Does My Texas Church Insurance Cover The Daycare We Run?

More and more churches are trying to find ways to put their physical space to work during the week to increase their interactions with the community around them. A church in Fort Worth recently reached out to us to discuss their plans of having a daycare operate in their building during the week. They were trying to help local families find more affordable options to put money back in their budgets.

While I'm sure they were excited about the sounds of children laughing, playing, and learning filling their hallways, the church leaders had some concerns. A few months ago, a board member asked two questions that caught everyone off guard.

• What happens if a child gets hurt?
• Does our church insurance cover the daycare?

No one had a clear answer to either question. The church has general liability insurance, but they were questioning if that was enough? Were staff members covered? What about bigger risks, like child abuse claims? The more they thought about it, the more questions came up and that prompted a call to one of our experienced insurance agents.

If your church is hosting or running a daycare, these are the kinds of things you need to think about before something happens. We helped this church identify three key topics to focus on with their questions.

Is the Daycare Part of the Church or a Separate Business?

The Fort Worth church had partnered with a daycare franchise, but they hadn’t thought about whether it was considered part of the church or a separate business. This matters because it affects how insurance coverage works.

If the daycare is fully operated by the church and is part of the same religious organization, it might be covered under the church’s existing insurance policy. But the specialized coverage for daycare operations is often limited. Many standard policies don’t automatically include daycare services.

If the daycare center is its own separate entity, meaning it has its own legal structure, bank accounts, and tax filings, the church’s commercial insurance policy probably does not cover it at all. In this case, the daycare will need to have its own separate daycare insurance coverage, even if it operates inside the church building.

After learning this, the church leaders checked their policy and found that their insurance did not automatically cover the daycare just because it was in their building. This meant they did not have adequate coverage for the childcare business.

Does the Church’s Insurance Cover the Right Risks?

Even if a daycare is part of the church, that doesn’t mean the church’s insurance covers everything. Most standard church policies often do not cover some of the biggest risks that come with child care. Your Sunday nursery operations may be fine, but child care centers operating during the week will need additional coverage to properly protect both the church and daycare.

• General Liability: This covers accidents, injuries, or property damage. But many church policies do not automatically extend this coverage to daycare operations. That means if a child falls and gets injured, the claim might not be covered. Securing an endorsement for this is important.
• Sexual Abuse and Molestation Coverage: This is one of the biggest risks for any child care program. No one likes to talk about it, but abuse allegations become expensive quickly. Most church coverage excludes this unless it’s specifically mentioned. Without it, the church could be left to handle lawsuits and legal costs on its own.
• Workers’ Compensation Insurance: Workers compensation insurance is optional in Texas, and many churches opt out. Without it, the church could be responsible for medical bills and lost wages if a staff member gets hurt on the job. Legal battles to secure these payments can sink an annual budget.

Even if your church is operating the daycare as a ministry inside the church, it is important that your insurance provider understands that this activity is occurring. They will need to include these potential risks in your insurance rate to make sure that the claims process is not compromised.

The church’s leadership team quickly realized that their policy didn’t fully protect them from these risks. They needed a better plan to protect both the church and the daycare.

Should Your Church Have Separate Daycare Insurance?

Many churches that run daycares and Mother's Day Out Programs ultimately end up deciding to look into daycare-specific insurance. They find that in many cases their basic policy does not provide enough liability protection. The best way to protect both the church and the onsite child care center is to secure daycare insurance coverage separately.