While nonprofits focus on different aspects of business than traditional companies, they are still businesses that can be at risk of liability and property loss. As such, they need to protect themselves with the same types of insurance that other companies do. A good insurance agent or broker will help to determine a nonprofit’s specific needs and exposures. They will then compare costs and coverage options with other companies to find the best deal on the right insurance policies for the company.
Some of the key types of insurance that nonprofits need are general liability, directors and officers (D&O) and commercial auto. These policies cover a range of incidents that can occur to the organization, its employees and volunteers and third party stakeholders such as donors and clients.
Liability insurance is the most important type of policy for nonprofits, as it protects the charitable company from claims that could be made against it. This can include claims such as injury, property damage, false advertising and slander. The coverage will typically pay for legal defense and settlement monies up to the limit of the policy.
If a nonprofit has an employee, then a workers compensation policy should be purchased. This is a requirement in many states for all employers and can protect the company from lawsuits resulting from workplace injuries. It also covers the cost of any rehabilitation or medical expenses that may arise as a result of an accident or illness.
While it is rare for a charitable company to have large assets, they can be susceptible to unforeseen events such as theft or fire. A commercial property insurance policy will provide a means to replace the company’s furniture, fixtures, office equipment and inventory. It will also cover the cost of any repairs or rebuilding due to an incident such as a natural disaster or vandalism.
Nonprofits that sell any products as a way to raise funds will need product liability insurance. This policy will protect the charity against lawsuits from customers who claim that they suffered loss or injury due to a particular product. It will pay for a legal defense as well as a significant portion of any judgment or settlement awarded to the customer.
Some insurance agents or brokers offer a bundle policy for nonprofits that includes all the main coverage policies. This can be much more cost effective than purchasing individual policies. However, it is important for a non-profit to understand the scope of each policy and not just look at the bottom line. It is also a good idea to discuss the needs of the organization with an independent insurance adviser. They will be able to evaluate the risks and provide a more comprehensive overview of the available options. They can also cross-reference costs with other companies in the same vertical, benchmark the policies against other nonprofits and review claims history and risk tolerance to ensure that the proper coverage is being offered at the best price. do nonprofits need insurance
