Your nanny or au pair is essential to the smooth operation of your family’s daily life. But hiring a nanny, au pair, or other domestic worker, makes you an employer and liable if anything happens to them while on the job. Protect yourself, your employees and the lifestyle you’ve achieved with the proper levels of nanny insurance for domestic employees from McSweeney & Ricci’s Private Client Group.
What is a Domestic Employee?
The definition of “employee” isn’t set in stone. “Domestic worker” or “domestic employee” could refer to an au pair, a nanny, a housekeeper, but could also include gardeners, home chefs and home health aids. A domestic employee could live in your home or in their own home.
Many people falsely assume they have coverage for their private childcare giver or domestic employees through their homeowners’ insurance. However, continuously employing someone makes you an “employer” and liable for them while on the job. States requiring your nanny to be covered by workers’ compensation, will exclude them from coverage on your homeowners’ policy. The unique risk exposures you face as an “employer” require customized insurance protection.
Is “Nanny Insurance” a Thing?
Technically, no. There is no specific type of insurance called “Nanny Insurance.” Workers’ compensation is what most people looking for “nanny insurance” or “domestic employee insurance” are actually seeking. In Massachusetts, workers’ compensation is a state required coverage for anyone with full-time employees.
In addition to purchasing workers’ compensation insurance, there are optional coverages to consider in order to safeguard your family assets, when employing domestic helpers. These optional coverages include employment practices liability insurance (EPLI), auto insurance and umbrella insurance. In the post that follows, we will provide information about each coverage and offer guidance on the proper levels for each situation.
Do I Need Workers’ Compensation Insurance for My Nanny or Au Pair?
If an employee in your home gets injured, workers’ compensation insurance protects your liability and covers the cost of their medical bills and any lost wages. Workers’ Compensation premiums are affordable, especially when considered against the high cost of today’s medical bills. Each state has different workers’ compensation insurance requirements for employers of nannies, au pairs and other domestic workers such as housekeepers, senior caregivers, and personal chefs.
Listed below are the requirements for some of the New England states:
- Massachusetts: Domestic employers in Massachusetts are required to purchase workers’ compensation insurance if their employee works 16 or more hours in a week. If your nanny doesn’t work for you 16 hours or more, you’re not required to purchase workers’ compensation insurance but you still should in case they get injured.
- Connecticut: Domestic workers in Connecticut are entitled to workers’ compensation if they are regularly employed for 26 hours or more per week.
- New Hampshire: Under New Hampshire Workers’ Compensation law RSA 281-A:5, every employer who has any employees, full or part-time, is required to cover these employees with workers’ compensation insurance.
The states that require you to carry workers’ compensation coverage for your household employee, typically exclude them from being covered by your homeowners’ or umbrella liability policy.
There are some states that do not require employers of domestic helpers to carry workers’ compensation for their employees, including:
- Rhode Island: Household employers in Rhode Island are not required to have workers’ compensation coverage for any full- or part-time employees.
- Vermont: Household employers in Vermont are not required to carry a workers’ compensation insurance policy.
- Maine: Household employers in Maine are not required to have workers’ compensation coverage for any full- or part-time employees.
If you live in one of these states, we recommend voluntarily purchasing workers’ compensation to protect your and your family’s assets. Consider the following scenario:
You live in Vermont and employ an au pair for your children 20 hours per week. One morning she slips on black ice on your front steps and fractures her hip. Your au pair then sues you and is awarded $200,000 in medical bills and $50,000 in lost wages. If the liability limit on your homeowners’ policy is $200,000, without workers’ compensation insurance, you would be responsible for $50,000 out of pocket. A workers’ compensation policy for a full-time employee with a $500,000 limit, would’ve had an annual cost of around $300, and could have covered your total liability.
Not purchasing workers’ compensation insurance could leave you personally responsible for thousands of dollars in medical bills and lost wages if your employee gets hurt.
If your state doesn’t require workers’ compensation and you decline to purchase the coverage voluntarily, you should, “consider beefing up your homeowners’ and umbrella liability policies.” (1) Remember when purchasing coverage, the more robust your asset portfolio, the more you stand to lose in a lawsuit.
Workers’ comp may be the only coverage required by your state for domestic employees. However, there are other optional coverages you should consider to protect your family’s assets.
Umbrella Insurance (Personal Excess Liability)
Accidents happen every day. If the cost of an accident or a lawsuit exceeds the liability limits on your home or auto policies, you would be left paying out of pocket for the remainder. With the exorbitant cost of medical care and lawsuits these days, that could jeopardize your financial security. An umbrella policy (also known as excess liability) is coverage every home and auto owner should consider, not just those with nannies or domestic workers. “An umbrella policy kicks in when you reach the limit on the underlying liability coverage in an auto, homeowners, renters or co-op / condo policy. It will also cover you for additional types of claims, such as libel and slander.” (2)
Consider the following scenario:
On a snowy winter day, your nanny is building a snowman in your yard with your children and slips on ice. She sustains serious injuries and the liability limit on your homeowners’ insurance isn’t enough to cover it. An umbrella policy could fill the gap in the coverage.
Adding a personal excess liability insurance policy to your existing insurance program helps protect your assets and lifestyle and is more cost efficient than you may think. A $1 million dollar umbrella policy could cost less than $300 annually.
Employment Practices Liability Insurance (EPLI) For Your Nanny or Au Pair
EPLI insurance protects employers in the event they are sued by their employee for actual or alleged wrongful employment practices including discrimination, sexual harassment, invasion of privacy, failure to employ or promote, wrongful termination, breach of contract, wage & hour law violations, emotional distress and more.
Typically added as an endorsement to an existing personal umbrella policy, Employment Practices Liability insurance would reimburse you as the employer, for the costs of defending yourself in a lawsuit and for any judgments and settlements, whether you win or lose. “Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers’ compensation are excluded from EPLI policies.” (3)
No matter how fair your actions as an employer, your household employee could still claim otherwise. Imagine a scenario where you fire your au pair for repeatedly being late picking your child up from school. The woman you replace her with happens to be younger. Your former au pair then charges you with age discrimination in a lawsuit. In this instance, EPLI coverage would help reimburse you for the court costs and judgement. With the number of employee lawsuits filed against employers on the rise, EPLI coverage is more important than ever.
Auto Insurance for Nannies
If you rely on your nanny or au pair to drive your children to and from school, sports or other activities and she is using your car, she should be added to your car insurance policy as a household driver. The cost of adding your nanny to your auto insurance will vary based on the number of years she’s been driving, her driving record and more. For instance, if your nanny has a bad driving history your insurance cost will go up, whereas if she’s a good driver you may qualify for a multi-car discount. Your McSweeney & Ricci Private Client Group Risk Manager can discuss the cost of adding her to your policy and answer any questions you may have.
If your nanny uses her own vehicle to drive your children to their destinations, it’s a bit trickier of a situation. You’ll need to review her car insurance policy to make sure the limits are high enough and include liability. Your nanny needs to inform her car insurance provider she’s using her vehicle for “business purposes.” Using her vehicle for work could mean her carrier will require she purchase a commercial auto policy, which can get expensive. Contact our Private Client Group to discuss your unique situation and the best insurance plan to keep you, your nanny and your children protected from risk.
How Do I Get Nanny Insurance?
You’ve hired a nanny who works for you more than 16 hours per week (in Massachusetts), and you want to ensure you have all the necessary safeguards in place to protect her, your children and your assets. You’ll want to contact a McSweeney & Ricci Private Client Group Risk Manager, who can review your homeowners’ insurance, and provide you with advice. We will get to know your unique situation and will make recommendations for coverage and answer any questions you may have.
As an employer, you’ll need an Employer Identification Number issued from the IRS. We will need your EIN to provide you with a quote for workers’ compensation insurance and you’ll also need it for tax purposes. Our team can assist you with the EIN application process as well as with customized insurance coverage.
We hope nothing bad ever happens while your nanny is caring for your children. But having the proper levels of insurance protection in place gives you peace of mind that you’re prepared for the unexpected. For more information, contact McSweeney & Ricci’s Private Client Group by calling (844) 501-1361 or submit for a complimentary insurance review on our website.
Sources: 1) Have a nanny or a maid? Here’s how to keep one simple accident from bankrupting you. - The Washington Post 2) What is an umbrella liability policy? | III 3) What is employment practices liability insurance (EPLI)? | III 4) Do you need insurance for your nanny? | Care.com HomePay