Home Care Insurance FAQ and Expert Answers

Most home care agencies need a comprehensive package including:

1. General Liability Insurance – Covers client falls, property damage, and bodily injury
2. Professional Liability Insurance – Covers negligence, care errors, and professional mistakes
3. Workers Compensation – Legally required for employee injuries
4. Sexual Abuse & Molestation Coverage – Essential for agencies providing personal care
5. Hired & Non-Owned Auto Insurance – Covers accidents when employees drive for work
6. Cyber Liability Insurance – Protects against data breaches and HIPAA violations

Additional coverages may include commercial auto (if you own vehicles), umbrella liability (for extra protection), and employment practices liability (for employee-related claims).

Professional liability insurance (also called errors and omissions or E&O insurance) covers allegations of negligence in how you provide care services. It covers medication errors, inadequate care allegations, failure to prevent falls, improper supervision, hiring unqualified caregivers, care coordination errors, and failure to follow care plans. You need it if you’re Medicare-certified (legally required), provide any skilled nursing services, are state-licensed (many states require it), or want protection from professional negligence claims. Even non-medical companion care agencies face negligence allegations and benefit from professional liability coverage. It’s essential protection that most payer contracts now require.

These coverages protect against different types of claims:

General Liability covers accidents and bodily injuries like client falls during care, property damage in client homes, visitor injuries at your office, and equipment damage. It’s for “slip and fall” type incidents.

Professional Liability covers negligence in your professional services like medication errors, inadequate care allegations, failure to prevent foreseeable harm, hiring unqualified staff, and care delivery mistakes. It’s for professional negligence claims.

You need BOTH. A client fall might trigger general liability, while allegations you failed to properly train the caregiver would trigger professional liability. The same incident can involve both policies.

Sexual abuse and molestation (SAM) coverage provides legal defense and damages for allegations of sexual abuse, molestation, inappropriate touching, or sexual harassment by your employees. It covers even completely false allegations, which are common when providing personal care to confused or cognitively impaired clients. General liability policies EXCLUDE all abuse allegations, leaving you completely unprotected without SAM coverage. If you provide any personal care (bathing, toileting, dressing), SAM coverage is essential. Defense costs alone typically exceed $100,000-$200,000. This coverage is critical for agencies providing intimate personal care services.

Yes, if you store any patient information electronically (including emails, texts, or photos on phones). You’re likely a covered entity under HIPAA, which means data breaches trigger mandatory breach notification, OCR investigations, and potential penalties of $100-$50,000 per record. Average breach costs exceed $200,000 even for small agencies. Cyber insurance covers breach response costs, legal fees, notification expenses, credit monitoring, regulatory fines, and defense costs. With increasing ransomware attacks and data breach risks, cyber liability is becoming essential rather than optional. Many contracts now require it.

Hired and non-owned auto insurance covers liability when employees use personal vehicles for work or rent vehicles for business purposes. “Non-owned” covers personal vehicles used for business; “hired” covers rental vehicles. Your caregivers’ personal auto insurance excludes business use, meaning they have zero coverage when driving between clients or transporting clients. You face vicarious liability for their work-related accidents. This coverage protects you from liability when employees cause accidents during work. It’s essential if caregivers drive at all for work. Cost is typically $800-$2,000 annually and is much cheaper than commercial auto insurance.

Occurrence coverage covers incidents that happen during the policy period, regardless of when claims are filed. If an incident occurs on March 15, 2024 while the policy is active, you’re covered even if the claim is filed years later after the policy expired.

Claims-made coverage covers claims filed during the policy period for incidents that occurred after the policy’s retroactive date. You’re only covered if both the incident occurred AND the claim was filed while coverage was active or during an extended reporting period (tail coverage).

Most professional liability is claims-made. General liability is typically occurrence. Claims-made requires continuous coverage or expensive tail coverage when you cancel. Never let claims-made coverage lapse.

Requirements vary by state and business type:

Workers Compensation: Required by law in 49 states (all except Texas) when you have employees. Even one employee requires coverage.

Professional Liability: Required for Medicare-certified home health agencies nationwide. Many states also require it for state-licensed home care agencies.

General Liability: Required by many states for licensed agencies. Specific minimum limits vary.

Surety Bonds: Required in some states (amounts typically $5,000-$50,000).

Beyond legal requirements, virtually all payer contracts require specific coverages and minimum limits. Check your state’s specific requirements and all contract requirements.

Yes, dramatically. Some states have no insurance requirements for non-medical home care agencies. Others mandate general liability, professional liability, and surety bonds. Minimum limits vary from $1M/$2M to $2M/$4M. Some states require expensive surety bonds ($50,000+). Requirements also differ based on whether you’re Medicare-certified, Medicaid-enrolled, or private-pay only. You must comply with each state’s specific requirements where you operate. Multi-state agencies must meet requirements in all states. [View our state-by-state guide] for specific requirements.

Medicare Conditions of Participation (42 CFR §484.12) require all Medicare-certified home health agencies to maintain professional liability insurance with minimum $1 million per claim. While Medicare doesn’t explicitly require a specific aggregate limit, $3 million annual aggregate is standard and recommended. You must also maintain general liability insurance (required by accrediting bodies and payer contracts). Workers compensation is required by state law. Proof of continuous coverage must be provided to Medicare contractors. Coverage gaps can result in Medicare termination.

You must comply with requirements in ALL states where you provide services. Each state has its own insurance mandates, so you may need different coverage limits for different states. Your insurance policies must cover all states where you operate (most policies cover all 50 states, but verify). You’ll need to provide separate certificates showing compliance with each state’s specific requirements for licensing. Multi-state operations are more complex and expensive but manageable with proper planning and specialized insurance support.

Consequences are severe:

• License denial or suspension (you cannot operate legally)
• Medicare termination (if applicable)
• Contract breaches (payers can terminate contracts immediately)
• Personal liability (you’re personally liable for all claims)
• Fines and penalties (state regulatory penalties)
• Legal exposure (cannot defend lawsuits without insurance)
• Business closure (one uninsured claim could bankrupt you)

Operating without required insurance is illegal, violates contracts, and exposes you to catastrophic financial risk. Never operate uninsured.

Yes, if you work as an independent contractor (1099) rather than an employee (W-2). Independent contractors are NOT covered by agency insurance and are personally liable for claims. Most agencies now require contractors to carry their own professional liability and general liability insurance (typically $1M/$3M and $1M/$2M). If you provide private care directly to clients, you absolutely need insurance. Even part-time contractors should be insured. Cost is typically $1,000-$2,500 annually for basic coverage. Without insurance, one lawsuit could cost you everything you own.

New agencies typically need:

• General Liability – $1M/$2M minimum
• Professional Liability – $1M/$3M minimum
• Workers Compensation – As soon as you hire your first employee
• Sexual Abuse & Molestation – $1M/$2M if providing personal care
• Hired & Non-Owned Auto – $1M if caregivers drive for work
• Cyber Liability – $1M if storing patient data electronically

Apply for insurance 30-60 days before starting operations. You’ll need proof of insurance for state licensing and your first client contracts. Budget $12,000-$25,000 annually for complete coverage for a small agency.

Yes. While private-pay agencies may face fewer regulatory requirements, you still face substantial liability exposure. Clients can sue for falls, injuries, and negligence regardless of payment source. You’re still subject to state laws, HIPAA if you maintain medical information, and workers comp requirements for employees. Many private-pay clients expect caregivers to be insured and request certificates. Insurance protects your business assets and personal assets from lawsuits. Operating without insurance exposes you to financial ruin from a single claim.

New agencies with no revenue can still get insurance based on projected revenue. Insurers ask for projected first-year revenue and adjust premium accordingly. You’ll pay minimum premium initially (typically $8,000-$15,000 for small agencies) and insurers audit at year-end. If actual revenue exceeds projections, you pay additional premium. If less, you may get a refund (though minimum premiums typically apply). Being honest about projections is important; significant underreporting can cause coverage issues. Most insurers specialize in new agencies and understand startup situations.

Usually yes, though rates will be higher and some carriers may decline. One or two prior claims may increase premiums 25-50%. Multiple claims or large claims (over $250,000) can increase rates 50-100%+ or force you to high-risk carriers with significantly higher premiums. Some claims make you uninsurable with standard carriers. Full disclosure is essential as insurers verify claims history. Work with specialized brokers who have access to markets willing to insure agencies with claims history. Strong current risk management practices can help offset prior claims.

If you OWN vehicles used to transport clients, you need commercial auto insurance covering liability and physical damage ($3,500-$8,000 per vehicle annually). If employees use PERSONAL vehicles to transport clients or drive between clients, you need hired and non-owned auto insurance ($800-$2,000 annually). If you do both, you need both coverages. Never allow employees to transport clients in personal vehicles without hired/non-owned coverage – their personal insurance excludes business use and you’re exposed to liability. Transportation adds significant risk and cost but is manageable with proper coverage.

You don’t need different types of insurance, but you need HIGHER limits and specialized carriers. Memory care agencies face higher fall rates, increased abuse allegations (true and false), wandering incidents, and aggressive behavior from patients. Expect premiums 20-40% higher than general home care. Recommend $2M/$4M general liability instead of $1M/$2M, and higher sexual abuse limits ($2M/$4M or more). Some carriers decline agencies with over 75% dementia clients. Work with specialized brokers who have access to carriers comfortable with memory care exposure.