Though nonprofit organizations have some key distinctions from other businesses, they still face many of the same common hazards on a daily basis. Nonprofits aren’t immune to risks like theft, cybercrime, or even lawsuits, so it’s critical for them to be equipped with the proper coverage. Fortunately an independent insurance agent can help you find the right nonprofit insurance to protect your organization. But first, here’s a deep dive into this important coverage.
What Is Nonprofit Insurance?
Essentially a special form of business insurance, nonprofit insurance is an agreement between the nonprofit organization and an insurance company in which the insurer agrees to cover financial losses relating to damages and liabilities that befall the organization. Only the specific perils stated in the policy will be covered by the insurance company, however. Nonprofit insurance is designed to help nonprofit organizations stay afloat, should disaster strike.
Who Needs Nonprofit Insurance?
Nonprofit organizations are mostly like any other organizations, with one major difference: They don’t turn a profit. This type of organization has been granted tax-exempt status by the IRS, which requires them to have a unique form of coverage. The following are common examples of nonprofit organizations that require special coverage:
- Federal credit unions
- Charitable organizations
- Scientific organizations
- Amateur sports associations
- Public safety testing organizations
- Religious organizations (e.g., churches)
- Social welfare groups
- Politically motivated groups
- Rotary clubs
- Volunteer fire stations
- Labor unions
- Agricultural unions
- Social and recreational clubs (e.g., country clubs)
This is not an inclusive list of non-profit organizations. Your independent insurance agent can help you determine if your organization needs nonprofit insurance.
Why Do I Need Nonprofit Insurance?
Just like other kinds of organizations, nonprofits face numerous common perils. In order to keep your organization protected, it needs coverage tailored to address the specific possible risks it’s up against on a routine basis.
Nonprofit organizations need protection against the following:
- Lawsuits and liabilities
- Employee misconduct
- Volunteer misconduct
- Cybercrime and data breaches
- Auto accidents
- Property damage
- Natural disasters
- Event-related mishaps
- Professional errors
- Worker injuries and illnesses
Once again, this list of common nonprofit organization hazards is not inclusive. Talk to your independent insurance agent at length about all the responsibilities of your nonprofit organization to ensure the best possible chance at getting set up with all the coverage you need in every area.
What Types of Coverage Do Nonprofit Organizations Need?
Nonprofit insurance is designed to protect organizations against all types of threats. Your policy will include the basics of business insurance coverage, with several coverages tailored specifically to your nonprofit added on. The more risks involved in your unique organization, the more coverage you’ll need, but here are a handful of commonly selected coverages in nonprofit insurance packages to start off.
Your nonprofit insurance package can be assembled from a combination of the following coverages:
- General liability: This coverage protects you against property damage or injury claims made by a third party.
- Property Insurance: Covers loss of or damage to your physical property, including your nonprofit’s office building and often any supplies inside it. Protected mishaps include fires, storms, and more.
- Commercial/business auto: Provides protection for any company vehicles against things like theft, vandalism, and damage from natural disasters. If your nonprofit runs events away from its home office or makes any kind of deliveries, you need this coverage.
- Cyber liability: If your nonprofit’s computer system is compromised, sensitive or personal data may be stolen and even sold to third parties. Aside from having to pay to clean up your network’s security, your organization could also face a lawsuit. This coverage protects against financial and legal ramifications following a cyberattack.
- Premises liability: This coverage protects against costs associated with third-party injuries and property damage sustained on your organization’s premises, or in other words, in or around your office. Common injuries include slips and falls.
- Professional liability: Also known as "errors & omissions insurance," this coverage protects against claims made by customers or clients who suffer financial loss due to the work they've hired you for. This coverage is absolutely crucial for nonprofits that provide any kind of counseling services.
- Employee practices liability: Covers legal fees in the event your nonprofit’s employees are involved in harassment cases against coworkers or the public.
- Crime insurance: Covers instances of employee theft from the organization.
- Workers’ compensation: If your employees become ill, get injured, or die from a work-related incident, this aspect of the insurance will cover the financial ramifications. Coverage is mandatory in most states.
- Life/health coverage for volunteers: These insurance products are alternative forms of workers’ comp coverage designed to protect volunteer workers from illness, injury, or death.
- Event insurance: Protects against potential mishaps related to events sponsored by the organization, including having to unexpectedly cancel an event on short notice, or causing property damage to the event site.
Your nonprofit insurance package will be assembled by selecting the coverages that work for your unique organization from a long list of available options. Coverage applies to everything from property damage to potential legal/court fees and beyond.
What’s Not Covered by Nonprofit Insurance?
While nonprofit insurance provides coverage for many potential sources of harm for these organizations, it doesn’t cover everything. While exclusions may vary by policy and the type of coverage required by your specific organization, there are a handful of commonly non-covered perils under nonprofit insurance, including:
- Intentional harm
- Regulatory/statutory penalties
- Employee dishonesty
- General wear and tear of equipment, etc.
- Routine maintenance fees
- Earthquake damage
- Nuclear reaction and war
- Temperature/humidity changes
- Inexplicably lost inventory
- Flood damage*
*If your nonprofit organization is located in an area prone to flooding, such as along the coast, you’ll most likely want to purchase additional flood coverage for your premises, or you may even be required to have it by your mortgage lender. Your independent insurance agent can give you more information about finding coverage.
What Are the Benefits of Nonprofit Insurance?
Nonprofit insurance provides protection in a number of ways. Beyond the nonprofit’s physical office building, many components of your organization stand to be destroyed or otherwise harmed by common threats.
Here are a handful of major benefits of having nonprofit insurance:
- Protection against professional errors/negligence: If your nonprofit organization offers any kind of professional service to the public, such as counseling, there’s always the potential to do unintended harm. Having the right coverage is crucial to help avoid huge potential fees needed to sort ugly legal matters.
- Protection against legal trouble: A costly and damaging event like a fire or lawsuit could mean the end of days for a nonprofit organization without the proper protection. If the nonprofit became unable to pay their loans, vendors, or employees, it could face serious legal consequences. Nonprofit insurance helps prevent these ugly matters from surfacing.
- Protection against a damaged reputation: Sometimes, incidents affecting nonprofits can end up in the media. Word about botched events or injured volunteers can spread quickly. Having the right nonprofit insurance can help prevent your organization’s reputation from going up in flames.
- Protection against bankruptcy: Imagine a severe storm or other terrible incident like an airplane crash that literally wipes out your nonprofit’s premises entirely. Without the right insurance, the organization’s owner could easily be forced into bankruptcy. Nonprofit insurance helps organizations to remain open and operational or rebuild following massive destruction.
Your independent insurance agent can help you review your nonprofit insurance policy to answer any remaining questions about your coverage. They’ll also be able to help you figure out whether you’ve got enough coverage, or if you should purchase more.
How Much Does Nonprofit Insurance Cost?
Really, it depends on a number of factors. Nonprofit organizations might pay just a few hundred bucks per year or they might pay well into the thousands, depending on the size and scope of operations and services offered. Unfortunately, it’s hard to offer an average figure, since each nonprofit is unique. But really, it all depends on a number of factors, like:
- The type of nonprofit: This includes whether your organization is a church, country club, etc. Additionally, the specific services offered by your nonprofit will affect its risk level to insure. Obviously, more danger means more money for insurance.
- The location of the nonprofit: Larger cities tend to have higher costs for insurance, but it goes beyond that. Depending on your nonprofit’s specific location, it may be more prone to various weather-related risks. Nonprofits located along the coast may have premiums up to 20% higher due to the increased risk of hurricane damage.
- The number of employees/volunteers: The more you've got, the more workers' comp. and alternative coverage you’ll need. Simple as that.
- The size of the nonprofit: The larger the reach of a nonprofit, the greater its exposure, and the more coverage it requires.
Your independent insurance agent can work with you to find a policy that fits within your nonprofit’s budget. Have your financial restrictions in mind before you start shopping for coverage to help speed the process along.
Benefits of an Independent Insurance Agent
Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility and competitive pricing while working for you. Find an independent insurance agent in your community here.
TrustedChoice.com Article | Reviewed by Paul Martin
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