Do Nonprofits Need Insurance?

Nonprofit organizations are a diverse group of companies that may not be focused on generating profit, but they do still need to protect their assets and property from financial losses. Just like any business, mistakes and accidents happen, and nonprofits are no exception. This is why it is vital to find the right insurance coverage to provide protection and peace of mind for all stakeholders involved.

The answer to the question “do nonprofits need insurance?” is a very complicated one. Every 501c3 company will have different insurance needs, depending on its size, industry and location. Some of the main types of insurance that nonprofits typically require include general liability, commercial auto, commercial property and crime coverage. In some cases, these policies will be bundled into a single package policy called a business owners policy (BOP) or a commercial package policy that will contain all the main coverages required for nonprofits.

General Liability Insurance: The most important policy for a nonprofit is the general liability policy. This provides protection in case a third party is injured on the nonprofit’s premises or if they experience property damage caused by the organization or its employees. Nonprofits that use volunteers should also look into getting a crime policy (or crime bond) as this coverage will help pay for stolen equipment, inventory or supplies.

Business Interruption Coverage: This is another type of policy that is commonly purchased by nonprofits as it can protect the organization financially if they are forced to close for an extended period of time due to a covered peril. For example, if a tornado or flood affects the area where a nonprofit is located and they are unable to operate for several weeks, this policy will pay for lost revenue, expenses and overhead.

Directors and Officers Liability Insurance: This policy protects the board of directors from lawsuits if they are accused of mismanagement. This can be as a result of bad investments or even alleged fraud. This policy will cover legal representation and the payout of damages caused by the plaintiff.

Auto Insurance: Nonprofits often need an auto insurance policy if they are using volunteers or employees to transport people and materials for their events, programs or services. This is especially true if the organization does not have its own vehicles as it will need to get a non-owned auto policy to protect their vehicle fleet.

It is a good idea for nonprofits to discuss their specific risk exposure and insurance needs with an experienced broker or agent to ensure that all the proper coverage is in place. They should also discuss potential discounts and additional policy options that can be purchased to save money. It is also recommended that they review their insurance history to make sure all past claims have been correctly reported and paid. For more information about the importance of having the right nonprofit insurance coverage, contact CS Plus today for an Insurance Review or a Nonprofit Insurance Consultation.

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