Insurance Guide for Intellectually and Developmentally Disabled Service Providers: Liability and Workers Compensation
- Daryl Henry
- Feb 25
- 5 min read
This article will give you a guide on the kinds of insurance you need to buy as a service provider to the intellectually and developmentally disabled.
I started attending MACS conferences in 2022. The state association for service providers is very strong, and every time I cold called a service provider, they would tell me “I met my insurance broker at MACS”. I never made much traction into the community, until one day, I got so mad, I pounded my hands on the table and said “That’s it! I’m going to MACS!”
It worked. I’ve brought in customers since then. More importantly, I’ve learned more about the community of people that help individuals and families.
Service providers typically fall into one of the following categories, and may offer a mix of these services:
1. In Home Support Services
2. Community Supported Living
3. Residential programming
4. Respite Care
5. Vocational Training
6. Day Service
From an insurance perspective, the names of the insurance coverages that you need are consistent across all these categories. However, the applications of the coverages will look different, and the interest level of an insurance company will vary greatly.
In this article, I’m going to focus on the coverages and how they will apply. In other blogs, I will dig deeper into how much the insurance costs and how does the underwriting changes between these various services.
1. General Liability Insurance
General Liability Insurance is the foundation of your coverage. It protects against lawsuits related to bodily injury and property damage to people outside your organization.
Example: Slip and falls are the most common General Liability insurance claim. They require that someone is alleging you were negligent. For example, you were mopping the floor, and a client slipped. Or there was a piece of loose carpet, and a client tripped.
2. Professional Liability Insurance (Malpractice Insurance)
General Liability Insurance does not cover professional mistakes. Professional Liability Insurance steps in when your agency is accused of negligence or failing to provide the agreed-upon level of care.
The degree of exposure can vary greatly between providers depending on what you are doing, who you are serving, and where you are doing it. A Group Home for individuals that require skilled care is much riskier than an adult day program for highly functioning individuals.
Examples:
You were scheduled from 1-5 PM, but no one was at the house, and the patient was injured.
A client chokes to death on a piece of food.
A client wanders off and is hit by a car.
A known food allergy was ignored, leading to a medical emergency.
The Professional liability lawsuits can be traumatic in these types of operations.
3. Abuse and Molestation Liability Insurance
This coverage protects your agency against lawsuits related to accusations of physical or sexual abuse.
Examples:
Two clients develop a romantic relationship. individual’s family claim it was not consensual.
A caregiver and relationship develop a romantic relationship.
A house manager withheld services from a client until they provide sexual favors.
4. Workers' Compensation Insurance
Workers' Compensation covers medical bills and lost wages for employees injured on the job.
It’s not hard to imagine ways that employees can get hurt on the job. Clients can behave erratically, and sometimes violently, resulting in employee injuries.
One side note, some service providers utilize Independent Contractors to deliver services. If you do, please read the article below to learn about those risks.
5. Commercial Auto Insurance
If your agency owns vehicles used for business, Commercial Auto Insurance is essential. It covers accidents involving business-owned vehicles during work-related travel.
I can’t stress it enough; vehicle safety is critical for you.
6. Hired and Non-Owned Auto Insurance (HNOA)
Even if your employees use their personal vehicles for work, your agency could still be held liable in an accident. HNOA provides coverage beyond the employee’s personal auto policy.
Tip: Verify that all caregivers driving for your business carry at least $100,000 in bodily injury liability per person and $300,000 per accident.
7. Cyber Liability Insurance
IDD Service providers handle sensitive client data, including medical records. Cyber Liability Insurance protects your agency in the event of a data breach, ransomware attack, or other cyber threats.
Some agencies have been completely shut down due to ransomware attacks on third-party software providers. Ensure your cyber policy includes coverage for disruptions caused by third-party vendors.
8. Employment Practices Liability Insurance (EPLI)
EPLI covers workplace-related lawsuits such as wrongful termination, harassment, and discrimination.
It can be challenging to find, train, and retain, the necessary talent to staff your programs. It’s very common for there to be higher turnover at the caregiver position. This can result in higher risk of lawsuits relating to hiring and firing discrimination.
Bonus: Third-Party Acts Liability within this policy can protect your agency if a client accuses you of discrimination.
Example: A client claims your agency refused service based on their race, gender, or sexual orientation. EPLI provides defense coverage.
9. Fidelity/Employee Dishonesty Bond
Fidelity & Employee Dishonesty Bonds protect the organization if an employee steals money from the organization. Or, if an employee steals money from a client. This can be particularly relevant to service providers that handle clients’ money.
Specific Coverage: Look for “Theft of Clients’ Property” in your policy.
10. Property Insurance
The Property insurance needs for service providers can be diverse. Some programs own buildings, rent apartments, and have contents at a list of locations. It’s important to make sure that buildings are insured to the full value that it would cost to be rebuilt, and that lists of apartments are routinely updated.
11. Business Interruption Insurance
Business Interruption coverage is particularly important. Many of the services provided require to be zoned and licensed for one location. This means that if something happens in that location, such as a group home or day services location, it is very difficult to relocate to a new space. More often than not, the only option is to wait until the space is available again.
During that interruption, you will have to relocate clients to safe location, pay employees overtime, pay additional rents, and absorb a loss of income. Make sure that your program provides enough money to absorb all these costs.
12. Umbrella Insurance
For severe incidents, standard policy limits may not be enough. Umbrella Insurance provides additional coverage when a claim exceeds your primary policy limits.
Industry Trend: In 2024, an estimated 50% of nuclear verdicts in the U.S. stemmed from abuse, neglect, or vehicle-related claims. These are key risks for Service Providers, making Umbrella Insurance a crucial safeguard.
Why Do You Need All These Policies?
Different types of lawsuits require different types of coverage. Service Providers can have complex operations that provide support to people in a variety of different environments. It’s critical to consider how the insurance program will interact with you in all these different spaces.
Final Thoughts
Insurance may not be the most exciting part of Service Provider for the Intellectually and Developmentally Disabled, but it’s one of the most important. The right coverage ensures that your agency is protected against unexpected risks.
Take the time to review your policies, consult an insurance expert, and ensure you have comprehensive coverage. Your future self—and your business—will thank you!
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