The soaring cost of daycare is leading to a rise in the number of families hiring an in-home nanny amongst our customer base. Most families however, do not have a comprehensive understanding of the financial risk involved with bringing a nanny on board until an uninsured claim occurs.
If you hire a nanny independently and plan to pay them on your own, you have essentially become an employer. This article will explore some of the risks associated with hiring a nanny, and how to mitigate those risks as much as possible. There are two ways to mitigate the exposure: buying the proper insurance coverage, and implementing the proper risk management (prevention).
The first thing that comes to my mind as an insurance agent is injury to the nanny. It is important that the family purchase workers compensation coverage for him or her. This will protect the family and the nanny if injured while performing nanny duties. The workers comp will pay for the nanny’s lost wages and medical bills during her leave. Without workers comp the family is leaving itself exposed to paying for the nanny’s medical bills and lost wages out of pocket, which can be substantial, while also being in the position of living without the nanny’s services.
It is equally important that the family have its own proper insurance protection in the form of personal umbrella coverage,with employer’s liability coverage included. The nanny could sue the family for a variety of reasons (mistreatment, negligence, etc), or the nanny’s family could sue the employing family for loss of consortium, which is the loss of his or her services (being able to provide for his or her own family).
Another insurance item necessary is auto insurance for the nanny. If the nanny will be operating the family’s vehicles it’s important that the nanny is included in the auto insurance program, and with increased insurance limits.
A good risk management tool for hiring a nanny is a thorough background check, which should include running the nanny’s driving history. A formal background check will alert the family to any previous criminal activity, or bad driving habits, that could lead to serious problems if the nanny is hired such as theft or speeding with children in the vehicle. His or her history of job terminations is also beneficial when considering a new hire. Using a payroll service to handle the payment of the nanny, including state and federal taxes, is also an ideal risk management tool.
The ultimate risk management solution for hiring an in-home nanny is using a nanny agency. This type of service alleviates nearly all of the risk exposure as he or she is the agency's employee. In other words, the agency is responsible for wages, taxes, background checks and workers compensation insurance. With that said, it is important that the family review the agency contract in detail with an attorney to understand what the family is responsible for and what the agency is responsible for. Increased umbrella coverage, including employer’s liability, is still recommended while using an agency.
If you currently have or are looking into an in-home nanny and would like to discuss your coverage options, ask your question below; click here to get a quote; or give us a call today at (800) 649-3252.