7 Essential Insurance Policies for Nonprofits
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Adequate insurance coverage for your nonprofit can protect you from a number of potential risks and ensure you can continue doing good work.
Nonprofit organizations are similar to businesses insofar as they offer goods or services. They do, however, often differ when it comes to structuring and operations. For this reason, it may be wise to purchase some traditional business insurance policies for your nonprofit as well as certain policies unique to nonprofits (learn about the 6 Types of Insurance All Businesses Should Have).
Traditional Business Insurance Options
Auto Insurance : This policy is especially important if your nonprofit has its own fleet of vehicles that you let your employees drive. The more employees you have out on the streets driving vehicles, the higher the risk that one will cause an accident or be involved in one (learn more in The Ultimate Guide to Auto Insurance).
You may also want to purchase car insurance even if your nonprofit does not own any vehicles, but you let employees use their own cars to do work for the organization. You can still be held liable if an employee causes an accident while conducting official business; therefore, it's good to be protected in case these types of circumstances arise.
General Liability Insurance: This type of insurance protects your nonprofit from injuries that occur to non-employees on the premises of your organization, or as the result of another aspect or feature of your organization, such as product use. Employees, however, don't need protection under this type of policy. Workers' compensation should cover them.
Worker’s Compensation: It covers injuries that occur to your employees while they are working. This insurance prevents your nonprofit from having to shoulder all the damages if a bad injury or illness occurs to one of your employees due to the work they do for your nonprofit (see An Intro to Workers' Compensation to learn more).
Directors and Officers Liability Insurance: The people who run your nonprofit, the directors and officers, can sometimes make mistakes, or otherwise mismanage the nonprofit. This type of mishandling of your organizations affairs can also result in lawsuits. For example, if the directors neglect a legally binding contract, your nonprofit can be held liable. In such cases, directors and officers liability provides financial coverage in the event that you are sued due to this type of situation (see Insurance and Lawsuits to find out what happens if you are sued).
Commercial Property Insurance: The building that your nonprofit is housed in can also potentially face perils. For example, fires, hurricanes, or earthquakes can all damage your commercial property. Property insurance hedges you against huge losses in the event of major damage occurring to your property. It is also important to note that many commercial property insurance policies offer coverage for contents, stock, and equipment (learn more in Business Insurance: Building, Contents and Stock).
Insurance Policies Specifically for Nonprofits
Volunteer Liability Insurance: Unlike corporations, nonprofits commonly use the services of volunteers to help with operations. Because worker’s compensation does not cover them as they are not actually employed, if a volunteer gets an injury or an illness, or has property damaged, and so on while working for the your organization, you could be held liable. Volunteer liability insurance can help you protect you from these types of liabilities.
Employee/Volunteer Dishonesty Insurance: Even at a nonprofit, employees and volunteers are not always 100 percent morally sound. Sometimes, they may engage in dishonest activities, such as embezzlement or forgery. Your nonprofit could face lawsuits as a result and be forced to pay damages that this type of policy would help protect you against.
It is better to be prepared for lawsuits against your nonprofit than to assume they simply won't happen, or to neglect the various risks you are exposed to in running such an organization. After all, many nonprofits are involved in charitable work or work that aims to toward better human society. It will be a lot harder to make the world a better place if financial woes due to coverage gaps set you back. In the long run, it may be worth the time to consider various types of essential insurance coverage for your nonprofit.