Insurance TLC for Senior Care Facilities

Nursing homes are a vital part of caring for the elderly and disabled. But for them to operate at their best, they need to have adequate protection from financial loss. Just one uninsured catastrophe could hurt the entire community.

There are two primary insurance coverages nursing homes need: property and liability. They are available through stand-alone insurance policies and specialty programs designed specifically for nursing home operators. They can be bundled into a combined policy or bought separately. The exact terms of your coverage will be affected by your size, your claims history, the number of residents you care for, your specialization (if you have one) and the type of nursing home you operate. Skilled care, intermediate care, and personal care (or a combination of these) may require customized terms. Your insurance broker will help you tailor coverage to your particular risks.

Let’s look at the important subsets of property and liability insurance so you’ll be better equipped to discuss your insurance portfolio with your broker.

Property insurance goes beyond your building

Your nursing home doesn’t just have structural concerns like roofing, pipes and drywall. It also contains expensive equipment and dangerous drugs that are essential to your operations. Your property insurance should address all of these.

• Building insurance — A commercial property policy will help you if your building is damaged by a covered peril. These typically include wind, fire, vandalism and damage from falling trees or storms. A property policy can also be written to include exterior structures such as fences, sheds, signs and gazebos. Flood and earthquake insurance are usually excluded and need to be insured separately.
• Equipment breakdown — Often called “boiler and machinery,” this type of insurance focuses on the systems that make your nursing home run. Your heating, air conditioning and ventilation systems would fall under this policy, as would your kitchen and built-in diagnostic or physical therapy equipment. Coverage is meant to help with the cost of repairing or replacing broken machinery. It will also help with repairs if a breakdown damages other property. And there is usually a business income loss provision in this coverage, though nursing homes are less at risk of losing revenue from a breakdown than, say, a retail shop or restaurant. An equipment breakdown policy will also cover food spoilage, which can be a big loss in a residential setting.
• Inland marine — This type of coverage applies to equipment that is transported to and from different locations and protects your investment against theft, damage and vandalism. It may also be written to insure money and securities held at your establishment. Ask about coverage for medicines and drugs stored at your facility. Theft of certain prescription medications is common, and spoilage is always a possibility with some drugs.
• Business personal property — Sometimes called “business contents” insurance, this type of policy covers computers, equipment, furnishings, office supplies and almost anything else that isn’t built in. But make sure there aren’t exclusions that bar coverage for something you want to insure.

Liability insurance spans the simple to the complex

Liability insurance protects your nursing home if someone is injured on your premises or as the result of your professional services or actions. It is mandatory almost everywhere, though securing only the minimum coverage required by law might not be advisable since it could leave you paying out dearly for a catastrophic claim.

• General liability — This type of insurance is standard for every commercial enterprise. It helps pay for injuries due to slips and falls on your premises, as well as advertising and other social injuries. It will also help if a resident scalds themselves or chokes on a piece of gristle served in your cafeteria. Ask your insurance broker about covering violations of residents’ rights as well.
• Professional liability — Though you may associate professional liability, sometimes called “malpractice,” insurance with doctors, all of your licensed staff should be included in your policy or have their own professional liability insurance to protect them and your nursing home. You should also have allied health professionals insurance to cover your technicians and other service staff. If you have a beautician or barber who serves residents in-house, they should have appropriate liability insurance for their specialty as well.
• Molestation and abuse — As ugly as it is to talk about, elder abuse is not uncommon, and an incident can destroy your nursing home. Close oversight and excellent background checks for staff can help, but a claim can still happen. Whether it is true or not, you will have to defend against it, so having insurance that helps pay for legal defense and any settlements or judgments is crucial.
• Management liability — This broad category encompasses employment practices liability insurance (wrongful hiring and firing and discrimination), directors and officers liability insurance (for executives and board members) and fiduciary liability insurance (for those who manage your employee benefits plans). Your medical directors should be included in your insurance as well.
• Crime/employee dishonesty insurance — This type of insurance protects your business against losses due to theft of patients’ property or other financial crimes perpetrated by your employees. You can cover all employees or name specific people, depending on the policy you get.
• Excess liability/umbrella insurance — Your underlying liability policies might not have high enough limits to pay for a massive claim. If you have an excess liability policy or commercial umbrella insurance, it will extend your coverage amount so you will face less out-of-pocket costs.
• Environmental liability — Your facility most likely handles and disposes of medical or biohazardous waste. Following security protocols is paramount, but accidents can still happen. Environmental liability (or environmental impairment) insurance can help with legal representation, investigation, cleanup and remediation costs.

Other critical coverages

Beyond your property and liability concerns, your nursing home needs solid workers’ compensation insurance to protect both your employees and your business. You should also consider cyber risk insurance, which helps with losses of or damage to your own data and digital operations, and cyber liability, which helps limit your financial pain if you are deemed responsible for cyber injury to another party.

If you transport patients to appointments, shopping centers or other off-campus activities, you will need some form of business auto insurance. It can be written to cover vehicles owned by your nursing home, non owned vehicles you rent or commission, and personal vehicles used for business purposes. Talk to your insurance broker about all the ways you shuttle your residents around.

If you contract with outside medical professionals (or any other vendors), carefully address liability coverage in your working agreements. Your insurance broker can help with a review of these contracts to point out any areas where you are accepting responsibilities without concomitant insurance protection.

This content is for informational purposes only and not for the purpose of providing, financial, medical or legal advice. You should contact your attorney, doctor, broker or advisor to obtain advice with respect to any particular issue or problem. Read more about our limitation of liability here.