I think the answer is going to different based on what insurance companies you ask.

The extra $1000 premium, is the commercial liability insurance, if i understand correctly. As it was explained to me by an insurance rep, if you are operating your daycare as a registered business, with legit receipts, contracts etc, then this is the proper insurance you should have. Some companies do not offer it.

If you are a more casual DCP, and you take care of a just a few kids, and don't operate so much like a business, you will be fine with an insurance rider, as i understand it.