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In our increasingly litigious society, it only takes one accident, oversight, or misunderstanding to trigger liability lawsuits. Nonprofits can face lawsuits from volunteers, donors, employees, and government regulators. Nonprofit leadership is also often a common target for litigation. According to a Towers Watson Directors & Officers (D&O) Liability Survey, 63 percent of nonprofit organizations reported a D&O claim in the past 10 years. Proper coverage will cover legal costs or damage awards in such instances.

The risk of injury to volunteers and third parties within the nonprofit sector can vary depending on the type of operation the organization is running. Nonprofits that do hands-on work, or have an office space are at risk of being held liable if an accident or an injury results from their operations or on their property.

Any nonprofit organization that engages in counseling, vocational training, and other kinds of instruction has significant professional liability exposure. This includes organizations like:

  • Churches and religious organizations
  • Volunteer health organizations and charities
  • Educational organizations and charities

Additionally, nonprofits have a high risk of data breaches and cyber attacks as they commonly maintain donor financial files, employee records, volunteer, and client data online. Beyond financial costs, lawsuits and data breaches can damage a nonprofit’s reputation and lead to a significant decrease in access to both donations and volunteers.

What Insurance Policies Do Nonprofits Need?

While every organization has unique insurance needs, there are core insurance policies that most nonprofits should obtain in order to mitigate and transfer risk:

General Liability Insurance:
A general liability insurance policy protects nonprofits from injury claims, advertising claims, and property damage claims. It will also cover defense costs, including court costs, witness fees, and attorney fees, in addition to judgment or settlement monies. Every nonprofit that does hands-on work or utilizes an office space should purchase general liability insurance.

Workers Compensation Insurance:
Injuries within the nonprofit sector can vary depending on your specific industry and the type of operation you run. If someone on your staff is injured in the workplace, workers compensation insurance will pay for medical care and lost wages. It’s important to note that workers comp covers volunteers and isn’t reserved exclusively for paid members of your staff.

Professional Liability Insurance:
Also known as professional indemnity or errors & omissions (E&O) insurance, this insurance policy keeps you and your organization protected from civil lawsuits for negligence, common mistakes, misrepresentation claims, and more.

Commercial Property Insurance:
This policy protects property owned and operated by your organization such as buildings, contents, equipment, and personal property used in your operation from perils of fire, theft, and natural disasters. Business interruption coverage is not sold as a stand-alone policy but can be included with a property insurance policy. This is crucial for nonprofits as they typically operate on a limited budget and even the shortest of interruptions can be financially devastating.

Directors & Officers Insurance:
D&O insurance covers defense costs and damages (awards and settlements) from wrongful acts, allegations, and lawsuits brought against your company’s board of directors and/or officers. It’s a type of insurance that was designed for the purpose of protecting your organization’s leaders (both current and past) from lawsuits and litigation. Board members are exposed to a number of personal liabilities even if they’re volunteering their time for a nonprofit organization. Convincing qualified candidates to sit on a nonprofit’s board can be a matter of whether or not they are protected by D&O insurance.

Employment Practices Liability Insurance (EPLI):
EPLI provides protection against employee claims related to issues such as wrongful termination, harassment, and discrimination. As with all of the other employee-related policies, EPLI coverage can also extend to covering claims involving volunteers, not just paid workers.

Cyber Insurance:
Most nonprofits keep detailed records of their donor, client, and volunteer personal information. They are legally liable to protect this data and the right cyber insurance policies can help transfer the risk of being hacked and compromised in any way.

Commercial Auto Insurance:
If your nonprofit uses cars, trucks, and vans in your daily operations, they will not be covered by a personal auto insurance policy. A commercial auto insurance policy provides liability coverage that will pay for damages to third-party property or injuries resulting from accidents involving your vehicles. You’ll also be able to add coverage for any medical bills of your own and damages that your vehicles may incur.

What Does It Cost?

Every nonprofit is different and so are their insurance needs and costs. The most common cost drivers tend to be the number of volunteers and employees working for the organization, the size of the NPO’s property, the services they offer, and whether or not they depend on any special equipment to perform their work.

Essentially, what they do, how they do it, and to whom they offer their services are all aspects that affect the cost of insurance.

Working with the right partner will ensure they are not only negotiating the right coverage but the best possible pricing options for the nonprofit as well. Embroker believes in giving our clients better choices using data and transparency. We benchmark all of your policies against similar organizations in your vertical, then procure multiple quotes from an independent broker. We also cross-reference your costs with nonprofits of comparable size, policy limits, claims history, and risk tolerance.

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