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An Insurance Guide for Nonprofit Organizations

As a nonprofit organization, it is vital that you have the correct and relevant insurance policies in place. The right insurance policies are specifically designed to reduce an organization’s risk and vulnerabilities to potential lawsuits that could be filed in relation to the work you are conducting.

It is important to review your current policies, and needs as an organization, to ensure every policy you already have is up to date and relevant, and any additional insurance policies are adequately sourced.

As a nonprofit organization, it is likely that you have a 501c3 tax-exempt status. However, you will still require different insurance policies to protect your organization against a variety of factors, such as loss resulting from an employee accident, motor vehicle collision, negligent acts, cyber attacks, and much more.

This guide will help you if you are wondering what insurance policies your nonprofit organization may require.

Understand Your Needs/Requirements

The first and most important step you should take is to sit down and thoroughly review the work that you complete, in order to better understand your insurance needs and requirements. Without this in-depth knowledge of all aspects of your organization, you may fail to protect important areas, resulting in costly consequences. You will also need to consider your organization’s objectives, risk tolerances, and future goals.

Another important aspect of finding the right insurance policies is considering the individuals who are involved in your organization and the assets. For example, employees and volunteers, the board of directors, office space and/or properties, vehicles, contracts, and inventory.

Types of Insurance

There are many types of insurance that a nonprofit organization may need. Below are some of the most common insurance policies that are sourced. However, it will entirely depend on your business needs as to which policies are suitable for you.

Contact a trusted insurance broker who can tell you exactly what insurance policies that you may need. It can be a complex area to navigate, as nonprofit business needs significantly differ from standard commercial businesses.

Liability Insurance

Liability insurance is vital for any nonprofit organization, as it will protect your business against claims of negligent conduct by a member of your organization. Negligence claims are brought against a person or organization if it is alleged that they have failed to uphold a certain level of service that is expected of them, for example, not providing a good standard of care to another individual which leads to a serious injury or death.

The right liability insurance will cover your organization for a range of things. Examples include if an injury has been sustained, any property has been damaged, in cases of slander and defamation, and any advertising activities that result in copyright infringement.

There are also more specific liability insurance policies that you can consider, such as directors and officers liability, which protects those involved in running and managing the organization, along with allegations of breaches or wrongful acts. There is also publisher’s liability insurance, which covers the organization and any materials that are printed as publications, newsletters, magazines, etc.

An insurance broker will help you find the right liability policy that will cover the aspects that apply to the work that you do.

Cyber Coverage

Unfortunately, every organization, regardless of how big or small, is vulnerable to a cyber attack. It was reported in 2018 that there were over 80,000 cyberattacks per day and small businesses were at a loss of, on average, $34,604, which resulted in 60% of them going out of business within 6 months of the attack.

There are many types of attacks that an organization is vulnerable to, for example, ransomware, crypto jacking, and malware. There is no industry that goes untouched by cyberattacks, and they are only growing in sophistication by the day. Therefore, it is vital that any organization is well protected with anti-malware and anti-virus software, but also with cyber insurance coverage.

Insurance is important, as many attacks occur because of personal error, identity theft, or malicious insider and social media accounts, which are not always protected by software alone.

Business Auto Insurance

Business auto insurance is vital to protect any nonprofit organization that uses and/or owns motor vehicles. Regardless of how big your fleet is, business auto insurance will commonly cover any losses incurred because of a collision. To what extent the vehicles are covered will depend on the level of insurance obtained. Your employees and volunteers would typically be covered under the liability insurance if they are at fault.

Workers’ Compensation

In some states, such as NJ, all organizations are required to have a workers compensation insurance policy in place if you have at least one person being paid to carry out work. This type of policy is there to protect both the employer and the employee, and to cover any losses that result from an injury in the workplace.

In the unfortunate case of an injury, there may be medical expenses, compensation, and financial losses in the form of lost earnings that are incurred. The policy will protect you against a lawsuit and provide your employees with what they need to move forward.

Commercial Umbrella Policy

A commercial umbrella policy is an excellent addition to your current policies, as it is only activated if you have exceeded the limits of an existing policy that you have. In the unfortunate event that you are involved in a significantly large liability loss, this policy will help you bridge the gap by providing your organization with additional policy limits.

Purchasing Insurance for Your Nonprofit Organization

These are just some of the most common insurance policies that are important for nonprofit organizations. Every organization will be unique with what policies they require and each insurance policy will have its own criteria, which it covers. It is important to speak to an insurance broker who can help you protect your organization and provide you with relevant and specialist advice.