Embroker’s Nonprofit Practice
Investing in the right insurance solution helps transfer risk to third parties and allow nonprofits to confidently focus on maximizing their missions and impact.
As a nonprofit, your mission is to make the world a better place. It’s not easy and there are many challenges nonprofits must face associated with operations, fundraising, public relations, volunteers, and more. No matter what your cause is or who you’re helping, your organization serves a purpose beyond the bottom line. But just because you’re a nonprofit does not mean that there’s not a lot of money tied up in what you do.
That’s why every nonprofit needs to invest in the right risk management solutions in order to allow it to continue to stay afloat and continue its mission even when potentially disastrous accidents and incidents occur. After all, a simple lawsuit can be enough to financially devastate even the best-run nonprofit organization.
We wrote this guide to help you, the reader, understand both the basics of insurance for nonprofits as well as some more advanced considerations. Our hope is that you walk away from this article a more empowered buyer, with a better understanding of the risk you can transfer to other parties via the right insurance coverage.
If you’d like help, we’d invite you to talk with a broker or get started by creating an Embroker account. Our highly experienced insurance experts will work with you to gain a deep understanding of your unique needs before negotiating a customized policy on your behalf. For more clarity on pricing, your business will be benchmarked against similar nonprofits in your vertical.
How to Find the Right Coverage for Your Nonprofit
It takes a lot of hard work to run a successful nonprofit. Just because your end goal isn’t your bottom line, doesn’t mean you should have to settle for an inferior insurance program. That’s why we strongly encourage you to look for a broker who has a program tailored for your industry.
Working with a partner that has experience placing NPOs and supporting claims ensures that they will be able to intelligently tailor an insurance program for your business across the following components:
How well does your broker understand your challenges and your specific needs based on your industry and vertical?
How much does adequate coverage cost on a monthly or yearly basis? Knowing this will help your nonprofit budget accordingly and create long term plans.
How much coverage do you need in the event of a claim? How much monetary risk do you expect given your organization’s operation? What does your risk program look like when you hit certain milestones?
Coverage terms and conditions:
What are the details that really matter to your operations? Each policy can have unique terms; endorsements that can be added and exclusions removed to tailor the coverage to your risks. A savvy broker who understands the needs of your organization will negotiate these terms to match your exposures.
Why Do Nonprofits Need Insurance?
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 the Willis Towers Watson Directors & Officers Liability survey, nonprofit organizations are twice as likely to file D&O claims than public and private companies. Proper coverage will cover legal costs or damage awards in such instances.
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
- All other nonprofits
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.
Worker’s 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 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.
Highly-Publicized Examples of Insurance at Work for Nonprofits
- Schenectady-based non-profit Things of My Very Own was hit by an unexpected flood that caused thousands of dollars in damages. The flooding was caused by ice thawing and refreezing on the roof of their building.
See: Local Nonprofit Hit With Floods
- A year after one of its employees was crushed to death, Sacramento’s Goodwill operation faced yet another new lawsuit from former workers and additional government scrutiny over its safety practices.
See: Sacramento Nonprofit Faces More Lawsuits, New Safety Probes
- The Community Child Care Council of Santa Clara County, Silicon Valley’s largest publicly funded child care provider, has been accused of mismanaging its employee pensions, according to a class-action lawsuit filed in the U.S. District Court in San Jose.
See: Child Care Nonprofit Allegedly Mismanaged Employee Pensions
- Addiction services nonprofit OnTrack was named in a new lawsuit by former and current employees who alleged whistleblower retaliation, infliction of emotional distress, and violations of both state wage and family leave laws.
See: Second Lawsuit Alleges Mistreatment By Ontrack Founder Rita Sullivan
Nonprofit Insurance Costs
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 to 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.
Now that you have a better understanding of insurance for nonprofits, you may be wondering how all of this affects your organization and where to go from here. If you need more help or information, you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, create your Embroker account today.
Nonprofits require unique insuring expertise and experience. Our Nonprofit Practice team will work closely with you to design a sustainable, cost-effective solution to help protect your mission with expert coverage.
Embroker is the easiest way to intelligently insure any business. We’re here to help!