5 Reasons Small Nonprofits Should Seriously Consider Workers Compensation

Insurance purchases for small nonprofits are often driven by contractual or some other requirement. One of the final coverages to make its way into a nonprofit’s risk management plan is workers compensation.  Unfortunately, it can be one of the most expensive coverages, but it can also represent protection against even greater expenses.

Photo Credit: kenteegardin via Compfight cc

Photo Credit: kenteegardin via Compfight cc

Why small 501c3s should not wait

While it’s easy for me to get caught up in a new client’s dismissal of workers comp due to the small size of the nonprofit or some other reason, I have to fight through my prospective client’s rebuttals. and at least recommend strongly that a nonprofit – even a small one – consider including workers compensation in their risk management and insurance program.

A few reasons why:
  1. Legal Requirements: In the State of Georgia, any business is required to have workers compensation if there are three or more employees, including corporate officers.  Nearly every nonprofit fits this description since most nonprofits have a couple corporate officers. If there is, then, one employee, it can be considered a legal requirement to carry the coverage. Many other states have similar statutes.
  2. To Pay for Expensive Employee Injuries: Factor in medical bills and potential disability or even death benefits, bills can mount quickly. In most states, the employer is responsible for paying for worker injuries regardless of whether coverage is in place. It doesn’t matter how many employees you have or, sometimes, if they are 1099s or not.  If there’s an injury, the employer is responsible. If there’s no coverage, the costs comes out of the organization’s pockets somehow, someway.
  3. To Create a Culture of Care: This reason can border on the touchy-feely, but stick with me here. If your nonprofit was created to serve, care for, or otherwise create positive change, why would you not want to be circumspect in making sure you were able to care for the employees that actually enact your mission? As the leadership cares for its employees, the employees care more for others.
  4. To Allow for Planning for the Unplannable:  Workers compensation is just another insurance coverage that represents a planned expense to help you combat an unplanned catastrophe. If your workers comp premium represents a $1,000 a month expense, you can plan for it. It’s hard to budget for an unplanned severe employee injury.
  5. To Qualify for Better Rates: Oftentimes a nonprofit calls me to purchase workers compensation due to a contractual requirement. If they’d never had coverage, then we are extremely limited in our options. If a small nonprofit takes out workers comp early, then when the payroll grows, that nonprofit has a better chance for qualifying for better rates. If you start late, with higher payrolls, your NPO might have to start in an assigned risk or other state insurance pool. These options come with high price tags.

There are more reasons, but those are enough for now.

The fact is that workers compensation causes much stress in the lives of nonprofit executive directors, CFOs, Treasurers, and other leaders. The coverage can be a big expense. I hope the reasons above are a helpful reminder why the expense might be worth it.

Questions (respond in the comments):
  • What are reasons you have or have not purchased workers compensation?
  • What is the single most annoying thing about dealing with comp?
If you have questions about this blog or other insurance topics, please send them to me via email, Twitter, Facebook, or LinkedIn (use the buttons in the sidebar). You can also click on ‘Request for More Information’ and connect that way. 

 

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