A nonprofit is a unique entity, but it still faces some of the same risks as other businesses. If a client trips and falls over equipment, for example, the nonprofit may be sued. Even more serious, a board member might be personally named in a lawsuit alleging fraud or financial mismanagement. Nonprofits must therefore have certain types of insurance to protect themselves from these pitfalls.
Generally, a nonprofit will want to have general liability insurance, property insurance, and directors and officers (D&O) coverage. Oftentimes these policies are offered in a business owners policy, or BOP, which can save the organization money because they bundle multiple insurances into one.
Liability insurance is the most important type of nonprofit insurance for many organizations. This type of coverage protects the nonprofit in the event that someone is injured while on the premises or when engaging in work activities for the charity. Liability can also include accidents that occur during events that are held on the property and damage to other people’s property caused by the nonprofit.
Property insurance offers protection for the space that a nonprofit occupies as well as some of its property, including fixtures, furniture, office equipment, inventory, and more. It can also cover the cost to repair or replace the property in the event of fire, theft, natural disasters and other catastrophes. Additionally, this type of policy can include loss of income coverage in the event that the nonprofit cannot operate due to a covered peril.
If an employee or volunteer uses a personal vehicle to transport supplies, deliver food, take a client to the doctor, or any other activity for the nonprofit, it is critical to have auto insurance. This is because if an accident occurs and the limits on the personal policy are exhausted, the nonprofit can be sued. To minimize this risk, a nonprofit can purchase commercial, non-owned and hired auto liability insurance that will offer the proper coverages.
Professional liability insurance offers protection if the nonprofit provides any kind of mentoring, counseling or life skills training. This is because if these activities go wrong, a lawsuit can be filed accusing the nonprofit of providing bad direction or advice. Typically, this is offered in a D&O policy.
Lastly, a nonprofit should consider cyber liability insurance as it is just as vulnerable to data breaches as any other business. This type of policy will offer protection for the sensitive information stored on servers, laptops, mobile devices and more. It is a good idea to review these different types of insurance with a trusted agent who can help a nonprofit find the right policy to fit its needs. They can also discuss the possibility of a policy bundle that can further save the nonprofit on premium costs. Oftentimes, these policies are available for only a small additional premium. This is because insurers understand that a nonprofit is not in the business of making profits and they are looking to help the community. what type of insurance does a nonprofit organization need