As nonprofit organizations struggle to balance their missions against their budgets, they often feel as though they have a twin-size sheet for a king-size bed.
Grants and private contributions are fewer and smaller, and public funds are short. Meanwhile, the needs that these organizations respond to are as great as ever, and often increasing.
Nonprofits have learned to economize: cutting overhead where possible, using more volunteers to extend their human resources, and even merging with organizations that have a similar mission.
Nonprofits also can look to their insurance and risk management expenses to economize by preventing future expense increases. But few nonprofit leaders are aware of how to do so. Insurance agents are in the best position to let nonprofits know about an innovative way to be efficient with the insurance and risk management budget:
Prevent claims to hold down premiums
Accidents will happen. A general liability insurance claim arising from an incident involving a nonprofit’s volunteer can drive up the organization’s GL premiums in subsequent years. Likewise, in states where volunteers can be covered by workers' compensation, a volunteer’s injury can have a similar effect on workers compensation premium and experience modification factor.
These increased insurance expenses, as well as any deductible expenses, can make that twin-size sheet seem even smaller to the nonprofit organization.
By contrast, agents can advise nonprofit organizations of an alternative approach that puts claims in different places (and thus helps keep GL and WC insurance premiums from increasing). This approach involves using alternative coverage for volunteers. The nonprofit might, in fact, be better off not relying on its GL policy or workers’ compensation policy to insure volunteers.
Shielding GL and workers' comp coverage
Here are two strategies for agents and brokers to consider as ways to shield a nonprofit’s general liability and workers compensation policies against potential claims:
- A volunteer liability policy can help prevent claims against the general liability policy, should a volunteer injure someone or damage someone’s property while volunteering. Experience shows that if the injured party knows that adequate coverage is available through the volunteer liability policy, a claim against the organization’s GL policy is much less likely than it would be otherwise.
- A volunteer accident medical reimbursement policy can be an attractive alternative to workers’ compensation coverage. Although it is not a true “apples to apples” comparison, the available limits and policy conditions of an accident policy can make it an acceptable alternative to the expense of workers’ compensation coverage.
While an agent must consider the ramifications for each circumstance, these strategies can protect the organization’s GL and workers' comp coverage, potentially providing a much better overall cost profile for the nonprofit. The cost of volunteer liability and accident policies can be a manageable one even for nonprofits on tight budgets.
Additionally, a volunteer liability policy and an accident policy fill important gaps that exist with general liability and workers’ compensation policies: They protect volunteers from the time they leave home until they return home.
Preventing claims in the first place is the best way to keep insurance costs low. But since accidents do happen, helping nonprofits allocate claims to the most appropriate, cost-effective coverage is a step in the right direction. The agent or broker who provides progressive thinking and solid alternatives can help the nonprofit devote more of its scarce resources to its mission.