability (optional)

What is commercial auto insurance for nannies?

If you use your personal vehicle in any type of money-making activity (e.g. delivering food, Uber driving, plowing snow, hauling lumber), you have overstepped the limits of a personal auto insurance policy.

In some cases, your insurance carrier will require that you purchase a commercial auto policy to address the new business risks you now face. Commercial auto policies can be pricey—running several thousand dollars higher, per year, than a personal policy on the same vehicle.

In other cases, you may be able to obtain a business class/rate on your existing personal policy. Costs vary, depending on how experienced a driver you are, but going this route would only add another $50-$100 to your premium.

Either way, employers will (or should) ask if you have the proper coverage before allowing you to take their children in your car. Be prepared: they may also request access to your auto-related files—driving record, vehicle maintenance plan, odometer—for safety and mileage reimbursement reasons*. (*Massachusetts employers are required to reimburse employees, per mile driven, when personal vehicle use is required on the job.)

Not getting the right coverage is a dangerous risk to take. We recommend that nannies (and others who use their vehicles for business) consult with an insurance agent before accepting any role that involves driving. Read more about car insurance for nannies.

What is general liability insurance for nannies?

General liability is a type of business insurance that usually covers damage to property or bodily injury. For a nanny, general liability insurance might cover the cost of a broken vase in a client’s home. (So the employer wouldn’t have to put in a homeowner’s claim and pay their own deductible.) General liability might also step in to cover an injury to a child—if, for example, the nanny dropped a baby off the changing table.

Most families don’t expect independent nannies (who aren’t hired through a nanny service company) to carry their own liability coverage. And for many nannies, the cost could be prohibitive. But if you’re looking for a way to differentiate yourself as someone who takes her role seriously, and is committed to serving families safely, the option might be worth exploring.

What is professional liability insurance for nannies?

Professional liability is a type of business insurance that usually covers mistakes, bad advice, or negligence. For a nanny, professional liability coverage might step in if a child consumed something poisonous while the nanny was occupied elsewhere, or if the nanny neglected to administer a necessary dose of medication.

Here again, most families don’t expect independent nannies (who aren’t hired through a service company) to carry their own liability coverage. Professional liability could cost several thousand dollars per year—a significant chunk of the average nanny’s take-home pay. But it can be a smart protection to invest in, helping you avoid the possibility of expensive lawsuits.