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Insurance Solutions for Nonprofit Organizations


Nonprofit organization volunteering

A nonprofit organization works with various kinds of equipment and it could also be targeted by lawsuits. Having insurance as a form of protection to counter such circumstances will often be the difference between ongoing financial stability and potential bankruptcy.

 

Many insurance companies specialize in products targeted to the needs of nonprofit organizations. Even if such a specialized product isn’t chosen, a non-commercial entity will still need to pick several policies that will offer optimal coverage in the case of an emergency.

 

Why Is Insurance So Important for Nonprofits?

Nonprofit organizations face various kinds of lawsuits, the most common ones being personal injury lawsuits, contract disputes, and employment law claims.

 

All three of those come with serious financial consequences for the organization. Additionally, they can damage the overall reputation of the nonprofit, impact volunteering rates, and lead to long-lasting negative consequences.

 

Nonprofits can also use equipment or own property as a part of their operations. A natural disaster damaging such valuables or destroying them altogether can put a permanent stop to the organization’s activities.

 

Insurance provides security in all of these instances.

 

Having insurance wouldn’t eliminate the risk of an emergency, a natural disaster, or an accident involving one of the organization’s employees. It will, however, mitigate the financial risks stemming from such situations.

 

Types of Insurance for Nonprofit Organizations

Depending on its area of operation and organizational specifics, a nonprofit can choose one of several kinds of insurance.

 

A few of the most prominent and practical options that most nonprofits select include:

 

·         General liability insurance: This type of insurance provides coverage against claims made by third parties for bodily injuries. It’s a must-have for most nonprofit organizations. If your nonprofit works with vendors or contractors, you need general liability insurance. The same applies to organizations that host lots of events, frequented by numerous guests.

·         Property and auto insurance: The purpose of these types of coverage is obvious. Property insurance covers damages or losses affecting buildings, offices, office equipment, or inventory. Auto insurance is very important for organizations that have multiple locations or whose volunteers use vehicles under the name of the nonprofit to do their work.

·         Workers’ compensation: In the event of any nonprofit organization employee getting injured in their line of duty, the workers’ compensation insurance will provide coverage for medical costs, property losses, and other complications stemming from the accident.

·         Professional liability and directors and officers (D&O) insurance: Also known as malpractice insurance, professional liability coverage can be very beneficial whenever a member of the organization is facing a lawsuit. The D&O insurance is specifically designed to offer protection to commercial organization and nonprofit leadership.  You may think that corporations will benefit from such insurance more but you’re wrong. Insurance Information Institute statistics suggest that out of all companies dealing with D&O claims, 58 percent are NPOs.

 

These are the most prominent kinds of insurance that the majority of nonprofits will benefit from. A few more specialized insurance options that could still be a good form of protection for some NPOs include:

 

·         Product liability insurance (especially if the organization sells products to generate funds for its causes)

·         Health insurance

·         Cyber liability insurance

·         Crime coverage

·         Employment practices liability insurance

 

A Guide to Choosing the Right Insurance Option for Your Organization

Which types of insurance should you choose for your NPO and what’s an adequate coverage amount? To answer these questions, you’ll need to go through several important considerations.

 

Your Nonprofit’s Area of Operation

Does your NPO build homes for people who lost everything in a natural disaster or is it focused on helping children with learning disabilities? The work that you do is the first factor that will determine the kinds of insurance that are an absolute necessity.

 

Nonprofits that help children or offer other kinds of social services will need general liability and professional liability insurance, property insurance, D&O coverage, workers’ compensation insurance, and business interruption insurance, to name a few.

 

A nonprofit rehab center, on the other hand, may need insurance policies that fall into these categories: general liability, professional liability, workers’ compensation coverage, abuse and molestation coverage, cyber liability insurance, and others. As you can see, some operational specifics can create certain risks that aren’t necessarily applicable to other kinds of NPOs.

 

Understand Common Risks

This one is an extension of the previous consideration and it revolves around risks. Your NPO’s niche results in particular risks that have to be mitigated.

 

Some risks are posed by individuals like volunteers and employees. The most common ones include being the victim of sexual abuse while working for the NPO, sustaining injuries, or being subjected to discrimination. All such employees and volunteers could file claims against the NPO or decide to go to court – major risks that have to be taken into account.

 

Other typical risks include auto accidents, data privacy breaches, or claims pertaining to fundraising methods.

 

Don’t Count on Just General Liability Insurance

There’s a common misconception that general liability insurance is enough to offer nonprofit organizations enough protection. That’s not the case.

 

General liability insurance covers only basics like premises and operations. Depending on the types of property and inventory owned by the NPO, some assets may not even be covered under such a policy.

 

When in Doubt, Opt for Umbrella or Excess Liability Insurance

Umbrella coverage is always a good idea, as it ensures an added layer of financial protection.

 

The umbrella policy extends the coverage of a general liability policy in the event of significant medical expenses, damages, or attorney fees in the event of a lawsuit. Commercial umbrella insurance costs approximately 40 dollars per month for each one million dollars of additional coverage, which makes it a budget-friendly safeguard choice for NPOs.

 

Consult a Knowledgeable Professional

Talking to someone who specializes in NPO insurance will help you determine the kinds of coverage and the amounts of insurance that make the most sense for your organization.

 

An organization that doesn’t generate profit should never just choose the cheapest insurance on the market. That’s a recipe for disaster in the long run. Insufficient coverage will ultimately lead to significant expenses in the event of property damage or a massive lawsuit.

 

If you need some help to make sense of all the options, contact us now. Our knowledgeable team members will respond to your inquiry in a personalized way, helping you identify the insurance products characterized by the best price-to-quality ratio.

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