Although nonprofit organizations are not structured to create profit, they operate very much like regular businesses. As such, they face many of the same liabilities and risks that corporations do. As such, it is essential that nonprofits have insurance to protect them from financial loss in the event of a lawsuit or other disaster.
The answer to the question “Do Nonprofits Need Insurance?” depends on several different factors. However, most nonprofits will need general liability and directors and officers (D&O) insurance at the very least. Other coverage may be needed depending on the type of work a nonprofit does, its size and other unique factors.
For example, if a nonprofit has volunteers that drive on behalf of the company to run errands or transport clients, a commercial auto policy is needed. This type of policy provides liability coverage that will pay for third-party damages or injuries resulting from a car accident. Nonprofits can also add on coverage for rented and non-owned cars in addition to the company’s own vehicles. This is particularly important if a nonprofit works from regions outside the United States, as this can provide critical protection for employees and the organization’s assets in the event of an accident or other crisis.
Another area in which a nonprofit should consider getting coverage is for data breaches or other cybersecurity issues. This is a growing concern for all types of businesses, and a nonprofit can be just as susceptible to a cyber attack as any other business. In fact, it is even more important for a nonprofit to have this coverage, as confidential client, donor and employee information is likely at risk. This is especially true if the organization uses mobile devices to access its data, such as laptops and cellphones.
It is also essential for a nonprofit to have property insurance to cover any damage to its buildings or other physical infrastructure. This type of insurance can cover replacement or repair costs, as well as lost income and regulatory interruption expense. Additionally, some policies include crime coverage, which can help reimburse a nonprofit for money stolen from the office or during an event such as an arson fire.
Finally, a nonprofit should have workers’ compensation insurance in case an employee is injured on the job. This type of insurance can pay for medical expenses and wage replacement, as well as any legal fees incurred by the employer in the event of a lawsuit.
When selecting an insurer, it is important to find one that specializes in working with nonprofits. Those that have worked with nonprofits in the past will understand their unique needs and challenges better than those who do not. It is also helpful to get quotes from multiple insurers to see what options are available and how competitive the pricing is. Finally, it is always a good idea to ask an insurer for references from other nonprofits that they have worked with in the past.