Nonprofits may not be out to make a profit, but they are still businesses that need to take steps to protect themselves from risk and liability. While there is no one-size-fits-all policy, the majority of nonprofit organizations need a variety of standard insurance policies to ensure they can continue their important work in the community.
The biggest concern for most charitable groups is liability, and the types of insurance that are needed vary by organization. The most basic requirement is general liability, which can help pay for claims of injury to a third party or damage to their property caused by the nonprofit. This includes coverage for premises liability, products/services liability and advertising injury (libel, slander and copyright infringement).
Since many nonprofits have limited budgets, it’s also important for them to carry business interruption insurance. This coverage can pay for lost income due to a disaster that temporarily closes the nonprofit’s facilities, preventing them from serving their community. This coverage is often included in a larger commercial property insurance policy, but it can also be purchased separately.
Another type of essential nonprofit insurance is workers’ compensation, which pays for medical bills and a portion of any lost wages for an injured worker. This is typically a requirement in most states if the nonprofit has employees. However, if volunteers are hired for special events or other purposes, they should be covered under a personal auto policy instead of the nonprofit’s general liability policy. If this is not done, the volunteer could be held liable for any injuries that occur during their time at work.
Because nonprofits frequently host special events and fundraisers, they need to carry event insurance that protects them if someone is hurt on the property or at an off-site location for an event. This type of policy can help cover legal fees, judgments and settlements. It’s also wise for a nonprofit to require all vendors and contractors to have general liability insurance as an additional insured on their policies, so they can be covered in the event of a claim.
Abuse and molestation coverage is an essential addition for any nonprofit that works with youth or seniors or other disadvantaged populations. This type of insurance can cover legal fees, judgements and settlements if there is an allegation of sexual abuse or molestation by an individual connected to the nonprofit.
Other essential policies include directors and officers insurance (D&O), which can help protect board members from lawsuits if they are named in a claim of financial mismanagement or fraud. Professional liability insurance, which is sometimes known as errors and omissions insurance, can also be a good add-on to any D&O policy, protecting the charity if its employees are sued for negligence. Lastly, a nonprofit that sells goods for fundraising or as part of their mission should consider product liability insurance to protect against any claims that they sold a defective product. Many of these policies can be bundled together into a business owner’s policy (BOP), which can save money on premiums. do nonprofits need insurance