Nonprofits need insurance, much in the same way for-profit companies do. The specifics may be different, but nonprofit managers ignore insurance needs at their peril.
To start with, nonprofits need to protect themselves from negligence claims with commercial general liability policies that cover damages to visitors, customers, suppliers or associates who may be injured on your property. A policy can also guard against claims of copyright infringement due to advertising activities.
These are the types of insurance most commonly needed by nonprofits. Which types your company needs will depend on its particular circumstances.
- Business auto — If you own any vehicles, this policy will cover them for auto liability and physical damage. If staff or volunteers use any vehicles, including their own, for your nonprofit’s activities, auto liability insurance is highly recommended. Your state may require you to purchase a minimum amount of coverage.
- Directors and officers liability — This type of insurance protects the organization’s directors, officers, employees and volunteers from lawsuits alleging fraud or financial mismanagement. For example, if a board member invests the group’s assets unwisely and loses everything, a creditor might sue the organization and its directors and officers. Your D&O insurance can include publishers’ liability and personal injury coverage, including libel, defamation, and copyright and trademark infringement if your group publishes a newsletter or marketing materials. It’s broader than your general liability policy coverage would be.
- Professional liability insurance — This covers staff, volunteers and the organization itself against liabilities from such workplace-related claims as discrimination or sexual harassment.
- Workers’ compensation — This is a subtype of D&O insurance that deals with personal injury claims only. Your state law likely requires a policy if your nonprofit has employees.
- Product liability insurance — If you raise funds by selling products, then consider this coverage to protect your company from lawsuits by customers claiming they were hurt by something you sold. The insurance covers the legal defense and a sizable portion of the damages.
- Umbrella or excess liability — This type of policy is for additional coverage for catastrophic liability loss beyond what is covered by your general liability, business auto liability and employer’s liability policies.
- Property insurance — This is a commercial property policy that covers furniture, fixtures, office equipment and stock that your group owns. If you’re running your nonprofit out of your home, you may need to adjust your homeowners or renters insurance policy. Many exclude coverage of business-related claims, while others forbid business use of your home.
- Crime or employee dishonesty — This policy covers theft by employees and can be extended to cover volunteers.
- Business owners package — A business owners package, or commercial package policy, combines general liability, property and crime coverage into one plan, which is usually more economical.
Finally, don’t forget to ask about your deductibles. How much will you have to pay out of pocket before the insurance kicks in? What types of losses or property damage won’t be covered?
This is just an overview. Your organization may need more or less insurance, depending on its situation. Just keep in mind that a single large or unexpected expense can lead to ruin. The right insurance can guard against what you see as your biggest risks. To get off on the right foot, be sure to find an agent with experience working with nonprofits.
To learn more about how our firm can serve your nonprofit organization, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.
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