Insurance Policies to Reduce Nonprofit Risk
Insurance is a critical part of operating any nonprofit organization, and it goes beyond just having the insurance policies that nonprofits are legally obligated to hold. Insurance is all about assessing risk and mitigating the risk to your organization should any issues arise.
Nonprofits engage in diverse activities, so there is no one-size-fits-all type of insurance. Each policy comes with its own set of exclusions, and various policies or riders might be necessary to cover the full scope of needs for your organization.
Your insurance agent is an important part of your nonprofit team who can help you assess risk and put the right pieces in place to reduce that risk. That means you need to keep your insurance agent updated as your organization grows, changes, and adds new activities. If they don’t know the full scope of your organization’s work, they can’t advise you on the insurance needed to protect the organization plus the board and employees. Make a plan together for how you will keep your insurance agent up-to-date, whether that means regular reviews of your coverage and activities, adding them to your newsletter list for programming updates, or simply calling them whenever programming or staffing changes occur.
There are many types of insurance that your agent may recommend, and it is good to be familiar with what they are and what types of situations they cover. In some cases, specific insurance types below may be covered under general liability or as a rider on your primary policy.
D&O insurance
Directors and officers’ insurance protects the personal assets of your board members if they are personally sued in conjunction with activities of the organization. Keep in mind that this policy only covers defense of your board members and does not cover your organization suing someone else.
General liability insurance
General liability insurance can pay for incidents and accidents that happen on your property or during your organization's activities. General liability policies typically protect visitors, vendors, participants, and others who interact with your organization. Two common examples of what’s covered under this type of insurance are slip-and-fall accidents in a parking lot or a dog bite while a volunteer is making a delivery for your organization.
Event insurance
Event insurance can cover incidents that happen during an off-site event held by your organization. It is important to understand what level of insurance the property owner and any vendors hold and what types of incidents your policy will cover.
“It is important to understand what level of insurance the property owner and any vendors hold and what types of incidents your policy will cover.”
Property insurance
Property insurance can cover damages to property owned by the organization, as well as loss of income caused by those damages. If your organization rents office space, you may need renter’s insurance rather than property insurance. Maintaining a current asset list is important for replacing what is lost.
Auto insurance
If your staff or volunteers are driving anywhere on official business for your organization, be sure you have auto insurance. This is important in case an employee is injured or injures someone else in an accident.
Workers’ compensation insurance
Workers’ comp insurance covers medical expenses, lost wages, and rehabilitation to employees injured while on the job. It can be applied to both employees and volunteers who are treated as employees. Be sure your insurance agent understands the roles of those who work in and for your organization.
Unemployment insurance
Legally, a nonprofit doesn’t need unemployment insurance unless they have four (or the equivalent such as 8 part-time) employees. However, if a former employee files for unemployment compensation from your organization, you may find you still want it even if you have fewer than four employees.
Cyber security insurance
Cyber security insurance covers any losses associated with a data breach, including employee or donor private information, as well as any hacking or extortion attempts related to sensitive organizational information. With this insurance, you would be compensated for financial losses due to interruption of services or equipment damage.
With so many types of insurance to navigate, it’s important that you have a good ongoing relationship with your insurance agent. They can advise you on what levels of coverage you need for regular programming and special events and help ensure coverage remains adequate as your organization grows and changes.
