With two-career couples becoming the norm, the need to hire a nanny is becoming more and more necessary. However, many families might not be aware of the risks that are associated with hiring a nanny directly, and in some cases these risks are not addressed until there is an uninsured claim.
Truth is, once you hire a nanny, you become an employer. And as such, you will have to take care of several essential items that include taxes, payroll, and insurance. If you had not given much thought to insurance, you should, since ignoring it could result in a financial disaster. Here are some of the policies to seriously consider in order to protect both yourself and the nanny.
Cover your nanny with workers compensation insurance
In most states, families are required by law to carry worker’s compensation on a household employee, but the requirements may differ from state to state.
For example, the nanny worker’s compensation in California is a requirement. And even though some level of worker’s compensation is generally provided through homeowners insurance there, it may not be sufficient. If it is not, an enhancement can be added to cover a household employee.
Do not hire a nanny assuming your homeowners insurance will cover worker’s compensation. Relatively cheap nanny insurance is available through commercial insurers, although some state funds can act as a provider of last resort where coverage is required by law. However, it is preferable to get nanny insurance quotes and obtain coverage from a private insurer since state funds are usually the most expensive method of acquiring the coverage.
Even if it is not required in your area, you should still purchase nanny insurance. Do not ignore the risk of lawsuits associated with a job-related injury. If you pay your nanny as an employee and buy worker’s compensation coverage, you could protect yourself from a civil suit.
If you do not cover her with worker’s compensation, you could end up owing her all the benefits that would have been payable under worker’s compensation—and maybe even some fines and penalties from your state.
You may need additional auto insurance
If your nanny regularly drives your children in your vehicle, you might need to add them to your insurance policy and increase your liability coverage. The important thing is to let your auto insurance company know if your nanny is going to drive your car. Even if it is only for occasional use, your insurance company can explain your options.
Give yourself peace of mind with umbrella coverage
You might need an umbrella policy that includes excess employer’s liability coverage beyond that which is provided by worker’s compensation coverage. Your nanny’s spouse, children, or other family members could bring a lawsuit for loss of services if your nanny is injured on the job. While there is employer’s liability coverage under workers’ compensation, lawsuits like this often exceed the limits.
Personal umbrella coverage begins after the underlying coverage, either worker’s compensation or homeowners insurance is exhausted.
Consider purchasing Employment Practices Liability Insurance (EPLI)
EPLI is a type of liability insurance that protects families against wrongful acts arising from the employment process. Some of the most common claims include:
- Wrongful termination
- Sexual harassment
But could also include:
- Invasion of privacy
- Breach of contract
- Emotional distress
EPLI is often added to a family’s existing worker’s compensation policy. Your insurance provider can give you additional details about this insurance.
You are not required to provide health insurance
But that does not mean you cannot or should not contribute to your nanny’s health insurance plan. If you choose to help, you can enroll your nanny in a plan such as a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or the Small Business Health Options Program. With either option, it is a good idea to have the bill sent directly to you.
The security and peace of mind you receive by having the proper nanny policies are worth the extra money. While no one anticipates terrible things happening to their nanny as they care for their kids, it is good to know that you have the support system in place to deal with anything that comes up. To learn more about nanny coverage, talk to one of our insurance experts today at NSI Insurance Group.