Hiring a nanny, housekeeper, lawn service or other domestic worker does not have to be a stressful process, as many staffing services will tell you, but it is a serious undertaking. Your family’s safety and financial well-being are at stake. You might have heard horror stories about dangerous workers not screened by background checks, or families going bankrupt after being held personally liable for enormous medical bills for injured employees. This type of liability is especially relevant in Minnesota where all employers are required to provide workers’ compensation coverage to all employees, including domestic workers. In Wisconsin, employers with three or more full- or part-time employees must carry coverage. (Employers in some states are not required to provide work comp coverage for domestic workers — see the National Federation of Independent Business for details on each state.)
The financial consequences of being sued can be very serious for high-net-worth individuals and families who have more assets at risk. We recommend liability umbrella coverage for typical families with assets over $300,000. Because high-net-worth individuals often face complicated liabilities and have a lot to lose, they should have an in-depth conversation with their agents about what limit would be best for their needs. An umbrella policy costs about $150 to $350 a year for the first $1 million of coverage and about $100 per million of coverage above that, according to the Insurance Information Institute (III). The cost may depend on where you live and how many homes, cars and boats you are insuring.
If you hire individuals for occasional jobs, first assess your homeowners policy to find out whether you have enough liability coverage. You can obtain more liability coverage by raising your existing amount or purchasing an umbrella liability policy. To give you peace of mind, an umbrella policy covers you and your family by paying claims that exceed the liability limits of your existing auto or homeowners policy.
Particularly if you engage in a high-risk activity or hobby that increases your odds of getting sued—such as having a teenage driver, owning a swimming pool or entertaining frequently—it is wise to supplement your insurance with a personal umbrella liability policy. Other factors that increase the necessity of umbrella insurance are:
See our article “The practicality of personal umbrella insurance” to learn more about this type of coverage.
There are basically two types of liability you need to address when it comes to domestic help: medical expenses in the event of a worker’s injury (covered by workers comp insurance), and lawsuits as a result of claims of wrongful termination, discrimination, harassment and other claims (covered by employment practices liability insurance (EPLI). Some people believe a homeowner's or umbrella insurance policy will protect them under such circumstances, but most policies won’t apply coverage to lawsuits based on wrongful employment practices.
Obviously, the well-being of your family is priority number one. In addition to using your own best judgement, background checks can help screen your worker(s) for past criminal conduct that could present dangers to your family or your finances.
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage.
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage. Once these potential short falls in coverage are identified, Scott will recommend solutions through a consultative approach, helping clients not only cover these risk exposures, but help them gain a broad understanding of what their insurance coverage can do for them. He has helped clients with personal insurance needs for 10 years, in all 50 states, and specializes in working with the complex situations of affluent clients.
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