What Type of Insurance Do I Need For My Nonprofit?Posted on May 20, 2021
A nonprofit organization, also known as a not-for-profit organization, is a legal entity organized and operated for a collective, public or social benefit whose funds and revenues are reinvested in the organization to achieve their mission goals.
Nonprofit organizations are typically designated as 501(c)(3), which means the Internal Revenue Service has approved them as a tax-exempt, charitable organization. A few examples of nonprofit organizations include hospitals, universities, charities, churches, social service agencies even your local little league teams.
As a nonprofit, you may operate on a shoestring budget, but one area you should not skimp on is insurance. A single unforeseen event could result in closure of your agency’s services leaving those you serve without benefit of food, shelter, education, and other services you offer.
General liability insurance should be purchased by all 501(c)(3) organizations to insure against third-party bodily injury or property damage claims. Further, professional liability and abuse and molestation as separate coverages with their own liability limits should be added.
Also, look closely at your lease; again, just because you’re a nonprofit doesn’t mean the landlord will not enforce all insurance provisions of your lease agreement.
Consider adding Hired and Non-owned Auto Liability to your auto policy to extend coverage to employees using their personal autos while on nonprofit business.
Directors and Officers Insurance
Directors, officers, board members, and employees within a nonprofit organization may be personally named in a lawsuit against the nonprofit for breach of their duties. Those duties are: Duty of Care or Due Diligence, Duty of Loyalty, Duty of Obedience, and Duty of Good Faith.
Your actions or inactions in the management of the nonprofit may be scrutinized in the following areas: financial status; government compliance; policy and procedures; compensation; performance; and personnel. A minimum of $1 million limit should be considered for an active nonprofit under directors and officer’s insurance
Cyber Liability Insurance
To facilitate your nonprofit’s mission, computers, including employee laptops and tablets are used daily. These items are easily compromised, resulting in a possible breach of confidential data. Cyber liability insurance protects the organization against these types of crimes.
Workers compensation insurance protects the employees, paying medical, disability, or even death benefits. Consider purchasing a Volunteer Accident policy which offers minimum limits for injures to volunteers incurred while acting on behalf of the nonprofit.
Employee Dishonesty Insurance
Employee dishonesty insurance is purchased to replace funds that an employee, board member, or officer stole. Many states and grant foundations require nonprofits to carry this insurance policy
Your insurance needs will vary depending on your mission statement, who receives your services, how your services are delivered and how you fund those services. As a nonprofit organization, seek out carriers and agents familiar with all aspects of not-for-profit insurance as specialization in product knowledge is necessary to secure the right insurance program.