As a business owner, you are held liable for any incident that may occur. Whether it is within your organization or to any of your employees. Therefore it is important to protect yourself and your organization from any claims that might be brought against you.
So, what type of insurance does a nonprofit organization need?
In this article, we delve into the different types of insurance your nonprofit organization needs and what they cover.
Does My Nonprofit Organization Need Insurance?
This question can only truly be answered on a case-by-case basis since nonprofit organizations vary so much from one another. As you are reading through the 7 types of nonprofit insurance listed in this article, ask yourself if each type of coverage could be useful to your specific organization. One common consideration is to think about the types of monetary loss that could occur and whether or not your organization could afford to pay out of its own funds.
What Type of Insurance Does a Nonprofit Organization Need?
501c3 insurance requirements vary from regular business organizations. Not all general business bundles cover everything you need to fully protect your nonprofit.
Additionally, nonprofits often have a smaller budget and therefore they often split their policies by necessary and secondary.
Most often nonprofits need General Liability Insurance and Directors & Officers Insurance (D&O) at the least. General Liability insurance covers a wide range of incidents that occur most commonly, while D&O insurance covers the officers, directors, and the organization itself. Keep reading to learn about everything that each type of insurance covers.
This being said, there are 7 key insurance types you may need for a nonprofit depending on the type of business you have, the number of employees, and a variety of other factors.
Let’s start with the most basic type of insurance you’ll need.
General Liability
General Liability insurance covers the most common liability claims against nonprofits, & is typically very important coverage for most organizations.
Coverage includes:
- Personal injury
- Advertising injury
- Bodily injury
- Property damage
There are two types of general liability insurance; premise and property.
Premises Liability Insurance
This type of insurance protects your nonprofit in case someone is injured on their property. Additionally, it can cover rental damage and property damage to a third-party caused by the nonprofit or its employees.
Not only that but it covers your nonprofit in case of claims such as slander, copyright infringement, and false advertising.
Premises insurance is often necessary for events, contracts, and funding.
Product Liability Insurance
As the name suggests, this type of liability insurance involves products. If you sell any products to customers, product liability insurance will protect your business in case of an incident. This covers accidents from misuse or if it is due to a defect.
For example, if someone gets injured from a defective product you sold them, your insurance will cover your legal bills and some of the settlement you have to pay.
There are three main liability cases
- Design defects
- Manufacturing defects
- Failure to warn
It also covers any loss due to damage of property from a natural disaster, theft, loss, or vandalism.
Professional Liability Insurance
Professional liability insurance, also known as malpractice insurance, protects your business from any work-related claims. For instance, if your organization fails to uphold contractional obligational standards.
If you are supposed to have a certain level of knowledge in this area of expertise but can’t perform your services to that extent, your organization can be held legally responsible.
For instance, you may provide counseling or therapy, but you realize your volunteer providing the counseling is not as qualified as you were led to believe. If someone were to sue you because of this then the insurance will help cover any settlements and legal fees.
This protects everyone from management to volunteers.
Next, let’s discuss coverage for your higher-ups.
Directors’ & Officers’ Liability
D&O insurance keeps your board of directors and officers protected from claims of mismanagement of your nonprofit. This can include a breach of duty or failure to uphold the best interests of stakeholders.
This can cover bad investments, financial mismanagement, or alleged fraud. This includes coverage for the cost of legal representation and the plaintiff’s damages.
Additionally, it covers sexual harassment claims, defamation, and copyright infringement.
However, if you need to cover any physical damages caused by a director, that would require general liability insurance.
Pro tip: Talk to a nonprofit insurance program administrator to discuss coverage as some policies exclude coverage for criminal acts or other scenarios.
Workers Compensation
Nonprofits are required by states to have workers’ compensation insurance. This insurance is used when an employee is injured on the job either due to employer negligence or an accidental incident.
It covers any medical costs, loss of income, and settlement fees surrounding employee injury on the job. While most workers’ compensation policies can cover volunteers, you can also get volunteer accident coverage to cover unpaid staff.
Sexual Misconduct Liability
Sexual misconduct refers to when someone sexually abuses or molests someone else. This also covers cases where negligent management results in sexual misconduct.
This includes an assault by an employee on another employee, a client, a contractor, or the population that they serve.
The liability insurance covers your legal defense and the settlement if you lose.
While this is something you hope to never have to use, it is important to still have it just in case.
Automobile Insurance
If your employees use a vehicle for work, even if it’s theirs, you need to have auto liability insurance. This will help make sure you are covered if they get into an accident and cause damage.
Some states may require you to get auto insurance such as personal injury protection (PIP) or uninsured motorist (UM).
There are several types of insurance to choose from. These include:
- Commercial – vehicles owned by a business
- Hired – this refers to rental cars
- Non-owned – cars owned by volunteers and staff
The cost of auto insurance depends on the risk involved. For instance, if your vehicle is always parked in a garage the insurance would be cheaper than if it was parked on a city street.
Cyber Liability Insurance
Just like any other business, nonprofits need to protect themselves from data breaches as well as ransomware attacks. When you have confidential and sensitive data from employees or donors that information can be at risk to hackers.
This cyber liability insurance covers identity theft losses, settlements with customers and employees, and any other fines you may receive.
Did you know that a report found that by 2025 cybercrime will cost the world $10.5 trillion annually? That’s insane! Keep your organization from becoming bankrupt due to something that is out of your hands.
Get The Best Coverage For Your NonProfit With CSIP
Looking for the best coverage and the best rates? At CSIP, we are passionate about helping nonprofits succeed.
Our administrators will help you determine what type of insurance your nonprofit organization needs. Our experience with non-profits allows us to save you money on premiums and alleviate financial strain.
Contact us today at (888) 794-7771 or learn more about how we can help your organization.
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