A nonprofit’s goal may be different than a for-profit business, but it still operates in a similar corporate structure and faces many of the same liabilities. It’s important for nonprofits to take steps to protect themselves from loss and liability.
While the answer to do nonprofits need insurance can vary based on the specific needs of each organization, there are several common types of insurance that nonprofits should consider. These include general liability, directors and officers insurance (D&O), professional liability insurance, and property insurance.
While it’s not necessary for all nonprofits to carry all of these types of insurance, a thorough review with an experienced insurance professional will help determine the most appropriate coverage options. It is also advisable to seek out insurers that have experience in the nonprofit sector and a history of providing excellent service.
A non-profit’s employees and volunteers are just as susceptible to injury and damage as those of any other business. Having a good insurance policy in place that covers the risks of their activities is an essential part of any operation. In addition, a good insurance policy will provide peace of mind to donors and sponsors who give to the nonprofit, knowing that their donations are protected.
Nonprofits need specialized liability coverage because they work with the public and have many stakeholders, including donors and volunteers. This means that a lawsuit from someone who is hurt, or whose property is damaged as a result of a nonprofit activity, could be significant. The right insurance policy will cover the legal fees and damages resulting from such a suit.
In addition, a nonprofit’s property may be subject to damage or theft from fire, storms, vandalism, theft, and other common causes of loss. Having a good commercial property insurance policy will protect against these losses. A comprehensive policy will often cover the cost of replacement and repair for any property owned by a nonprofit.
Director and officer (D&O) insurance offers protection to board members, officers, and in some cases other staff and volunteers against claims of mismanagement or alleged fraud. In addition to covering the costs of legal representation, D&O insurance will usually pay for any damages awarded against the nonprofit.
If a nonprofit produces newsletters or other publications, it is recommended to have a D&O policy with a publisher’s liability clause that will also cover libel and copyright infringement. Many D&O policies will also include employment practices liability insurance (EPLI) to provide additional protection for nonprofit employees.
Lastly, nonprofits that sell products in order to raise funds or to promote their cause should consider product liability insurance. This will cover the costs of repairing or replacing a product that is defective or causes bodily harm. It is also recommended that a nonprofit seek out a specialist to help them determine the best type of liability insurance to protect their operations, people, and assets. While the cost of insurance is not cheap, it is an essential investment for any company, including nonprofits.