Americans are very generous. On average, each American household donates approximately $400 to charitable organizations each year. These groups work hard for the betterment of society. Just like any business, however, charities do not operate without risks. Fortunately, they can be protected by business insurance plans designed specifically for organizations that operate under a charitable business model.
Statistics about U.S. Charity Groups, 2008
- In 2008, about 63.4% of all non-profit organizations were public charities
- There were 974,337 public charity organizations in the U.S. that year
- This was an increase of 63.4% since 1998
- Of these charities, 231,625 groups had gross receipts exceeding $25,000
- There were also 70,480 private foundations in the U.S. that year
- This was increase of 63.6% over 1998
What Is a Charitable Organization?
While all charities are non-profit businesses, not all non-profits are charities. Charitable organizations center on philanthropy or serving the public’s interest or well-being. These groups can include educational, religious and fundraising groups as well as foundations. In the United States, most non-profit organizations pay taxes, but charitable organizations are exempt.
Some charities operate as private foundations. These private groups generally receive outside funding through a benefactor such as a person, family, group or corporation. Public charities generally operate on grants from the government or from private foundations. The groups may not fit the typical business model, but they are still businesses and need to be insured accordingly.
What Kinds of Insurance Do Charities Need?
Like any business organization, charitable foundations need to protect assets and finances with a suitable business insurance policy. Charity insurance policies are designed specifically to meet the unique coverage needs of these groups. If you own or run a charity, it's a good idea to be sure that you are fully covered for losses and damage. Some coverage options to consider include:
- Liability insurance
- Property insurance
- Directors and officers insurance
- Other business-related insurance
Be Sure to Have Sufficient Charity Liability Insurance
We live in a litigious society. It is therefore very important that businesses, including charities, are protected by adequate liability insurance. Some liability insurance that may interest charities includes:
- General liability insurance: This will provide your organization with coverage, including compensation for court costs and legal fees, when you face a lawsuit for liability, like a personal injury or property damage case. This can happen if a third party is injured while in your offices or if members of your organization damage another’s property while setting up a fundraiser, for example.
- Charity event insurance: Also known as special-event insurance, a charity event insurance policy provides coverage for a single event. The more people that will be in attendance, the more a policy will cost. This insurance provides liability coverage if a guest at the event is injured or if the venue is damaged in any way throughout the course of the event. This coverage may be required by banquet halls or ballrooms in which your event is sponsored.
- Commercial vehicle insurance: If your charitable organization uses a company-owned vehicle or a fleet of vehicles, they will need to be insured to meet your state’s minimum liability coverage requirements. This will protect your organization if an employee is responsible for a motor vehicle collision that causes injuries or property damage to a third party.
- Non-owned or for-hire vehicle insurance: If members of your charity routinely use their privately-owned cars to do business or volunteer work for your organization, the charity can be held liable if they cause bodily injury or property damage to another. Non-owned vehicle insurance can provide liability coverage whenever privately-owned vehicles are used for work-related purposes for your organization.
Charitable Organizations Need Property Insurance
Your charity may have a lot of valuable property including computers, telecommunication systems, office furniture and supplies. If this property were to be lost or damaged in a catastrophe or burglary, you could receive compensation for these losses through charity insurance property coverage.
When you purchase your policy, you will want to be sure that you are purchasing enough coverage to allow you replace all your lost items in the event of a total loss. Many plans will allow you to purchase coverage at your items actual depreciated value, or you can pay more for replacement-value compensation.
Some specialty items, such as custom-made equipment or expensive electronics may require an additional rider in order to be fully covered under your insurance plan.
Directors and Officers Insurance Protects Your Charity
Charitable organizations and private foundations typically operate under the management of a board of directors. The members of these boards often work for free or for a nominal fee. It is important to be able to attract talented and well-connected board members to help with fundraising. This will be easier to accomplish if your organization carries directors and officers insurance.
Many people think that that those who work for a charity would not be likely to sue their employer. This is not the case. Directors and officers insurance can protect your charity’s management team from claims of improper actions such as sexual harassment, discrimination, wrongful termination or misuse of the organization’s funds.
Even if the claims are frivolous, the necessary legal fees to build a defense can often be very high. It's a good idea to make sure you can weather any financial storm with the right insurance in place.
Other Insurance Options for Charitable Groups
Charity insurance policies offer additional coverage options. Some insurance your charitable organization can benefit from includes:
- Fidelity insurance: This will shield your organization from financial losses brought on by the dishonest or illegal actions of an employee or volunteer. This includes coverage for embezzlement, theft or deliberate misappropriation of funds.
- Loss of income insurance: If your organization is forced to temporarily stop operations because of a covered event such as a fire, this insurance can provide you with a continuation of income so that you can pay your scheduled monthly bills. Most policies limit this coverage to one year.
- Workers compensation insurance: If a worker or volunteer is injured while working, your organization will be responsible for covering any ensuing medical costs. Workers compensation insurance can be purchased through your business insurance plan and will provide coverage for these expenses.
Learn More About Insurance for Charities
Shopping for insurance for charitable organizations can often be confusing. It's a good idea to build a policy that is right for the unique needs of your organization, just be sure that you are not paying too much for coverage.
When you're looking for the best charity coverage for your organization, it's a good idea to find a trusted:
- Lawyer, to make sure you're in compliance with state and federal requirements, and that your liability risks are identified
- Financial advisor/CPA, to make sure that you understand how to budget for enough coverage, and that you can plan for fundraising activities understanding how much your overhead costs will be
- Insurance agent, to advocate for you, update your policies, and cover special events, volunteers, etc.
When you consult with experts, you'll get a better picture of what's required of you. But your search won't end there. It's highly recommended that you seek out at least 3 quotes for similar coverage from different insurers before you buy. With precious funds at stake, it's important to get a bigger picture of what charity insurance costs, and what that investment is going to do to help your organization succeed.