Workers Compensation Insurance for Nonprofits

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Workers comp can be a confusing topic and a difficult type of policy to find for a nonprofit. If you have questions that this post doesn’t answer, please reach out. My contact information is on my about page. We are licensed in most states and have access to workers compensation carriers with programs specifically for nonprofits.

Workers Compensation is vital for nonprofits and social service organizations with employees.  Many nonprofits avoid the coverage, but in the end, it can be a vital protection of your nonprofit’s corporate assets.

If you are a foundation or other office-only nonprofit, it’s a pretty simple coverage to procure.

If you’re out on the front lines doing the stuff, then you will have a much harder time finding cost-effective coverage for a few reasons. Try not to be discouraged by this, but make sure to budget for it!

Employee Injury Workers Comp

Workers comp pays if an employee gets hurt at work. Period. Photo Credit: Curationpics via Compfight cc

I’m a Georgia insurance agent. Workers Compensation is a very state-specific coverage. It depends on state laws to determine how the coverage will pay benefits to injured workers. You’ll need to discuss your 

What follows is a general discussion of how Workers Comp works for nonprofit organizations.  So pour a cup of coffee because, well, you might need it. Workers Comp ain’t clowns and jugglers after all.

The Purpose of Workers Compensation

Workers Compensation came about around the beginning of the 20th century to respond to the problem of worker injuries. Before workers compensation, a worker had to prove negligence on the part of the organization or company. This was, at that time, terribly hard to do.

Legislation passed that said, more or less, that any injury during work hours would be covered by workers compensation benefits. The cause of the injury was irrelevant. If you’re on the clock and you get hurt, workers compensation is the go to coverage to address the costs of the injury.

One of my clients had an incident where a worker’s eardrum burst because another coworker threw one of those poppers (AKA Bang Snaps)  at her. They were being stupid and not working, but it was during work. Consequently, the claim was paid.

Needless to say my client was not just a little ticked off. He was fuming. His rates eventually would be affected.

The purpose is to provide medical expenses and disability for employees who are injured at work, regardless of how the injury happens.

Who Benefits from Workers Compensation?

It seems at first blush that only the employee benefits from this coverage. This is true in that they receive the direct benefits. But the ultimate beneficiary is the corporation.

If the coverage isn’t in place, then the corporation has to fork over the funds according to the legal requirements and pay structures set up by the state. Workers Compensation provides a way to plan for an expense. If an employee is injured, the cost could be insurmountable were coverage not in place.

Special Workers Compensation Considerations for Nonprofits and Social Service Organizations

In most ways, workers compensation is the same for nonprofits as it is for for profit businesses. The application of the legal requirements is the same, regardless. But there are some special considerations that social service organizations need to be aware of.

  1. Availability: Service organizations have limited workers compensation options. In Georgia, I’ve seen insurance markets for nonprofits dwindle greatly–especially for new nonprofits. When you’re shopping for coverage, it’s a good idea to find an agent who is familiar with nonprofits. If you can be placed with a standard company, do your best to maintain that coverage. Pay on time. Include safety training and driver training in your best practices.
  2. Cost: This dovetails with availability. The rate per $100 of payroll for the two main nonprofit class codes is minimally $2.50 up to over $5.00 or $6.00 if you have to go into a state’s assigned risk pool. It is not an inexpensive coverage if you have a lot of payroll. Be forewarned and budget appropriately. (click here for 6 workers compensation cost cutting tips
  3. Subcontractors/1099s:  Many nonprofits use independent contractors to perform counseling and social work. Honestly, there are times when these nonprofits need to sack up and convert these to W2s (not always, but often). You WILL have to pay workers compensation premium for these subcontractors. Auditors will ferret out that payroll. Also, if they get injured on your watch, it will normally be on your organization’s dime. 
  4. Volunteers: This one is tricky. Typically, volunteers will not expect workers comp to cover them if they get injured. There is some legal precedent for a volunteer’s injuries paid for by workers compensation, though. I often recommend a volunteer accident policy to help mitigate this risk–it will help shield your organization from possibly having to dip into the workers compensation for minor incidents (and to prevent the cost of attributing ‘estimated payroll’ for volunteer hours–a cost, though, that might be worth it). Volunteer coverage is also determined by state laws variously, state by state

What Should You Do?

Each organization is different. Social service organizations can be everything from a small counseling practice to a large residential facility for adults with developmental disabilities to a humane society or animal shelter.

Your best bet is to consider the human resources that provide your labor and discuss with your insurance agent. Ask him: ‘How can I best address potential injuries to the people who provide their time, energy, and sweat to make my organization work?’

It’s always best to make sure you are prepared to pay for employees, 1099s (who don’t have their own coverage), and even volunteers. This might be a big chunk of budget, but it’s a fiduciary duty on the part of the executive and board leadership.

I’d Love to Hear Your Thoughts in the Comments

  • What questions do you have about nonprofit or social service workers compensation?
  • How are you currently addressing your labor injury issues, both via insurance options and other risk management tools?
  • How difficult or easy has it been for you to find and keep affordable workers compensation?

Comments

  1. Debbie munsell says:

    I work for an animal rescue non profit. They want me to sign a release of liability. Do they still need work comp insurance and if i sign it and get injured does it cover me.

    • Brett Cohrs says:

      Hi Debbie,

      There’s a lot of “it depends” in that scenario. Feel free to fill out my “request for more info” and we can swap emails about your situation.

  2. Christina Johnson says:

    I am working on opening a non profit no kill dog shelter in Colorado State, and i am doing this from the ground up with no money and hoping on help from fundraisers, donations, go fund me etc. So im trying to get as much knowledge as possible on insurances, workmans comp, 501 c 3, D & O insurance etc. And im asking for funds for these as seed money to get started.
    Can you suggest anything to help me? Or help me with the costs of these necessary coverages so that i can at least show i know a little something?
    This is such an important cause and so needed here in Pueblo, Colorado. So any help and advice would be so appreciated.
    Thank you,
    Christina Johnson

Trackbacks

  1. […] Employees: Your employees, if named, have coverage under the GL policy. As for their injuries, that’s what Workers Comp is for. […]

  2. […] Workers compensation is governed very specifically by state code. I would recommend you discuss this option with your agent. […]

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