Why Your Non-Profit Organization Is Taking on More Risk Than You Thought

Non-profit organizations typically have a mission to serve the greater good. They also have to operate like any normal business, which includes identifying risks and finding protection from unforeseen events.

If you operate a non-profit organization, you must address the wide variety of risks that you face if you want your mission to succeed. Non-profit business insurance is one way to protect your organization from disaster. And while you may think you need only minimal coverage—perhaps a simple property or liability policy—you probably need more non-profit insurance than you think. 

What would happen if a member of your board were sued for some type of negligence? Are you covered for all of the additional risks that are present when you host special events offsite? If your basic business insurance policies exclude coverage for certain types of lawsuits, one accident or lawsuit could force you to close. 

An independent insurance can help you uncover all of the risks to your non-profit organization. You may find you need a variety of non-profit insurance policies to obtain a comprehensive portfolio of coverage. 

 Non-Profit Organizations in the United States

  • In 2013, 1.4 million non-profit organizations were registered with the IRS.
  • Non-profits had combined expenses of $2.10 trillion in 2014.
  • Combined non-profit revenues in 2014 were $2.26 trillion.
    • 92% board funding
    • 91% major gifts
    • 90% direct response
    • 88% corporate gifts or grants
    • 87% online
    • 82% special events

Source: Urban Institue; National Center for Charitable Statistics

What Types of Insurance Do Non-Profits Need?

A basic non-profit organization insurance plan includes commercial general liability insurance to protect from lawsuits and property insurance for any office space, equipment, and other business personal property. Large non-profits may need to cover buildings that they own, vehicles, and other forms of business property. You might even need coverage for special events, and a variety of additional non-profit liability insurance policies.

Commercial general liability (CGL) insurance is essential for any business, especially for any business or organization that regularly associates with the general public, on- or off-premises. CGL insurance protects your non-profit from lawsuits related to third-party bodily injury or property damage. This can be as simple as a slip, trip, or fall in your office, or serious injury or death caused by your organization.

If such an incident occurs, your CGL policy pays for medical expenses, costs to repair or replace damaged property, attorney fees, court costs, and any settlements or judgments that you must pay. CGL insurance also covers certain personal injury claims (slander and libel) and advertising liability claims.

Many small non-profits may not have a lot of business property. But if you have office space, office equipment, furniture, computers, and other electronics, you need business property insurance to protect your NPO in the event of a fire, smoke damage, theft, vandalism, and certain weather events.

If you own your building, your commercial property policy also covers damage to the building. Your property policy may also include business interruption coverage, which provides income replacement and reimburses you for certain ongoing expenses (salaries, rent) if you must close or relocate temporarily after a covered loss (e.g., a fire).

Non-profit insurance policies frequently exclude coverage for flood damage. You may need to purchase a separate flood insurance policy if it is offered where your business is located.

Depending on the size of your non-profit and the work you do, you may qualify for a business owners policy (BOP); this type of policy offers liability, property, and business interruption coverage in one affordable package policy designed for small to mid-size businesses.

If you run your non-profit out of your home, talk to your independent insurance agent about amending your homeowners insurance policy to include coverage for your business property and any business-related liability risks you face. You may need to purchase special coverage for home-based businesses.

Don’t Miss Important Liability Coverage for Your Directors and Officers

Lawsuits are probably the greatest risk for any non-profit. And while your CGL policy offers broad coverage that protects against a wide variety of potential lawsuits, you may be exposed to other types of lawsuits that it does not cover.

The directors and officers who serve your NPO must maintain the organization’s financial stability and provide the appropriate resources and environment in order for it to flourish. But nearly any decision that your board makes can trigger a lawsuit, which can hurt the NPO and threaten the personal assets of the directors and officers. All of this calls for another form of non-profit liability insurance.

Non-profit directors and officers (D&O) liability insurance protects the assets of individual directors and officers, employees, and your NPO from certain allegations. Policies vary by insurance company, but in general D&O policies provide coverage if you are sued for:

  • Civil rights violations
  • Conflicts of interest
  • Statute violation
  • Fraud
  • Violation of by-laws
  • Breach of contract or fiduciary duty
  • Financial mismanagement
  • Negligence
  • Mistakes or errors of judgment

D&O liability insurance pays for your defense costs, damages, settlements, and judgments related to a covered complaint. It is generally customized for the organization and the type of work that you do. 

Non-profit D&O liability insurance protects the assets of your directors and officers, as well as their spouses, domestic partners, heirs, and estates. 

You may also want to purchase employment practices liability insurance. This policy offers coverage for claims of employment-related discrimination by prospective, current, or former employees. Your D&O policy may specifically exclude coverage for these kinds of claims, so be sure to know what is covered (and what is not) by both policies. 

Protect Your Employees with Workers’ Compensation Insurance 

Your non-profit organization probably has employees just like any other business. If you do, you need insurance that protects your employees from workplace injuries and illnesses. Workers’ compensation insurance covers medical expenses and provides income replacement if an employee is injured on the job. 

Many non-profits use volunteer workers to perform a wide variety of tasks. Each state has different workers’ compensation laws, and they vary on whether volunteers can or must be covered by workers’ compensation insurance. In states where volunteers cannot be covered by workers’ compensation, or where it is optional, NPOs may choose to purchase special accident medical reimbursement policies to cover incidents where volunteers are injured while working on their behalf. 

An independent agent who specializes in workers’ compensation insurance can help you determine how to best protect your volunteer workers.

Make Sure Your Non-Profit Is Covered for Special Events

Special events such as fundraisers, dinners, auctions, and golf tournaments may play a huge role in your non-profit organization. But does your general liability insurance policy provide all the coverage you need?

Many special events involve renting space and inviting people to participate. They also often involve serving alcohol and participating in athletic activities and other high-risk activities like bounce houses, carnival rides, or swimming. If someone is injured or property is damaged at one of these vents, your CGL policy might not provide the coverage you need.

You should first talk to your Trusted Choice® agent about whether your CGL policy excludes special events. If it does, you need special event insurance, which is extra coverage for a one-time event or a series of events, depending on your needs. These policies often include liquor liability coverage, which protects you in the event that there is an alcohol-related injury or property damage.

Finding the Right Insurance for Non-Profits

You may need some additional insurance policies for your non-profit, including:

  • Commercial auto insurance. This covers vehicles that are owned or rented by your NPO, or any personal vehicles that are driven for business purposes.
  • Excess liability insurance. Also called commercial umbrella insurance, this provides additional liability protection above and beyond the liability limits of other applicable liability policies.
  • Professional liability insurance. This offers protection for claims of professional negligence, errors, or omissions. This may be particularly important if your non-profit provides counseling or other professional services.

A local, independent Trusted Choice agent can help you find the non-profit insurance policies you need, and can help you customize them to protect against the specific risks you face. Our agents have experience putting together customized insurance plans for non-profits and can work with multiple, highly rated insurance companies, so you can obtain several quotes quickly without doing the work on your own. Contact an agent in your area and get started today. 

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