There are more than 1.5 million nonprofit organizations registered in the U.S., according to the National Center for Charitable Statistics (NCCS). This number is made up of private foundations, public charities and other types of nonprofits, such as fraternal organizations, chambers of commerce and civic leagues. As with any other type of business, nonprofit organizations face certain threats that put them at risk for legal and financial challenges. Insurance is designed to help protect nonprofits from certain risks.
How Is Insurance Different For Nonprofit Organizations?
Nonprofit organizations operate as a business, even if their primary objective is not to create a profit. Like all businesses, nonprofits must protect their interests, which includes their staff and assets. No two businesses are exactly alike which means that their insurance needs will differ. Insurance plays a critical role in guarding a nonprofit organization from unexpected events that could result in serious consequences for the organization and its members.
It is a common misconception that nonprofits cannot be sued due to charitable immunity. This concept is based on the belief that charitable organizations should be exempt from all legal liability when providing selflessly to their communities; however, the concept of charitable immunity is outdated. Today, Alabama, Delaware and Colorado are the only states in the U.S. that provide liability protection to all volunteers who work with charitable organizations.
Nonprofit organizations will benefit greatly from acquiring the right types of insurance. If a nonprofit is unsure of what types of insurance are applicable, a business insurance broker is able to offer guidance regarding which policies are best suited for the organization.
What Types Of Insurance Should A Non-Profit Have?
Every non-profit requires employees, volunteers and assets to fulfill its mission, yet these are also what put a nonprofit at risk for legal issues. Fortunately, nonprofit organizations have access to a wide range of insurance types to protect their staff and assets.
The type and amount of insurance a nonprofit may need is based on a variety of factors, such as the size of the organization, the number of employees and volunteers and the risks that are industry specific. Some of the most c, include the following:
Directors And Officers Insurance
Directors and officers liability insurance, also referred to as D&O insurance, is a type of coverage that protects against personal losses in the event of a lawsuit as a result of serving as a director or an officer for an organization. D&O insurance may cover a wide range of related costs, such as legal fees and other expenses incurred by the organization as a result of a lawsuit. However, there are some exceptions; most directors and officers insurance policies exclude criminal offenses and cases of fraud.
General Liability Insurance
General liability insurance, also known as business liability coverage, is a type of insurance that protects organizations from a wide range of claims, such as bodily injury, advertising injury, property damage, reputational harm and copyright infringement. For example, if someone became injured on businesses premises and sued the organization, general liability insurance would help cover those related expenses.
It is important to understand that general liability insurance does not cover everything. Some common claims that are excluded include commercial auto accidents, damage to one’s own business, employee illnesses and injuries, errors in professional services and claims that cost more than the policy limit.
Nonprofit Health Insurance
Nonprofit health insurance is essentially the same as traditional health insurance as it provides coverage for common healthcare and medical expenses. The main difference between the two is that nonprofit health insurance companies do not operate to make a profit from their shareholders, and instead provide services to its members.
Nonprofits that choose this type of health insurance are still required to pay a monthly premium and other common health insurance expenses, such as copays, deductibles and coinsurance. According to the Alliance for Advancing Nonprofit Health Care, approximately 63 percent of all U.S. health plans with more than 100,000 enrollees are nonprofit.
Additional Lines Of Coverage For Nonprofits
Some nonprofit organizations may seek more comprehensive coverage. Today, there are many ways in which nonprofits are able to protect their interests, such as workers compensation insurance, cyber liability insurance, commercial auto insurance, property insurance and employee dishonesty insurance. Larger nonprofits will generally require more in-depth coverage than small businesses, with fewer risks.
Additional lines of coverage to consider for a nonprofit include:
- Workers compensation insurance – With a workers compensation insurance policy, nonprofit organizations are protected in the event that an employee becomes ill or injured while performing job duties. Workers compensation pays for medical expenses, disability benefits and even death benefits to families of ill or injured employees.
- Property insurance – Although many small nonprofit organizations do not have costly property, having this type of insurance can still be advantageous. Property insurance not only covers equipment, tools and materials used by businesses, but also damaged property relating to burst pipes, storms, theft and vandalism.
- Commercial auto insurance – If a nonprofit organization uses vehicles for work-related purposes, having commercial auto insurance ensures that expenses are covered in the event of a vehicle accident.
- Employee dishonesty insurance – Also referred to as crime coverage, this type of insurance helps replace funds stolen by staff. Many foundation grants and municipal contracts require nonprofits to have this type of coverage.
- Cyber liability insurance – With the rapid growth of the internet, cyber liability insurance is invaluable for any nonprofit organization. Cyber liability insurance provides coverage for financial losses or lawsuits stemming from the loss or corruption of sensitive client data, employee data or donor data.
Speak With A Business Insurance Broker Today
Having the correct insurance policies alleviates the fear of legal risk while a nonprofit organization is serving their community. For more information about the types of insurance best suited for nonprofit organizations, speak with an experienced business insurance broker at Business Benefits Group.