Mandatory vs Optional
Mandatory participation by all participants under an Accident policy is superior to optional participation by some participants.
Most Accident policies covering sports and recreation organizations require a premium to be paid on behalf of and coverage to be extended to all participants. Since most Accident coverages are excess or secondary, mandatory participation by all participants results in a representative spread of participants whether or not they are covered by family health insurance.
On the other hand, some Accident policies covering sports and recreation organizations allow each participant or his or her parent to elect whether or not they want coverage. Optional participation results in adverse selection against the insurance carrier since only those who don’t have existing family health insurance will normally opt to purchase Accident coverage.
Because most of the participants purchasing coverage under an optional participation plan don’t have existing family health insurance, the Accident policy will be paying most claims on a primary basis, which will be very expensive for the insurance carrier.
As a result, optional participation Accident policies tend to be very expensive and often unaffordable. In order to make them more affordable, the insurance carrier will water down the benefits by either lowering the medical limit or inserting internal payout limitations or sublimits.
Watered-down benefits under Optional participation Accident policies don’t adequately cover medical bills in the event of a moderate to serious injury. If all the medical bills of the injured party are not paid, the result can be a lawsuit against the sports organization in search of a deep pocket.
In addition, many General Liability carriers that cover sports organizations require that Excess Accident Insurance is carried on all participants on a mandatory participation basis. Otherwise, General Liability coverage can be voided in the event of a participant injury lawsuit.