Is your nonprofit properly insured?
Insurance is a critical part of a nonprofit’s overall risk-management strategy. From protecting employees and volunteers to safeguarding facilities, programs and financial resources, the right coverage can help your organization remain resilient in the face of unexpected events. The challenge is finding the appropriate balance — securing adequate protection without paying for more coverage than you need based on your actual risks.
Evaluate the basics
One type of insurance that’s almost always necessary is a general liability policy for accidents and injuries that occur on a nonprofit’s property involving clients, volunteers, suppliers, visitors and anyone other than employees. Also, your state likely mandates unemployment insurance and workers’ compensation coverage.
Property insurance that covers theft and damage to your buildings, furniture, fixtures, supplies and other physical assets is essential, too. When buying a property insurance policy, make sure it covers the replacement cost of assets, rather than their current market value (which is likely much lower).
Consider other types of coverage
Depending on your nonprofit’s operations and assets, you may want to consider optional insurance protection, including automobile, product liability, fraud/employee dishonesty, business interruption, umbrella coverage, and directors and officers (D&O) liability insurance.
Today, it’s also important to look at cyber insurance. It can protect your organization from the financial impact of data breaches, ransomware attacks and other cybersecurity incidents. It typically covers costs such as breach response, legal expenses, notification requirements and lost income from system downtime.
If you conduct special events, also consider insurance that covers associated risks. Before purchasing a separate policy, however, check whether your nonprofit’s general liability coverage extends to special events.
Prioritize significant exposures
Because you’re likely working with a limited budget, focus on the risks that pose the greatest threats. Then discuss with your financial and insurance advisors the types — and amounts — of coverage that will mitigate those risks.
Don’t assume insurance alone will address your nonprofit’s exposure. You should also take steps to help reduce the likelihood that you’ll ever need to file an insurance claim. For example, put in place internal controls and other risk-avoidance policies, such as employee orientations and ongoing training.
Right-size your protection
Your nonprofit’s insurance coverage should reflect its specific activities, assets and obligations — not follow a one-size-fits-all checklist. Regularly reviewing coverage can help ensure your organization is protected against evolving risks while avoiding unnecessary costs. Contact us to evaluate your insurance needs and strengthen your risk-management strategy.
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