America's 1.5 million charitable non-profits house, teach, feed, and support people of every age, gender, race, and socioeconomic status from coast to coast. In fact, if non-profits were a country, they would have the 5th largest economy in the world.
And after the year we’ve had, I think it goes without saying that communities across every state need healthy and effective non-profits now more than ever.
One rewarding aspect of our job as insurers is helping these non-profits stay focused on their missions by ensuring they have the right insurance coverage in place. Although every organization’s needs are different, here are some guidelines about coverage options for nonprofits:
Liability insurance
Liability insurance protects a nonprofit from claims that allege negligence by the organization, its employees, or its volunteers. Simply put, negligence is the failure to take proper care in doing something.
The legal definition is a little more nuanced. It defines negligence as “the failure to exercise care toward others which a reasonable or prudent person would do in the same or similar circumstances.” For this reason, we recommend liability insurance for all our non-profit clients.
5 types of liability insurance
There are five types of liability insurance a nonprofit should consider based on their unique needs and services:
1. Commercial general liability
The most common liability policy for non-profits is a commercial general liability policy. A policy of this nature covers claims for bodily injury, property damage, personal injury, and advertising injury.
2. Business auto
If a nonprofit owns vehicles, we recommend a business auto policy to cover auto liability and physical damage.
If the organization doesn’t own any vehicles, a hired and non-owned auto liability coverage policy is the right choice. This type of policy covers physical damage to another person’s car, medical expenses if someone else gets hurt, and legal expenses if a nonprofit is sued for negligence.
3. Directors’ and officers’ liability
Another liability policy to consider is a directors’ and officers’ (D&O) policy. This type of policy protects the organization, directors, officers, employees, and volunteers for “wrongful acts” in managing the organization.
If you have employees, you’ll want to ensure your D&O policy includes employment practices liability coverage—most non-profit D&O policies do. This type of coverage protects employers against claims made by employees alleging:
Discrimination (based on sex, race, age, or disability)
Wrongful termination
Harassment
Other employment-related issues, such as failure to promote
Keep in mind employment-related claims are the most common type of D&O claims filed against nonprofits.
4. Workers’ compensation
If you have any full-time or part-time employees, your state law likely requires your nonprofit to carry a workers’ compensation policy—another form of liability coverage.
5. Umbrella or excess liability policy
An umbrella or excess liability policy is a smart catch-all for nonprofits. It provides added policy limits for a catastrophic loss over the general liability, business auto liability, and employers liability policies.
Property insurance
A commercial property policy covers a nonprofit’s physical location along with furniture, fixtures, and office equipment. Additionally, if they own computers or electronic equipment, a computer or electronic data processing policy may be a good option. It provides coverage due to power surges, head drive crashes, and even viruses.
This is a broad overview of some of the coverage types we highly recommend for our nonprofits. Additional policies like an employee dishonesty policy or business owners policy are also available.
Proper insurance coverage allows nonprofits to spend their time focused on doing what they do best: making a positive impact on others--and we’re here to help.
If you have questions or need more info on any of these options, please let us know so we can help you get the appropriate coverages your nonprofit needs. Our team is here whenever you need us. You can contact us at (516) 277-0812 or via email at info@thesarricagroup.com.