Just Bought a Child Care Center? What Insurance Do You Need?

Most new child care center owners need general liability, workers' compensation, commercial property with business income and, if the center runs vans, commercial auto. The one most worth checking first is abuse and molestation cover, because standard liability forms commonly exclude it. It is often bought back by endorsement or as its own policy, so read what the seller left you. Employment practices liability is worth pricing for centers with hourly staff. This guide is for the buyer of a licensed, center-based program who inherited the seller's policies and wants to know what should be in force, in whose name, and what to confirm in the first few weeks.

What insurance does a child care center need in force?

Use this table as a menu, not a requirement. A single center usually buys a subset of what large operators carry, and the right mix depends on your state, your lease, your lender and whether you transport children. Your policy wording controls what each line does.

One large operator describes a program that also includes professional liability, umbrella, student accident, fiduciary and directors and officers cover. Whether a small center needs them depends on its lease, lender and size.

What makes insuring a child care center different?

Four features set this business apart from an ordinary service company, and each shows up in how the policies are built.

• The license limits what you can do. State ratios cap how many children one caregiver may supervise, so staffing caps enrollment, and losing teachers is a staffing problem, not an insured loss.
• Federal child care funding rules shape operations. For providers that take Child Care and Development Fund (CCDF) money, federal rules require state health and safety standards covering safe sleep, medication, food allergy emergencies, premises hazards, transportation and reporting of suspected abuse. Those topics are where regulators, parents and insurers look when something goes wrong.
• The premises is usually leased. Your landlord sets many of your insurance terms. See contracts, licenses and bonds for a child care center.
• The people are the main exposure. Payroll is large, staff are often hourly or part-time, and every adult in the building has access to children. That drives workers' compensation, employment practices and abuse coverage.

Texas, for one, sets a minimum liability limit. That is a floor, not a recommended limit, and it is not an abuse coverage rule. The second question below gives the detail, and the license side is in the contracts guide above.

What should I confirm in the first few weeks?

Work through these in order. The first three protect you against a gap you cannot see, and the rest tighten the program.

1. Which policies are in force, and under which name? Ask for every declarations page and read the named insured (the entity the policy is written for), the address and the dates. Policies may list the seller's entity or an old center name. See how to read a declarations page.
2. Is the license reissued in your name, and when? Whether your insurance responds if the center operates under the wrong permit is a question for your broker and deal counsel. Do not assume it does. The licensing detail is in the contracts guide.
3. What does the abuse and molestation cover actually say? Get the endorsement or the separate policy, not a summary. Note the retroactive date if it is claims-made.
4. Has the workers' compensation carrier been told about the sale? An ownership change is generally reported within 90 days, and the seller's mod usually follows the business. The steps and the state differences are in workers' comp, payroll and class codes for a child care center.
5. Who owns the vans, and who drives them? Get titles, a vehicle list and driver records.
6. What does the lease say? Check additional insured, waiver of subrogation, limits and any umbrella ask.
7. What does the lender require? If you used a Small Business Administration (SBA) loan, the lender writes insurance terms into the loan documents. See SBA lender insurance requirements.
8. What do the loss runs show? Ask for as many years as the carriers will give you. Loss runs are the claim history for each policy.

The broader sequence is in the first 90 days of insurance after buying a business, and the pre-closing version is the insurance checklist for buying a business.

Do the seller's policies move over to me?

It depends on how you bought. In a stock or membership interest purchase, the company is the same legal entity, so its policies and claims history generally stay with it, although insurers still need to be told. Permits are a separate question in child care, because some states treat the sale of the entity that holds the license as a change in ownership (see below). In an asset purchase, a policy's rights and duties generally cannot be transferred without the insurer's written consent, so you normally need your own policies at closing. Asset vs stock purchase explains the structure.

In child care there is an extra layer. The license is issued to a specific operator, and in Florida and Texas a sale, and in Texas some equity sales, means a new application or permit, so the license and the insurance both need planning. See contracts, licenses and bonds for a child care center for what transfers and what must be reissued.

A hypothetical example. A buyer purchases the assets of a center with 60 children and keeps the name, the staff and the classrooms. In week two a toddler is hurt on the climbing structure and the parents bring a medical expense claim. A general liability policy is usually where a premises claim like this goes, subject to its wording and exclusions, but the only liability policy on file names the seller's company and runs to the end of the term. The first questions are whether that policy still applies to the buyer's new entity, whether the buyer's own policy was bound before the closing date, and whether the playground checklists exist. Your broker and the carrier answer the first two, not the closing documents.

Which coverages can wait until renewal?

Not everything has to be solved in the first month. A sensible order is to settle abuse coverage, workers' compensation, auto and property in the first weeks, and review the rest at renewal or when the lender or landlord asks. Umbrella, cyber, crime limits, deductibles and a market comparison are fit and price decisions you can make once you know the business. Ownership change filings, loss runs, named insured corrections and lease requirements run on a clock, so do them inside the first 90 days.

The gaps worth checking first are covered in coverage gaps new owners of child care centers find, and what moves your price is in what drives insurance cost for a child care center. A Morrow review can compare your inherited policies against the center you bought and request quotes where it makes sense. New terms depend on carrier underwriting.

Keep reading

• Hidden Coverage Gaps in a Child Care Center You Just Bought
• Workers' Comp, Payroll and Class Codes for a Child Care Center
• Contracts, Licenses and Bonds for a Child Care Center
• Your First 90 Days of Insurance After Buying a Business: A Checklist
• All guides for new business owners

Frequently asked questions

What should I ask the seller for first?

The declarations pages and forms schedule for every policy, the abuse and molestation wording, the vehicle list, loss runs for as many years as the carriers will give, and the lease. Read the named insured and the dates before anything else.

Is child care insurance required by law?

It depends on the state. Texas, for example, requires a center to carry liability insurance of $300,000 per occurrence unless it has an accepted reason not to, and to tell parents in writing if it carries none. That is a liability floor, not an abuse coverage rule. Other states set their own rules, so confirm your state's licensing rules, your lease and your loan terms.

Do I need commercial auto if I only use my own car for field trips?

Staff driving personal cars is a non-owned auto exposure that a general liability policy usually excludes. Hired and non-owned auto cover is one way to address it. Ask your broker how your policy treats it.

Will the seller's insurance keep working after I buy?

Not reliably. In an asset purchase you generally need your own policies. In a stock purchase the policies may stay, but the insurer should be told. Check the named insured on every policy, and see the contracts guide for the license side.

How soon should I tell the workers' compensation carrier about the sale?

Generally within 90 days under the standard policy and NCCI rules, but state fund and bureau rules differ. The steps and the state differences are in the workers' comp guide for a child care center. Ask your broker for the right form.

References

• Texas Health and Human Services: Minimum Standards for Child-Care Centers, chapter 746 (revised December 2025)
• Texas Administrative Code: 26 TAC 745.437, change in ownership
• Florida Statutes section 402.308: licenses
• Cornell Legal Information Institute: 45 CFR 98.41, health and safety requirements for child care providers
• NCCI: Experience Rating Plan Manual, ownership change rules (Texas filing, effective July 1, 2025)
• Insurance Xdate: ISO form CG 21 46, abuse or molestation exclusion (summary)

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.