Nonprofit Insurance

A Complete Guide For Your Organization draft

What is Nonprofit Insurance? 

Like any other organization, nonprofit organizations also need to secure themselves from the many risks and unforeseen events. Moreover, proper insurance is imperative to protecting the people and assets that help a nonprofit fulfill its vision. Some of the most common risks nonprofit organizations face are:  
  • Fraud, embezzlement, and misuse of funds by employees or board members
  • Claims of negligence or breach of duty
  • Accidents and workplace injuries
  • Property damage
  • Data breaches

In this article

Why Do You Need Nonprofit Insurance?

Nonprofits have many stakeholders, including employees, donors, volunteers, and government regulators. Therefore, a small error with any of these parties can result in a lawsuit. Moreover, legal fees and damage settlements can drain your nonprofit’s funds very quickly. In such instance, proper coverage protects your organization, its assets, and stakeholders.

Additionally, if your nonprofit is religious and operates out of a church or any other religious organization, opt for church insurance.

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What Does Nonprofit Insurance Cover?

The following policies are the most recommended policies for your nonprofit. As a result, it will be a great asset to your nonprofit’s risk management strategy.

Business Owners Policy

business owners policy (BOP) combines nonprofit liability insurance with commercial property insurance and business interruption insurance (BII). Moreover, the liability insurance covers claims against property damage or bodily injury to third-parties.  

Commercial property covers damages to a business property caused by fire, theft and equipment damage. Adding BII to the policy covers any income losses due to a temporary closure. Therefore, purchasing a BOP is usually cheaper than buying standalone policies. 

Get a personalized nonprofit insurance quote now from your nearest insurance agent!

Commercial Property Insurance

Commercial property insurance covers losses or damages to your nonprofit’s properties and assets. Therefore, to secure physical assets, like office equipment, furniture, and computers, property insurance is a must. Moreover, it covers costs related to covered events like vandalism, theft, or fire.  

Commercial General Liability Insurance

Commercial general liability insurance (CGLI) covers any damages made to a third-party by your organization and your employees. Therefore, the coverages include:  
  • Third-party bodily harm: The policy covers all costs, including medical bills, court settlements, and legal fees.
  • Third-party property harm: The policy pays for repair, replacement, and legal costs incurred by the loss of property.
  • Advertisement harm: The policy covers any costs related to copyright and defamation lawsuits against the organization.
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Commercial Auto Insurance

Commercial auto insurance provides auto liability and physical damage coverage in case of an accident involving your business vehicle(s). Suppose the vehicle owned by your organization is at fault. Therefore, auto liability pays for the damage and injuries to the third-party. This insurance is compulsory for businesses who use commercial vehicles in all states except Virginia and New Hampshire.  

Workers Compensation Insurance

Workers compensation insurance protects your employees if they get injured resulting from any work-related accidents or mishaps. It covers medical costs, loss of wages, rehabilitation costs, as well as death benefits. This insurance is mandatory in all states except Texas. 

Also, there are some exceptions in this insurance. For example, volunteers, interns, and students in training are not included since they are not your employees. In such cases, you can opt for volunteer accident insurance.  

Professional Liability Insurance

Professional liability insurance covers losses that arise due to professional negligence, misconduct, or errors during a professional’s course of work. Additionally, the policy also includes defense costs, or any other expenses incurred in case of lawsuits.  

Employment Practices Liability Insurance

Work-related lawsuits occur when workers claim there has been a violation of their legal rights by the organization. Moreover, this results in damage in reputation for the organization, costly legal fees, decreased employee morale and disruption in work.   

Employment practices liability insurance covers defense costs for wrongful acts related to employment. It includes workplace harassment and discrimination, violation of the Family and Medical Leave Act, and wrongful termination.   

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Directors and Officers Insurance

Directors and officers (D&O) insurance is one of the first coverages many nonprofits ask about. And it is just as vital for nonprofit organizations. Therefore, D&O insurance personally protects the board of directors against any lawsuits relating to:

  • Misuse of funds  
  • Embezzlement  
  • Wrongful termination of an employee  
  • Claims of harassment  
  • Negligence  

Cyber Liability Insurance

Cyber liability insurance has been making waves in the industry due to the number of recent commercial data breaches. However, nonprofits are also not immune to cybercrime.   

Suppose you do not have property online security. As a result, employee, donor, and/or client data, can be easily accessed by a cyber criminals. Therefore, cyber liability covers data damage, cyber extortion, loss of income, and reputation management.  

Event Insurance

Nonprofits regularly hold special events such as fundraisers and meetings. For instance, a candle is accidently knocked over and sets fire to the property or a child slips and injures themselves. In such instances, event insurance comes to the rescue. It covers property damage, and bodily injury.  

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Fiduciary Liability Insurance

If your nonprofit provides additional benefits like retirement and health plans, fiduciary insurance is a viable option. Moreover, it covers any losses or legal fees that arise due to claims against the trustee. It includes weak investment decision and negligence of trustee’s duty.   

Commercial Umbrella Insurance

Commercial umbrella insurance provides additional limits over commercial auto liability, CGLI, professional liability, or D&O liability. However, it is not a mandatory policy, if your nonprofit operates on a larger scale. However, you should consider purchasing this insurance policy.  

Get a personalized nonprofit insurance quote now from your nearest insurance agent!

Additional Policies to Consider for Nonprofits

You can also add a few additional policies to ensure your nonprofit and stakeholders get extra protection.  

Employee Dishonesty and Crime Coverage

An employee dishonesty policy helps to replace funds stolen by an employee. Often, this type of fraud is inflicted over a more extended period. Therefore, when discovered, it causes significant trust issues between the community and nonprofit. Hence, the coverage will cover the loss from employee theft.   

Volunteer Accident Insurance

As mentioned previously, volunteers are not covered under your workers compensation policy. You’ll need to opt for a separate volunteer accident insurance to protect volunteers. It covers volunteers in the event of injury, disability, or death in the course of their work with your nonprofit. Additionally, it can also be an essential endorsement if your volunteers do not have health insurance.   

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How Much Does Insurance Cost for a Nonprofit Organization?

The costs depend upon the size and activities of your nonprofit. In other words, your nonprofit’s activities and services determine the type of liability and potential claims you face. Therefore, factors that determine the cost of your insurance are:  

  1. Budget  
  2. Nature of work
  3. Value of assets
  4. Payroll
  5. Size of the workforce
  6. Claims history

Get a personalized nonprofit insurance quote now from your nearest insurance agent!

Get a personalized nonprofit insurance quote now from your nearest insurance agent!