Any large unexpected expense could lead to financial ruin for nonprofit organizations, given their shoestring budget. Getting the right type of liability insurance can protect against the biggest risks. One of the insurance coverage options that nonprofit organizations should consider is workers’ compensation coverage.
What Is Workers Compensation Coverage?
Workers’ compensation coverage, governed by state law, is a type of insurance that offers medical benefits and wage replacement for employees who are injured or become ill during employment, whether at your office, during a work-related errand, while traveling for business, while attending a function or in other similar work-related situations. In exchange, the worker gives up the right to sue you for the tort of negligence as the employer.
Workers’ comp plans differ among jurisdictions. Provisions can be made as reimbursement of medical expenses, functioning as a form of health insurance, as benefits payable for employees who die on the job, functioning as life insurance, or as weekly payments in place of wages, functioning as disability insurance. However, general damages for pain and suffering as well as punitive damages are typically not covered for nonprofit negligence.
If You Have Employees
You might rely heavily on your volunteers, but you might also employ some true employees that you pay wages to. Under the workers’ compensation system, you are required to purchase this insurance if you have any employees.
Any individuals who are compensated for their services at nonprofit organizations should be covered under workers’ compensation by law.
If You Have Volunteers
Although your volunteers might not be paid wages, from the perspective of workers compensation, they might in fact be considered workers. However, if they are truly volunteers, then they do not need to be covered by workers compensation. Because workers’ comp is a state-governed program, the laws vary widely on the issue of the insurability of volunteers. Some states will not allow you to purchase workers’ compensation coverage for any of your volunteers, some will make it mandatory, others will specify the different types of volunteers that must be covered, and others still may allow nonprofit organizations to make the distinction and provide workers comp for volunteers at their own discretion. Make sure you do your research and assess the situation accordingly.
What about Volunteer Accidental Coverage?
Workers compensation coverage can be expensive, based on the number of people being covered. If you are not, by law, required to provide this insurance or cannot cover your volunteers under workers’ comp, then a more cost-effective but less broad option to consider is volunteer accidental coverage. This policy is often preferred by insurance companies because volunteers’ roles and duties can be undefined and variable, it can be difficult to determine a reportable wage, volunteers aren’t subjected to the same laws as employees, and most nonprofit organizations don’t have handbooks for volunteers that outline acceptable safety and behaviour.
Volunteer accidental coverage is the next best thing to workers’ compensation coverage when it comes to protecting your loyal and hard-working volunteers in the event that they’re injured. It may cover accidental medical, disability, dismemberment, and death, while only costing your nonprofit between $100 and $400 a year; however, there is a dollar limit.