How much will liability insurance cost for my assisted living facility or group home?

For the purpose of this blog, I'm going to assume that you're going to buy a liability package that at least includes these three coverages – General Liability, Professional Liability, and Abuse and Molestation.  I make this assumption because this is how most insurance companies will bundle these products together.  It’s not recommended to try to buy them separately.

Before I can explain the estimated cost, I need to explain the factors that would impact pricing for a group home or an assisted living facility.

For Profit versus Nonprofit

The first thing I'd point out is that for profit versus nonprofit makes a difference.  There are more carriers that will insure a non-profit organization in this class of business than there are a for-profit organization.  The reason being, there's a higher expectation of care for for-profit entities than there are for non-profit entities.

If a person is paying a lot of money for their family member to be in a group home or assisted living facility, and that family member is hurt, they are going to be much less forgiving than if the program had been mostly subsidized by the government.

Size of your Facility

Depending on where you're at, which state you're in, usually there are some licensing agencies that will decide how many beds you can have in the home.

The number of beds you have is going to dictate how much your insurance costs.

For a lot of startups, you're usually looking at 8 to 16 beds and under.  But for large organizations, the number of beds can be much larger.

It’s not just the number of beds, it’s the number of occupied beds that can make a difference.  If you are licensed for 16 beds but 12 are occupied, that can factor into the underwriting, and it's important to disclose that.

If you're not at full occupancy, just be careful, especially if you're for profit.  A lot of underwriters are going to look at your financial statements.  They want to make sure you're operating at a profit because entities that have financial issues are also more likely to be sued for lack of care in their programs.

Type of Residents

There's a difference in underwriting a group home for children, a group home for the intellectually and developmentally disabled, seniors, and substance use disorder programs.  The people you have living in your home will impact the availability of insurance products.  It will also impact underwriting and pricing.   

As I write this in 2024, there are very limited markets for youth group homes.  These types of organizations have had some very challenging abuse and molestation lawsuits over the years.

For Profit substance use disorder programs are also experiencing a significant lack of supply for insurance. 

The assisted living market is coming back from its Covid lows.  But since the societal shift is toward home health care, there is still a lot of pressure on assisted living and the assisting living insurance market.

Programs for intellectually and developmentally disabled have the benefit of a variety of programs and insurance companies that are able and willing to insure them. 

Level of Care

The next thing that's going to factor into the pricing for your assisted living or group home is going to be the level of care that you provide.

The continuum of care seems to be similar across various practices. 

1.     Independent Living

2.     24/7 Supervised Care

3.     24/7 Supervised Medical Care.

It’s not the same in all disciplines, and different verbiages are used for seniors versus people in recovery, as they should.  But the principles hold the same.

If you’re offering services to people that mostly function on their own, their expectation of care from you is much less than the 24/7 supervised care.  This is different from a detox facility, or a program with medical professionals on site 24 hours a day.

If you offer a higher level of care, your insurance premiums will be higher.

Levels of Coverage

The levels of coverage you select will impact the pricing in your program. 

If you need $5,000,000 of coverage to apply to apply for a state license, that's going to be more expensive than $1,000,000.

Some companies may want to start you at $25,000 of abuse and molestation liability coverage, but will offer more for a premium.

You should also consider the retentions on your policy.  One policy can look cheaper, but upon closer examination, you’ll see that it has a $10,000 liability retention, whereas another has $2,500 liability retention.

In many situations, the price difference between programs can be explained by differences in coverage… but not always.

Location

Every state and every legal and regulatory environment are different.

If you're in Georgia right now in 2024, you're not doing so well.  That's one of the worst regulatory environments in America.  Other states aren't so bad.

When there's more carriers, there's more competition, there's more availability of product, and your pricing is lower.

If it's a tougher environment, there's less companies, less competition, it's going to be more expensive.

Claims History

Another factor that's going to weigh into the pricing of your program will be your claims history.

For startups, this is challenging.  You have no history at all.  Underwriters think they are missing a critical piece of data to determine how the pricing for your account.  What they do instead is review your management experience and business plan.

However, if you've been in business for a while and you have a history, they will consider that data.  Your claims history is a direct output of your internal housekeeping practices.  Organizations with strong housekeeping practices have less claims and pay their bills on time.  These are generally accepted facts in the insurance industry.

Weaker organizations have lots of claims, large claims, and pay late.

If you do have claims, it’s important to explain what happened, what you did to fix it, and why it won't happen again.

Pricing Range

By this point, you can tell there are a lot of variables that will impact the cost of your liability insurance.  In Maryland, for an 8-16 bed house, I’m typically seeing $2500 to $5000 a year range for a liability package that includes General Liability, Professional Liability, and Abuse and Molestation liability insurance.

You can't hold me to that.  Every state's different, every environment's different.  And like I said, there's a lot of factors that go into it that an underwriter needs to look at.

But I hope that gives an indication.