Are Nonprofits Exempt From Workers’ Compensation Insurance?

For most businesses in the for-profit sector, workers’ compensation (WC) insurance is required by law. But what are the guidelines for nonprofit organizations? Here, we’ll take a brief look at WC insurance and how it may or may not apply to your nonprofit clients.

Are Nonprofits Required to Carry WC Insurance for Employees?  
Unfortunately, there isn’t a one-size-fits-all set of rules when it comes to nonprofits and WC insurance, as every state has its own requirements and regulations. However, whether a nonprofit is required to provide WC insurance for its staff and volunteers is dependent on two main factors: the state in which the organization operates and how the business is structured. 

State Requirements
Depending on the state in which a nonprofit operates, the entity may be exempt from carrying WC insurance. For this reason, organizations must understand the WC laws and specific exemptions in their state when considering WC insurance for their employees.

Most states base workers’ compensation insurance exemptions for nonprofit organizations on a variety of factors, including the type and number of workers employed, how the organization is classified, the amount of wages earned, and the number of hours worked.

For example, nonprofits in some states are only required to carry workers’ compensation insurance if they have five or more employees, while other states require coverage for all employees employed by an organization, regardless.  

What About Volunteers?
Many of the same state-specific considerations for paid employees also apply to volunteers when determining whether WC insurance is required or even allowed for nonpaid workers.

In general, nonprofits that utilize volunteers are typically not required to provide WC coverage because the volunteers are not being paid. However, as noted previously, rules will differ from state to state. For example, one state may recognize volunteers as employees based on the number of hours worked, making them eligible for WC coverage, while another state may not recognize volunteers as employees in any capacity, making them exempt from getting coverage under a WC insurance policy.

The rules that apply to nonprofits regarding WC coverage can be difficult for organizations to navigate. For this reason, it is important to work with your clients to understand these challenges and select the coverage they need based on state-specific rules and their individual risk exposure.

About Charity First 
The incredible services nonprofits provide come with unique and complex risks that are part of their everyday work in serving the elderly, children, and other vulnerable populations. That is why Charity First is committed to providing our retail partners across the country with best-in-class underwriting, consistent and responsive service, and risk management services that include workers’ compensation insurance, general liability insurance, and accident insurance for volunteers and participants.

To learn more, please contact us at 800-352-2761 or