Last updated 2026-07-09
TL;DR
Indiana law lets a home provider care for up to 5 unrelated children at once without a state license. Six or more unrelated kids means you must get licensed. The exemption comes with real conditions, and breaking them can mean per-day fines, a forced shutdown, and losing eligibility for child care subsidy payments.
How many kids can you watch in Indiana without a license?
Five unrelated children at one time. That is the line. Indiana Code 12-17.2-3.5 sets the exemption: a provider who cares for no more than five children who are not related to them by blood, marriage, or adoption does not need a license from the Indiana Family and Social Services Administration (FSSA). [1]
Related children in your care, including your own, do not count against the five. So if you have two kids of your own at home and you watch five neighbor children, you are still within the unlicensed limit. That is a genuine benefit. It is one reason family child care in Indiana is common in smaller towns where a formal license feels out of reach.
But "up to five" means five at any given moment, not five per shift or five per day. If six unrelated children are ever present at the same time, even for twenty minutes, you are operating outside the exemption. Indiana's Office of Early Childhood and Out-of-School Learning (OECOSL) treats that as unlicensed operation of a regulated facility, which carries civil penalties. [1]
Age matters too. The exemption covers children under 18, but the five-child cap applies whether you specialize in infants or school-age kids. There is no separate carve-out for part-time or drop-in care.
What rules still apply to unlicensed home daycares in Indiana?
Unlicensed is not unregulated. Several requirements attach to any provider watching unrelated children, license or no license.
Indiana Code 12-17.2-3.5 requires unlicensed providers to give each family a written disclosure statement before care begins. That statement has to say the home is not licensed or inspected by the state. [1] This is where your written agreement earns its keep: it should carry the disclosure language, your hours and rates, your sick-child policy, and your emergency procedures. A verbal handshake leaves you exposed if a family later claims they never knew you were unlicensed.
Any provider who takes payment from Indiana's Child Care and Development Fund (CCDF) subsidy program has to meet extra requirements no matter their license status. CCDF rules under 45 CFR Part 98 require states to set health and safety standards for every provider receiving subsidy dollars, including unlicensed relatives and neighbors. [2] Indiana's CCDF plan makes enrolled unlicensed providers complete basic health and safety training, pass background checks, and allow monitoring visits. [3]
Local zoning ordinances can restrict home-based businesses on their own, child care included. Some Indiana counties and cities require a home occupation permit or a zoning variance even for exempt daycares. Call your county planning office before you take your first child.
Bring on an employee to help and you step into employer territory: payroll taxes, workers' compensation, and possibly more regulatory paperwork. Solo operation is the cleanest way to stay inside the exemption.
For a closer look at liability exposure, see our guide on home daycare insurance.
What happens if you exceed the 5-child limit without a license?
FSSA can issue a cease-and-desist order and assess civil penalties against providers who operate beyond the exemption without a license. [1] The fines run per day of violation, so a short stretch of over-capacity operation can still land a penalty letter. OECOSL has stepped up enforcement since 2020, following child fatalities in unlicensed settings around the country.
The fine is the smallest part. Operating unlicensed above the exemption can permanently bar you from the CCDF subsidy system. In Indiana, CCDF subsidies pay a large share of care costs for low-income families, so losing eligibility means losing a chunk of your potential revenue for good.
Then there is insurance. Most standard homeowner's policies exclude liability for business activities. If a child is hurt in your care and you were operating outside the legal exemption, your carrier has even stronger grounds to deny the claim. [4] That is a real risk, not a footnote. Our overview of daycare liability insurance covers what a home provider should actually carry.
Criminal charges are possible when FSSA believes the operation was willful and children were harmed. Rare, but not theoretical.
Who is exempt from Indiana's child care licensing requirement?
Indiana law lists several categories of providers who do not need a license beyond the basic five-child rule. [1]
Relative care is the broadest. A grandparent, aunt, uncle, or sibling caring only for related children never needs a license, no matter how many. The kids have to be actually related by blood, marriage, or adoption.
Care in the child's own home is exempt too. Go to the child's house to provide care there and you are not running a home daycare in the regulatory sense.
Drop-in care with strict time limits can qualify in some cases, though Indiana's rules here are not fully spelled out in statute and FSSA guidance has been uneven. Planning drop-in care? Get written confirmation from OECOSL before you open.
School-run before- and after-school programs, church programs that stay under certain frequency limits, and summer camps operating under separate permits also fall outside the standard licensing framework.
Unsure whether your situation qualifies? Call OECOSL at (800) 299-1627. They will tell you. Then ask for that answer by email so you have it in writing. That extra step is worth the ten minutes.
How does Indiana's unlicensed daycare compare to neighboring states?
Indiana's five-child limit sits in the middle of the Midwest pack, but the details vary enough that a comparison helps if you live near a state line or advise families who move.
| State | Unrelated children allowed without license | Notes |
|---|---|---|
| Indiana | 5 | Disclosure statement required [1] |
| Ohio | 6 | Type A vs. Type B home distinctions apply [5] |
| Illinois | 3 | Much stricter; most home providers need a license [6] |
| Michigan | 6 | License required at 7 or more unrelated children [7] |
| Kentucky | 5 | Similar to Indiana; background check required for CCDF [8] |
Illinois is the outlier. A provider in suburban Chicago who crosses into Indiana goes from needing a license at 4 children to fully exempt at 5. That gap is wide enough that some providers make location decisions around it, though zoning and taxes usually weigh more.
Child Care Aware of America reported in its 2023 fact sheet that a large share of home-based providers nationally operate without a state license, relying on exemptions like Indiana's. [9] Many of them are legitimate caregivers doing good work. The exemption exists because small family care really is different from center care, not because the state stopped caring about those children.
Can an unlicensed Indiana home daycare accept CCDF subsidy payments?
Yes, with real conditions. Indiana participates in the federal Child Care and Development Fund, which subsidizes care for eligible low-income families. Federal rules at 45 CFR 98.42 require states to let parents use their CCDF certificates with legally operating unlicensed providers, which in Indiana means providers caring for five or fewer unrelated children. [2]
The catch: Indiana requires unlicensed providers to register with FSSA before accepting a single subsidy payment. That registration includes a criminal background check, a sex offender registry check, a home safety inspection, and basic health and safety training. [3] Unlicensed does not mean unvetted once subsidy dollars are involved.
The training runs at least 10 hours of health and safety pre-service work covering safe sleep, CPR, recognizing abuse, and emergency preparedness. [3] That is a real commitment. Know it before you assume taking one subsidized child is simple.
Subsidy rates for unlicensed providers sit at the bottom of Indiana's schedule. The state sets reimbursement by license category, and unlicensed registered providers earn the lowest tier. If subsidy income drives your business model, that lower rate is a solid reason to pursue full licensure even while you stay under the five-child cap.
For a broader look at what care costs families and providers, the daycare cost guide has current Indiana rate data.
What should an unlicensed home daycare contract include in Indiana?
A written contract is not legally required beyond the disclosure statement, but skipping one is a mistake. When something goes wrong, the contract is your first line of defense.
At minimum, cover these:
The state disclosure statement. Indiana requires you to tell families in writing that your home is not licensed by the state. Put that language at the top or in its own section, not buried in paragraph seven. [1]
Hours and drop-off/pickup policies. Be specific. "Morning" is not a time. "7:00 a.m. to 5:30 p.m., Monday through Friday" is.
Rates, payment due dates, and your late fee. Indiana does not cap what unlicensed providers charge, so this is fully negotiable. Get it in writing anyway.
Sick child policy. Who decides when a child is too sick to attend? Which symptoms mean exclusion? What do you do if a child gets sick mid-day?
Emergency authorization. Parents have to authorize you to seek emergency medical care. Name the child's pediatrician and the nearest emergency facility.
Termination terms. How much notice do you require? How much will you give? What happens to prepaid fees?
Photography and social media consent. This one gets skipped and then becomes a fight.
Your child-to-adult ratio. If you are running at the five-child limit alone, put it in writing.
Have a family law attorney review the whole thing once. A few hundred dollars now can save thousands later. ChildCareComp's compliance toolkit has a starting template that already covers Indiana's disclosure requirements.
How do you get a license if you want to grow beyond 5 children?
To care for six or more unrelated children, you need a Licensed Child Care Home (up to 16 children with an assistant) or a Licensed Child Care Center. Most home providers go the home route. [1]
The Licensed Child Care Home process in Indiana involves:
An application through OECOSL, currently submitted via the online licensing portal at IN.gov.
A health and fire safety inspection of your home. You have to meet standards on smoke detectors, carbon monoxide detectors, first aid supplies, safe sleep spaces, outdoor play area, and more.
A criminal history background check and a child protection history check for every adult living in or regularly present in the home.
Pre-service training. Indiana requires 10 hours of orientation training before a license issues, with annual training after that. [3]
Proof of liability insurance. FSSA recommends at least $100,000 per occurrence, though statute does not set a hard floor.
A written program policy, basically a more formal version of the contract above.
Processing time varies. OECOSL has run backlogs before, and the realistic timeline from submission to license in hand is three to six months. Plan around that if you are expanding.
Once licensed, you can care for up to eight children in a Licensed Child Care Home without an assistant, or up to 16 with a qualified assistant on-site. [1] Going from five to eight is a big revenue jump without a major change to your physical space, which is why plenty of providers decide the effort pays off.
What background checks are required for unlicensed home daycare providers in Indiana?
For unlicensed providers who do not accept CCDF subsidies, Indiana does not require a background check by statute. That surprises people. It probably should not be the law, but it is the current state of things. [1]
For unlicensed providers who want into the CCDF subsidy program, background checks are mandatory under federal law. 45 CFR 98.43 requires states to run checks against the state criminal record repository, the sex offender registry, the child abuse and neglect registry, and FBI fingerprint records for every subsidy-receiving provider. [10] Indiana handles this through FSSA's background check portal.
Disqualifying offenses include any conviction for a crime against a child, violent felonies, and drug felonies within a lookback period that varies by offense. Indiana follows the federal minimum lookback periods set in the 2016 CCDF final rule.
Even if you are not chasing subsidies, running your own check and keeping it on file is smart. It shows good faith to families and to your insurance carrier. Several third-party services run FBI-level checks for roughly $30 to $75. The Indiana State Police also offer criminal history checks through their online portal.
What are the health and safety minimums for an unlicensed Indiana home daycare?
Indiana statute does not spell out a detailed health and safety checklist for unlicensed providers outside the subsidy system. That gap is one of the standing criticisms of the exemption model. It does not mean anything goes.
For providers in the CCDF system, Indiana's CCDF plan requires health and safety standards covering safe sleep for infants (consistent with AAP guidelines), prevention of and response to illness, food and nutrition safety, building and premises safety, and emergency preparedness. [3]
For every home provider, licensed or not, child welfare law still applies. You hold mandatory reporter status the moment you provide regular care. You must report suspected abuse or neglect to the Indiana Department of Child Services (DCS) hotline at 1-800-800-5556. [11] Failing to report is a crime.
Safe sleep deserves its own line. Indiana has seen infant deaths in unlicensed home settings, and FSSA has named unsafe sleep as a leading cause. The standard is plain: infants sleep alone, on their back, in a crib or bassinet with a firm flat surface and no soft bedding. [12] Every home provider should follow it, license or not.
For cleanliness and sanitation standards, our daycare cleaning guide covers what licensed homes are expected to do and why that is a reasonable baseline for everyone else too.
What are the risks of running an unlicensed home daycare outside the legal limits in Indiana?
The risks pile up fast the moment you step past the exemption.
Civil penalties from FSSA. Per-day fines for unlicensed operation above the threshold are written into Indiana Code 12-17.2-3.5. [1] Even a brief over-capacity stretch can draw a penalty letter.
Loss of subsidy eligibility. Permanent disqualification from CCDF is on the table for providers found to have operated unlawfully. That one does not come back.
Insurance denial. Standard homeowner's policies exclude business activities. Care for children outside the legal exemption and you have essentially no coverage for an injury claim. [4] One serious incident can wipe out personal assets.
Criminal liability. When cases involve harm to children or willful, repeat violations, FSSA refers them to the county prosecutor. Charges have been filed in Indiana against providers who ignored cease-and-desist orders.
Reputational damage. Local news covers child care enforcement. Getting named in a story about unlicensed daycare ends most home businesses.
The enforcement risk is not hypothetical. OECOSL increased complaint-driven inspections of suspected unlicensed providers after a 2022 policy shift. A tip from a neighbor, a soured parent, or a rival provider is enough to trigger a visit.
The five-child cap is not a technicality. It is where Indiana drew the regulatory line. Staying under it costs you nothing and shields you from all of the above. The day you consistently need six or more children to make the math work is the day to pursue licensure.
Frequently asked questions
Can I watch 5 kids plus my own children without a license in Indiana?
Yes. Indiana's exemption applies to unrelated children only. Your own kids, or children related to you by blood, marriage, or adoption, do not count toward the five-child cap. You could have two of your own children and five unrelated children in the home at the same time and still stay within the unlicensed exemption under Indiana Code 12-17.2-3.5.
Does an unlicensed Indiana home daycare have to give parents any paperwork?
Yes. Indiana law requires unlicensed providers to give each family a written disclosure statement before care begins, stating the home is not licensed or inspected by the state. Beyond that, you should have a written contract covering rates, hours, sick-child policies, and emergency authorization. The disclosure is legally required; the contract is practical self-protection.
Can an unlicensed home daycare in Indiana get paid by CCDF subsidies?
Yes, but you have to register with FSSA first. Registration requires a criminal background check, a sex offender registry check, a home safety inspection, and at least 10 hours of health and safety pre-service training. Reimbursement rates for unlicensed registered providers sit lower than rates for licensed providers on Indiana's schedule.
What is the fine for running an unlicensed daycare over the 5-child limit in Indiana?
Indiana Code 12-17.2-3.5 authorizes civil penalties assessed per day of violation. FSSA does not publish a fixed dollar figure, but enforcement letters cite the per-day statutory authority. Beyond the fine, FSSA can issue a cease-and-desist order and, for repeat or willful violations, refer the case to the county prosecutor. Operating above the limit is not a gray area.
Do I need a background check to run an unlicensed home daycare in Indiana?
If you are not accepting CCDF subsidy payments, Indiana statute does not currently require a background check for unlicensed providers under the five-child exemption. If you do accept subsidies, federal CCDF rules at 45 CFR 98.43 mandate criminal history, sex offender, child abuse registry, and FBI fingerprint checks. Running a voluntary check is still a smart move for any home provider.
How many children can a Licensed Child Care Home watch in Indiana?
A Licensed Child Care Home in Indiana can care for up to 8 unrelated children without an assistant and up to 16 with a qualified assistant on-site. That is a big jump from the 5-child unlicensed limit. The licensing process takes roughly 3 to 6 months and involves a home inspection, background checks, pre-service training, and proof of liability insurance.
Can I operate a part-time or drop-in unlicensed daycare in Indiana?
The five-child limit applies no matter the schedule. Part-time or drop-in arrangements do not earn a higher cap. If more than five unrelated children are ever in the home at once, you are outside the exemption. Indiana law sets no minimum hours-per-week threshold that would widen the exemption. When in doubt, call OECOSL at (800) 299-1627 and get their answer in writing.
What insurance does an unlicensed home daycare provider in Indiana need?
Indiana does not specify an insurance requirement for unlicensed providers outside the subsidy system. But standard homeowner's policies exclude business activities, so an injury to a child in your care is likely not covered. Home daycare liability coverage or a commercial in-home daycare policy fills that gap. Our home daycare insurance guide covers what Indiana providers should carry and what typical premiums look like.
Is a church nursery or Sunday school exempt from Indiana's child care licensing requirement?
Generally yes, with conditions. Indiana Code 12-17.2-3.5 exempts religious organizations providing child care incidental to religious activities, but the exemption limits hours and frequency. A church running a full weekday child care program is not automatically exempt just because it is a religious organization. OECOSL has issued guidance on this distinction, and a call to the agency is the safest way to confirm your situation.
Does Indiana require CPR certification for unlicensed home daycare providers?
Indiana statute does not require CPR certification for unlicensed providers outside the CCDF system. For unlicensed providers who do receive CCDF subsidies, the health and safety training under Indiana's CCDF plan includes first aid and CPR components. Even without a legal mandate, pediatric CPR and first aid certification is one of the most defensible steps a home provider can take, and many parents ask about it directly.
Can I advertise my unlicensed Indiana home daycare online?
Yes. Advertising unlicensed care within the legal exemption is not prohibited. Include the state disclosure language in any written materials, websites included, so families know upfront the home is not state-licensed. Advertising beyond what you can legally provide is where trouble starts: do not market space for six or more unrelated children if you are operating without a license.
What happens if a parent reports my unlicensed Indiana home daycare to the state?
OECOSL investigates complaints about suspected unlicensed providers. An investigator may make an unannounced visit to count how many children are present and review your records. If you are within the five-child limit and your disclosure statements are in order, a complaint investigation is unlikely to lead to action against you. If you are over the limit, a complaint can trigger an enforcement case fast.
How does Indiana's 5-child unlicensed limit compare to Illinois?
Illinois allows only 3 unrelated children before a license is required, making it one of the strictest states in the Midwest. Indiana's 5-child limit gives home providers more room. Ohio and Michigan both allow 6 unrelated children before licensing kicks in. The differences are large enough to matter for providers near state lines, though zoning and local rules add another layer wherever you land.
Sources
- Indiana General Assembly, Indiana Code 12-17.2-3.5 (Child Care Exemptions): Indiana exempts providers caring for 5 or fewer unrelated children from licensing; requires written disclosure statement; authorizes civil penalties for violations
- U.S. Department of Health and Human Services, 45 CFR Part 98 (CCDF Final Rule): States must allow CCDF certificates with legally operating unlicensed providers and must apply health and safety standards to all subsidy-receiving providers including unlicensed ones
- Indiana Family and Social Services Administration, Office of Early Childhood and Out-of-School Learning: Indiana's CCDF plan requires unlicensed subsidy providers to complete health and safety training, pass background checks, allow monitoring visits, and meet safe sleep and emergency preparedness standards
- Insurance Information Institute, Home Business Insurance: Standard homeowner's policies exclude liability for business activities conducted in the home, including child care
- Illinois Department of Children and Family Services, Licensing Standards for Day Care Homes: Illinois requires a license for home providers caring for more than 3 unrelated children
- Michigan Department of Licensing and Regulatory Affairs, Child Care Licensing: Michigan requires a license when a home provider cares for 7 or more unrelated children
- Kentucky Cabinet for Health and Family Services, Child Care Licensing: Kentucky exempts providers caring for 5 or fewer unrelated children from licensing; background check required for CCDF participation
- Child Care Aware of America, Child Care in America 2023 Fact Sheet: A large share of home-based providers nationally operate without a state license, relying on statutory exemptions
- U.S. Department of Health and Human Services, 45 CFR 98.43 (CCDF Background Check Requirements): CCDF rules require states to run criminal history, sex offender registry, child abuse registry, and FBI fingerprint checks on all subsidy-receiving providers
- Indiana Department of Child Services, Mandatory Reporting Requirements: All child care providers in Indiana, licensed or not, are mandatory reporters of suspected child abuse or neglect
- American Academy of Pediatrics, Safe Sleep Recommendations: AAP recommends infants sleep alone, on their back, on a firm flat surface with no soft bedding; this standard is referenced in Indiana CCDF health and safety requirements