How Much Does General Liability, Auto, And Workers Compensation Insurance Cost for Home Health Agencies?

I’ve yet to meet the owner of a Home Health Agency who started their business so they could deal with insurance. They feel much the same way about me as I do about my accountant… I know I need them, and they keep me out of big trouble, but I’m not in a hurry to talk Tax Code.

Even more than that, I don’t know how to differentiate between one accountant and another, so it feels overwhelming to talk to them.

This blog is to give you a breakdown of the different coverages you need and an idea of how much they cost.

A Caregiver talks happily with a client

General Liability Insurance, Professional Liability, and Abuse and Molestation Liability Insurance

What are these three coverages?

I refer to these three as the “Liability Package.” This is not an industry term, but they are the foundational coverages you need from the moment your agency starts its business with one caregiver, up through an agency with $100,000,000 in revenue. I review these three coverages together because they are typically sold as a package.

General liability insurance is the foundation of most business insurance plans. It protects your agency against claims of bodily injury, property damage, or advertising injury caused to third parties—essentially, anyone who isn’t an employee.

However, general liability insurance has two key exclusions: one for Professional Liability and another for Abuse and Molestation. Therefore, a good liability package will attach the next two coverages.

Professional liability insurance, also known as errors and omissions (E&O) insurance, covers claims of negligence, mistakes, or inadequate care that could harm a client.

Abuse and Molestation liability insurance protects the organization from accusations of physical or sexual abuse.

Why do insurance companies have all these exclusions?

There are a couple of reasons to note.

First, there is no way to write one contract that can adequately describe all the different lawsuits a business might experience. Separate coverages exist to describe different lawsuits. For instance, if a caregiver is cleaning the kitchen and a client slips on a wet spot on the floor, that’s bodily injury.

Second, there is no way to accurately price a policy that covers “everything.” There are too many factors that could determine how much the insurance company should charge.

Third, no customer wants all the coverage that would be included in the “everything” policy. Excluding coverage gives the insurance company the opportunity to offer separate products with different coverage limits and prices designed to meet an individual’s needs.

In the case of a Home Health Agency, one business may have one caregiver and only want $25,000 of Abuse & Molestation Liability insurance. On the other hand, an agency with 200 caregivers might want $2,000,000 of coverage, if it’s available.

Why do you need it?

Let’s list out a couple of possible scenarios:

For General Liability, let’s say a caregiver is cleaning the kitchen and the floor is wet. The client slips on the floor and claims that the caregiver made the area unsafe. They then sue the agency for the injuries from the fall.

For Professional Liability, examples are easier to relay when I know specifically the kind of person the agency is working with. For some populations, like individuals with Alzheimer’s, it’s easy to imagine a client wandering off when the caregiver is supposed to be supervising. Failing to provide anything that is in your service agreement could be grounds for a lawsuit. As a brief sidebar, this is why some insurance companies will ask about what is in your contract. That contract is your first line of defense in lawsuits against you.

For Abuse and Molestation, I’ve heard stories of owners who went into the bedroom of a resident, closed the door, and had an inappropriate relationship. The lawsuits are very expensive to defend.

How much does it cost?

General liability insurance for home health agencies varies depending on a number of factors. An individual caregiver’s liability package can cost $500-$1,000. A business with $2,000,000 in payroll that primarily offers companion care services can cost in the $7,000-$10,000 range. The exact cost depends on factors like your location, the size of your agency, and your claims history.

Factors That Influence Insurance Costs

Now that we’ve covered the types of insurance, let’s dive into what affects the cost of your premiums:

1. Size of Your Agency: The larger your agency (in terms of staff and revenue), the higher your insurance costs will likely be. More employees and clients mean more risk, which insurers account for in their pricing

2. Services Provided: Agencies offering high-risk services, such as skilled nursing or physical therapy, tend to pay more for insurance than those focused solely on non-medical care.

3. Location: Insurance costs vary by state and even by city. Urban areas with higher claim rates usually come with higher premiums.

4. Claims History: If your agency has a history of claims, insurers may charge you more as a higher-risk client.

5. Coverage Limits: Higher coverage limits mean better protection but also higher premiums. For example, a $1 million general liability policy costs more than a $500,000 policy.

6. Employee Training and Certifications: Well-trained staff with relevant certifications can lower your risk and, in turn, your insurance premiums.

   
   

Auto and Hired and Non-Owned Insurance for Company Vehicles

What is it?

Home health agencies either have a fleet of owned commercial vehicles that they use to operate their business, or they have their caregivers drive their personal vehicles for agency business. Both scenarios present a business risk and need to be insured.

In the scenario where an agency has no owned vehicles but their caregivers drive, I explain that they have a fleet of vehicles for the business—they just don’t own it.

Commercial auto insurance is for vehicles owned by the business. Hired and Non-Owned Auto insurance is secondary insurance. It sits on top of the personal auto insurance owned by the individual caregiver.

Why do you need it?

One of the quickest ways you’ll have a catastrophic lawsuit is a vehicle accident with a caregiver and a client in the car.

Related Article -- Auto Insurance for Social Services, The Quickest Way You'll Have a $1,000,000 claim

How Much Does it Cost?

For an individual caregiver, Hired and Non-Owned Auto Insurance can be included in the $500 to $1,000 you pay for General Liability insurance. For a larger agency, Hired and Non-Owned insurance depends on the insurance company. It can range between $1,000-$2,000. For an Owned Vehicle, Insurance is typically between $2,000-$4,000.

Factors That Influence Insurance Costs

1. Size of Your Agency: More vehicles and more drivers will increase the cost.

2. Driver Record of Your Caregivers: Some caregivers may not qualify at all for coverage if they have a poor driving history.

3. Location: Urban areas are more expensive. States with adverse legal environments are more expensive as well.

4. Claims History: If your agency has a history of claims, insurers may charge you more as a higher-risk client.

5. Coverage Limits: Higher coverage limits mean better protection but also higher premiums. For example, a $1 million general liability policy costs more than a $500,000 policy.

6. Types of Services Provided in Vehicles: Some agencies do not transport clients at all. These programs have more options available to them, and their programs are typically less expensive.

   
   

Workers Compensation Insurance

What is it?

Workers Compensation insurance provides medical benefits to employees injured on the job. Every state has different laws about which businesses need to purchase insurance. For example, in Maryland, if you have one employee, you need to buy insurance. In Virginia, if you have more than two, you need to buy insurance.

Every state is different. Do a quick Google search and find out from your local state commission the rules in your state.

Why do you need it?

Beyond compliance reasons, it’s very expensive when people get hurt on the job. Employees slip and hurt their backs. Clients unexpectedly open doors and bang caregivers in the head. Employees cut their fingers while preparing food for clients. Caregivers hurt their backs lifting clients… even if the file says they shouldn’t lift the client.

There are innumerable situations where an employee can be injured and require medical attention. Unless you want to be the coordinator of medical benefits for that person, workers compensation insurance is critical.

How much does it cost?

The governing class code for Home Health Agencies is typically 8835. Once again, this can vary by state. The rate for every $100 of payroll ranges between $1 to $3.

Factors That Influence Insurance Costs

1. Size of Your Agency: Workers Compensation is measured based on payroll. More payroll means a higher cost.

2. Services Provided: Higher-risk services can sometimes lead to more lifting situations. Lifting causes a lot of injuries.

3. Location: Medical costs vary by region. Each state has its own list of mandated benefits.

4. Claims History: If your agency has a history of claims, you will pay more.

   
   

Conclusion

If you’ve got questions about the specifics of your agency, I’m happy to help. My hope is that this guide gives you the framework you need to understand why you’re paying what you do. In turn, it may help you create more options for your renewal and reduce your costs.