Although many industries can benefit from tailored policies, mission-driven organizations like non-profits should have customized insurance coverage that mitigates the risks they most typically experience.
While some organizations employ paid staff and others use unpaid volunteer labor to achieve their mission, many non-profits employ both. As volunteers and employees work side-by-side, non-profit business owners, leaders, and strategists should know the important distinctions between insurance coverage for paid and unpaid workers.
Failure to recognize these differences can lead to operational, reputational, or legal risks. More importantly, valued workers may not have the coverage they need when it matters most. This article highlights the essential differences between volunteer and employee insurance coverage.
Our goal is to guide non-profits in Hawaiʻi toward a risk management strategy that works for them and for the benefit of their workers.
What is the Legal Difference Between Volunteer and Employee Insurance?
Volunteer and employee insurance coverages do not apply to workers interchangeably. This means that in certain situations, the wrong type of insurance may fail to cover an employee’s liabilities, resulting in claim denials and out-of-pocket costs.
What this means is that different commercial insurance policies are designed for specific types of employees. Failing to match the policy to the workers according to their classification can leave dangerous coverage gaps.
Volunteer Insurance
Volunteer insurance refers to policies that protect workers who do not receive paid compensation. These workers may work using a formal agreement or a company waiver, but they are not legally considered employees.
This means that any insurance protections designated to protect businesses against employee-related claims, such as workers’ comp insurance, will not protect them if an unpaid worker files a claim.
Employee Insurance
Employee insurance protects individuals who are hired under formal agreements and paid a wage or salary. These employees are protected by employment laws, such as Hawaiʻi’s wage laws, anti-discrimination policies, and workers’ compensation requirements. By accepting salaried workers, non-profits also accept the legal responsibility to make sure their insurance policies protect them.
How Does Workers’ Compensation Work for Non-Profits?
As mentioned, workers’ compensation insurance only applies to paid employees, including coverage for medical treatment and lost wages for injuries. The Hawaiʻi Revised Statutes §386 establish workers’ comp requirements for businesses. Importantly, volunteer workers are usually excluded from workers’ comp coverage, though the coverage can be extended to include them.
Without this extended coverage, volunteer workers would rely on personal health insurance plans to cover injuries or liability claims. Separately insuring all volunteer workers would be expensive and impractical. To close this coverage gap, non-profits should prioritize volunteer accident insurance when shopping for their policies.
These plans soften the blow of medical and legal liabilities in the event of a work-related injury involving volunteer workers. Even limited medical reimbursement can go a long way toward protecting volunteers, lowering risk to the organization, and maintaining a good reputation.
Is General Liability a Concern?
Non-profits in Hawaiʻi know that general liability insurance is necessary to protect the organization from liabilities related to bodily injuries, personal injuries, or property damage during normal operations or public events. Many general liability policies protect employees, but many do not extend this coverage to unpaid volunteers.
This major difference in how insurers treat unpaid volunteers can cause costly coverage gaps that lead to out-of-pocket costs or even legal consequences. For example, a business without additional insurance for volunteers is vulnerable whenever their volunteers work a public event. If a volunteer accidentally hurts a bystander, that event would not be covered for either the individual or the organization.
Local insurance agencies help non-profit organizations expand their general liability coverage to explicitly include volunteer workers. Alternatively, volunteer endorsements can be purchased on top of an existing general liability policy.
How Does Auto Liability Differ Between Employees?
Auto liability carries another essential distinction that non-profits should be aware of since employees often drive company-owned vehicles that are covered by the commercial auto coverage of the business. Some businesses that employ volunteers may also require them to use their own vehicles, which would not be covered by their personal insurance policies while performing business-related tasks.
Non-owned auto liability coverage is an imperative coverage for non-profits that rely on privately owned vehicles. Since not all organizations require coverage for volunteers, most plans do not include it by default. The non-profit is responsible for knowing which of their employees warrants additional coverage.
Partner with an Experienced Local Non-profit Insurance Provider
At Atlas Insurance, our team of experts helps non-profits in Hawaiʻi maintain the right types of coverage for their workers, regardless of whether they are paid employees or unpaid volunteers. Under Hawaiʻi’s labor laws, the employee’s status changes their coverage needs.
Employers and managers must know how to reduce liability depending on the status of their workers. When hosting a public event, hiring new staff, or organizing volunteers, non-profit organizations should not be burdened with potential coverage gaps.
For nearly 100 years, Atlas Insurance has been helping businesses of all kinds in Hawaiʻi to get the right insurance for their needs. Contact our team today to learn how business insurance plans can be customized to minimize risk and maximize coverage, regardless of the status of your employees.