Insurance can be overwhelming for anyone, let alone for a nonprofit organization. However, it is extremely important to stay educated on the types of insurance your nonprofit may need.
View insurance as a step along the way to fulfilling your mission, as it will help protect your organization and its assets and limit barriers to success.
Here are some of the types of insurance policies you may come across. Every nonprofit’s needs are different, so you will likely require a specific combination of policies.
Directors and Officers
A directors and officers policy is important to consider as the management and board of your organization can be sued for wrongful acts or mismanagement, which can result in financial damages not covered by your general liability policy. This coverage can provide defense and indemnification for lawsuits alleging errors made by higher tier executives.
Employment Practices Liability
An employment practices liability policy protects your organization against employee claims of legal rights violations. These internal violations can include sexual harassment, discrimination, and wrongful termination. Some of this type of coverage may be included in your Directors and Officers policy.
A general liability policy can protect your organization from claims alleging negligent conduct by your employees, volunteers, or agents. Negligent conduct means your nonprofit failed to use the proper standard of care when carrying out services and this resulted in bodily injury, property damage, or personal injury. This type of policy is one of the most common for nonprofit organizations.
California requires that all employers with more than one employee provide workers’ compensation coverage for job-related injuries or illnesses. This policy will protect your organization from employee lawsuits claiming negligence as a cause of workplace illness or injury. Like most other policies, it can be helpful to get quotes from several providers as premiums can vary greatly.
There are two types of auto coverage: hired and non-owned policies and commercial automobile policies. A hired and non-owned policy protects your organization against claims from employees and volunteers. If an employee or volunteer gets into an accident while driving their personal vehicle on behalf of your organization, this policy could protect against extended losses or lawsuits.
Commercial automobile policies protect the organization when an employee or volunteer is at fault in an accident and can also cover physical damage.
Property insurance will protect property the nonprofit owns. Optional property coverage can include computer or electronic data processing policies.
This policy can protect against employee risk of crime such as embezzlement, forgery, theft, or vandalism. Optional policies also cover third party crime such as robbery.
Business Interruption Insurance
Generally, business interruption insurance protects an organization against lost income due to physical loss or damage to covered property resulting from covered peril. Some business interruption policies include special endorsements that insure against lost income sustained due to the existence of a communicable disease at the insured property or a government order prohibiting the use of the property.
There are many elements to consider when shopping for policies: measurement of risk, monetary limits, who is to be covered, and more. Make sure to work with an insurance agent who understands or specializes in nonprofit insurance and the specific risks you may encounter. This will ensure an informed and trusted decision.
Staying informed is the best way to protect your organization from any harm that could burden your mission.
Next time we will take a look at nonprofit risk assessment and how it can help you determine what insurance you may need.
Learn more about the various types of insurance: