Yes your insurance company needs to know. Your home policy will not cover the daycare toys, equipment, supplies or any liability should one of them be hurt. You need to inform them and get at minimum a rider put on your home policy that says you have a daycare and states how many children are covered and for what - with some it is only 2 or 3 kids too. You can then add the business and get a home business policy added - a lot cheaper than a separate business policy. This will cover the 5 children in most cases. State Farm and Cooperators will cover 5 children. Allstate will only cover 3. Not sure about some of the smaller private firms but be sure to get the number of children in writing as it may not be five and also if your own children are included in the count of 5.