What Type of Insurance Does a Nonprofit Organization Need

A nonprofit organization exists to make a difference in society. Like any business, they need to take in more money than they spend, otherwise they will not be able to sustain their operations. To do so, they often have multiple revenue streams such as donations, grants, product sales, sponsorships and event tickets. This diversity in funding sources makes it important that a nonprofit has insurance coverage in place to protect against unforeseen events, accidents and lawsuits. In a recent article, personal finance website The Balance discussed 7 insurance types that every nonprofit should have.

While the number of policies a nonprofit needs will vary, most nonprofits need at least General Liability Insurance and Directors & Officers (D&O) insurance. D&O insurance provides protection in the event that a director or board member is sued for actions related to their work at the nonprofit. It can cover legal defense costs and compensation awarded to victims of negligence, mismanagement or sexual harassment.

Nonprofits may also need professional liability insurance, which is similar to D&O insurance but covers errors and omissions rather than just directors and officers. It is especially beneficial for organizations that offer services to clients such as coaching, counseling, education, mentoring and more. The policy provides protection against claims alleging negligent acts such as mishandling, copyright infringement and more.

Finally, a nonprofit should have commercial auto insurance, which is the type of policy that covers damage to vehicles used by staff and volunteers. It is often purchased in a bundle with other policies such as commercial property and general liability to create a business owners policy or BOP.

Insurance companies typically rate policies by deductibles, with the higher the deductible, the lower the premium. A nonprofit should always consider a range of deductible options and compare the cost of each to determine what option is best for their budget.

Other important policies that a nonprofit should consider include workers’ compensation, property and crime insurance. Workers’ compensation provides financial support to employees who are injured on the job, while property and crime policies protect against theft or damage of equipment or assets.

Many nonprofits also hold special events, fundraisers or other activities that require additional coverages. These can be insured by event insurance to provide liability and property coverage for the locations where these events are held, as well as third-party stakeholders such as vendors and attendees.

The best way to determine what specific policies are needed by a nonprofit is to speak with an independent agent that specializes in insuring these businesses. The agent can review the company’s history, coverage limits and more to find the ideal plan. They can even help compare costs with other nonprofits of a similar size, industry and risk tolerance to ensure the proper coverage is in place. what type of insurance does a nonprofit organization need

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