Types of insurance a non-profit organization needs

Lawsuits: the non-profit’s worst enemy

When you consider the limited budgets  non-profit organizations run on, it’s not surprising that a single lawsuit could have a devastating impact on that organization; if not shutting them down, then seriously damaging their reputation.

However, there’s a way to help prevent this from happening: the right insurance.

If you’re associated with a non-profit organization, here’s a brief outline of a few different types of insurance which could help protect your organization from potentially crippling lawsuits.

Insurance essentials

General liability insurance provides basic liability coverage and should be bought by every organization. This is what’s known as “slip and fall” insurance. This means that if someone is hurt on your premises, or their property gets damaged, you are covered if they claim against you.

Unsurprisingly, these types of mishap often happen more frequently when alcohol’s around, so if you ever hold special events or fundraisers it’s definitely worth checking what your general liability covers, and potentially buying liquor liability if it falls short.

Insurance for your property

If your organization has its own headquarters (either owned or rented), consider the effect on the organization if the property were to be damaged or destroyed. Assess the risks of fire, earthquake, flood, vandalism or theft and make sure you’re covered against those which are appropriate. Make sure your property insurance covers fixtures; the loss of furniture, computers or sports equipment would be pricey to replace and damaging to your operation.

Insurance for your people

Just like a private company, if you have any employees you need to buy worker’s compensation. This type of insurance pays out benefits to workers who have suffered work-related illnesses and injuries.

If you don’t have it and an employee becomes sick or is injured, you could be sued. Many insurers also offer packages specializing in coverage for volunteers so if you often use unpaid workers, it would also be worth looking into this.

Insurance for your board members

Should we buy directors’ and officers’ insurance? It’s a question often asked by non-profit organizations.

Board members of any non-profit organization can be found personally liable for any mishaps which occur while they’re acting in an official capacity.  If the organization can’t afford to pay legal fees or damages, the individual will have to cover it themselves.

If the non-profit organization has directors’ and officers’ insurance, this could help cover any costs incurred in defending the board member against these allegations, as well as cover damages or settlements if they were found to be in the wrong.

Weigh up the risks

Most lawsuits claimed against non-profit organizations are for the usual “slip and fall” incidents covered by general liability insurance.

Claims against individual board members, on the other hand, are usually only made by employees or volunteers, for things like unfair dismissal, harassment, or discrimination.

So if your non-profit doesn’t employ anyone, there’s less risk of a claim being made against your board members.

Ultimately, it’s a matter of discretion: do your other types of insurance cover you against the sorts of claim which are likely to be made against your organization?

If there are any gaps which you feel could put individual members at risk of liability claims, then directors’ and officers’ insurance may be what you need.

Size up your coverage needs

Larger or more successful organizations that are more likely to face bigger claims ought to consider the potential usefulness of umbrella insurance.

Umbrella insurance works by sitting on top of your existing coverage, thereby providing you with additional coverage limits.

As well as this, umbrella insurance usually fills in any holes where your other insurance policies don’t quite overlap, making sure all areas are covered.

Fewer risks, fewer claims

The main thing to remember is to assess what your needs may be and make sure that your operation is as low risk as possible.

By identifying areas of risk in your operation, you can stop some potential problems before they develop into lawsuits against board members.

Once you’ve prevented mishaps and mess-ups as much as you can, choosing the right insurance can help to protect your non-profit organization from those risks which are impossible to predict.