The Nanny Question: When Hiring Help Makes You an Employer

By The NMH Agency Team, Licensed Agent

Somewhere between hiring the occasional babysitter and employing a
full-time nanny, a legal line gets crossed that almost no family
notices: you become a household employer, with
obligations that sound like they belong to companies, because they do,
and now also to you. The tax side of this gets some press (the “nanny
tax” has name recognition). The insurance side gets almost none, and
it’s where families are most exposed. Let’s fix that, from the insurance
seat.

The scenario that funds
this article

Your nanny slips on the wet kitchen floor and breaks her wrist:
medical bills, weeks unable to work. Who pays?

Most families assume their homeowners liability handles it, and
here’s the unpleasant surprise: homeowners policies commonly
exclude bodily injury to employees where workers’ compensation
applies or is required, and separately, many exclude injuries to
“domestic employees” beyond limited medical payments. Meanwhile, a
growing list of states requires workers’ compensation coverage
for household employees meeting hours or wage thresholds,
full-time domestic workers especially, with the thresholds varying
enormously state to state. An injured household employee in a state
where you were required to carry comp, and didn’t, leaves you facing her
medical bills and lost wages personally, plus potential penalties for
the missing coverage. That’s the exposure, and it lands on kind,
generous families who simply never knew the category existed.

Sorting your
situation in three questions

One: is this person your employee at all? The
IRS-flavored test: do you control what work is done and how? A nanny
working your schedule in your home with your rules: employee, almost
always. The cleaning service with its own crew and insurance,
the agency caregiver on the agency’s payroll, the lawn company:
generally their employees, not yours, which is exactly why “are
you insured, and can I see the certificate?” is a fair and standard
question to ask any service you hire. Independent-contractor labels
don’t survive contact with the control test, no matter what anyone wrote
on an invoice.

Two: does your state require workers’ comp at your employee’s
hours? This varies too much for internet generalities, some
states require it for essentially any domestic employee past modest
thresholds, others exempt household workers, and answers change. It’s a
two-minute lookup we do for families regularly.

Three: required or not, what covers an injury? Where
comp is required, buy it (below). Where it’s optional, it’s often still
available and worth pricing, because it cleanly solves
precisely the slip-on-the-floor scenario, converting an open-ended
personal liability into a premium.

What the
coverage costs and where it comes from

Household workers’ compensation is unglamorous and affordable:
typically several hundred to about a thousand dollars a year for one
domestic employee, obtainable as a standalone policy, through state
funds in some states, or, in a number of states, as an
endorsement on your homeowners policy, which is the
tidy version when available. It pays the injured employee’s medical
costs and lost wages regardless of fault, and, crucially, it’s generally
the exclusive remedy: comp in place means the injury doesn’t
become a lawsuit against your house.

While you’re in the paperwork: the driving question.
A nanny driving your kids in your car should be a listed driver on your
auto policy; driving her car for your errands raises her
coverage questions worth settling in advance (and possibly mileage
reimbursement per your accountant). The umbrella check:
tell your umbrella carrier about household staff; some umbrellas include
or offer employer-liability-adjacent protection, and all of them should
know the exposure exists. And EPLI-flavored risk
(employment disputes with household staff: wrongful termination and
similar claims) has coverage available for households with significant
staff, more relevant to the multi-employee household than the
single-nanny one, but real.

The family-office
version of the checklist

For most families the whole program is short: confirm
employee-versus-vendor status for each person who works in your home;
check your state’s comp requirement against their hours; buy the comp
policy or endorsement (required or merely wise); list the driving
arrangements properly; ask vendors for certificates; and loop your
umbrella in. An afternoon of setup, modest annual cost, and the
kitchen-floor scenario becomes a covered event instead of a family
crisis with a friendship inside it.

You hired help to make the household run better. Insuring them
properly is part of the same kindness, to them and to yourselves.

Nanny, caregiver, or regular help in your home? Call 800.388.6780
or start a review and tell us the
arrangement. We’ll check your state’s rules and price the fix.