If you're opening a senior care or assisted living facility in California, you're stepping into one of the most regulated industries in the state. That's actually a good thing—these rules exist to protect vulnerable residents. But here's what catches most new operators off guard: you can't even apply for your license without the right insurance already in place. California doesn't mess around when it comes to senior care insurance requirements, and understanding what you need before you start is critical.
Whether you're converting your home into a small residential care facility or launching a larger assisted living operation, the insurance requirements are non-negotiable. The California Department of Social Services, through its Community Care Licensing Division, will verify your coverage before issuing any license. Let's break down exactly what you need, what it costs, and how to stay compliant.
The Non-Negotiable: Liability Insurance for RCFEs
California law—specifically Assembly Bill 1523—requires every Residential Care Facility for the Elderly (RCFE) to maintain liability insurance. The minimums are clear: $1 million per occurrence and $3 million in annual aggregate. This isn't a suggestion. It's been mandatory since July 1, 2015, and your facility literally cannot operate without it.
This coverage protects against injuries to residents or guests caused by negligent acts or omissions by you or your employees. Think slip-and-fall accidents, medication errors, or inadequate supervision that leads to resident harm. The policy needs to include general liability, professional liability, and ideally abuse coverage—a critical component given the vulnerability of your residents.
When you submit your RCFE license application, you'll need to provide proof of this coverage. That means a certificate of insurance showing the correct limits and naming the California Department of Social Services as a certificate holder. Many operators make the mistake of shopping for insurance after starting the application process—don't do that. Get quotes and secure coverage early, because it can take time to find carriers willing to insure senior care facilities.
Workers' Compensation: Protecting Your Employees
California requires workers' compensation insurance for all employers with employees—no exceptions for senior care facilities. If you have even one employee, you need coverage. This protects your staff if they're injured on the job, covering medical expenses and lost wages. In senior care, where employees lift residents, manage medications, and work long shifts, injuries happen.
Starting February 1, 2026, California employers must provide employees with written notice of their workers' compensation rights, along with other workplace protections. You'll need to give this notice when you hire someone and then annually thereafter. The California Labor Commissioner is providing a template, so you won't have to draft this from scratch—but you do need to comply.
If you're running a Home Care Organization (HCO) that sends aides into clients' homes rather than operating a facility, you still need workers' compensation for all affiliated home care aides. For household employers who directly hire caregivers, the requirement kicks in if the employee has worked at least 52 hours in a 90-day period or earned at least $100 during that time. Bottom line: budget for workers' comp from day one.
Home Care Organizations: Additional Insurance Layers
If you're licensing a Home Care Organization in California, your insurance requirements go beyond what RCFEs need. You must maintain general and professional liability insurance with the same $1 million per occurrence and $3 million aggregate limits. But on top of that, you're required to carry a $10,000 employee dishonesty bond with third-party coverage.
This bond protects clients if your employees steal from them or engage in fraudulent activity. Given that home care aides often work unsupervised in clients' homes and may handle personal belongings or finances, this protection is essential. Additionally, if your organization manages any resident finances—even temporarily—you'll need to file a minimum $1,000 surety bond as required by California Health and Safety Code 1569.60.
When you submit your HCO license application to the California Department of Social Services, you'll need certificates proving all three coverages: liability insurance, workers' compensation, and the dishonesty bond. These must be active and maintained throughout the life of your license. Let one lapse, and you're operating illegally.
Optional But Smart: Additional Coverages to Consider
Beyond the legal minimums, smart operators add layers of protection. Umbrella or excess liability insurance gives you higher limits than your standard general liability policy—think $5 million or $10 million in coverage. When your facility gets sued for a serious injury, the minimum $1 million per occurrence can disappear fast. Medical costs, legal fees, and settlements add up.
If you own or lease vehicles to transport residents or employees, you need commercial auto insurance. Employment practices liability insurance (EPLI) protects against lawsuits over wrongful termination, discrimination, or sexual harassment. With California's strict employment laws, EPLI is worth considering—especially as you grow and hire more staff. Property insurance protects your building and contents if you own the facility, while business interruption insurance covers lost income if you have to temporarily close due to fire, flood, or other disasters.
Financial Requirements Beyond Insurance
California doesn't just want proof of insurance—they want to know you can actually run the business. When you apply for an RCFE license, you'll need to demonstrate financial stability. Typically, that means showing you have three times your monthly operating costs readily accessible in cash or credit, in the name of the applicant. If you're purchasing an existing, operating facility, the requirement drops to one month of operating costs.
Starting a six-bed RCFE in California can cost $65,000 to $75,000 when you factor in licensing fees, facility modifications, insurance, and initial operating capital. These aren't small numbers, but they reflect the reality that running a senior care facility is a serious financial undertaking. The state wants to make sure you won't go bankrupt three months in, leaving vulnerable residents without care.
How to Get Started and Stay Compliant
Start your insurance shopping early. Don't wait until you're ready to submit your license application. Senior care facilities are considered high-risk by many insurers, so you may need to contact specialized brokers who understand this market. Get multiple quotes, compare coverage terms, and make sure any policy explicitly covers the activities your facility will provide.
Once you're licensed and operating, staying compliant means keeping your insurance active and up to date. Set calendar reminders for renewal dates, and never let a policy lapse—even for a day. The Community Care Licensing Division can inspect your facility at any time and will verify your insurance coverage. Operating without proper insurance can result in fines, license suspension, or permanent closure.
Stay informed about changes to California employment laws, minimum wage increases, and workers' compensation requirements. In 2026, California's minimum wage is increasing to $16.90 per hour, which affects your labor costs and may impact your workers' comp premiums. Subscribe to updates from the California Department of Social Services and consider joining industry associations like the California Assisted Living Association for ongoing guidance.
Opening a senior care or assisted living facility in California is rewarding work, but it comes with serious responsibilities. The insurance requirements exist to protect the people you serve and ensure your business can handle the financial risks of this industry. Take the time to understand what you need, work with experienced insurance professionals, and build compliance into your business plan from day one. Your residents—and your business—will be better protected for it.
