What Type of Insurance Does a Nonprofit Organization Need?
Nonprofit organizations operate on a tight budget. One unexpected expense could put them in financial ruin. That’s why it’s vital for nonprofits to understand what types of insurance they need to protect themselves against financial perils. In this article, we’ll take a look at 7 key policies every charitable organization should have in place.
The bare necessities:
Most charities will need general liability insurance, worker’s compensation insurance, and directors and officers (D&O) insurance at the very least. This is because, unlike for-profit businesses, charitable organizations are exposed to numerous liabilities stemming from their work and activities. These liabilities include lawsuits from donors and clients who may sue due to negligence or mismanagement. Additionally, a lot of charitable organizations use volunteers to help out with their work. Often times, these individuals don’t undergo the same rigorous screening as employees and can expose the charity to additional risks including property damage, personal injury, and theft.
A general liability policy will cover damages awarded to a client, visitor, or supplier who is injured on the nonprofit’s property. It will also protect the nonprofit if they are sued for advertising damage or if someone is harmed by the organization’s product or service. This policy is commonly referred to as a commercial general liability or CGL policy.
For nonprofits that employ paid staff members, worker’s compensation insurance is required. This coverage will pay for medical expenses and wages if an employee is hurt in the workplace. Additionally, it covers death benefits, rehabilitation, and supplemental income should an employee be unable to return to work after an accident. It is important to note that this insurance also covers volunteer employees, and should be considered as a part of any nonprofit’s overall risk management strategy.
Many nonprofits keep detailed records of their donors and client information. This is why having the right cyber insurance policy is critical. Most insurers offer a standalone cyber policy or a business owners policy that bundles together all main coverage policies.
Any time an employee or volunteer takes a vehicle on the nonprofit’s behalf, it’s important that they have this coverage. This will cover any damage or liability caused by the vehicle, regardless of whether it is owned by the charity or not.
Most nonprofits will sell or donate their products to raise funds. As such, a nonprofit should consider getting product liability insurance in case a customer is hurt by these goods. It’s worth mentioning that this type of insurance is usually not offered by traditional insurers as it’s viewed as a high-risk policy. Nevertheless, there are specialist insurers that will provide this insurance to charities. We recommend speaking with a specialized nonprofit insurance broker to get more information on this type of coverage. what type of insurance does a nonprofit organization need