Do nonprofits need liability insurance? Nonprofit organizations usually operate or run with deep dedication and tight budgets to complete their mission and pay more attention to the resources of their services and programs instead of the administrative costs. However, among their efforts, nonprofit organizations are exposed to potential liabilities and risks.
What’s more, lawsuits and accident claims can arise suddenly, and this can affect the operation and financial stability of the organization. This makes everyone wonder if liability insurance is necessary for nonprofits. Well, the answer to this question will be available in this blog post. Before we begin, it is important to know that liability insurance plays an important role in safeguarding nonprofit organizations from operational risks and legal claim impact financially.
What is Liability Insurance?
Liability insurance is a form of coverage that offers financial protection to individuals and organizations from legal claims associated with negligence, injuries, or damages. With liability insurance, allegations of misconduct, property damage, and bodily injury are covered.
Meanwhile, the main objective of this insurance type is to protect organizations from substantial financial losses by covering legal judgments, settlements, and costs of covered claims. Nevertheless, this form of insurance is beneficial for nonprofits because they can carry out their charitable events or activities without worry.
Types of Insurance Policies Nonprofit Organizations Need
Nonprofit individuals and businesses need different forms of insurance quotes to protect their assets and operations. Here are some of the commonly recommended insurance quotes for nonprofits:
General Liability Insurance
This form of insurance offers protection against third-party claims for property damage and bodily injury that take place during nonprofit events.
Property Insurance
Property insurance provides coverage for inventory, loss to buildings, office equipment, other owned properties, and damages.
Directors and Officers Liability Insurance
Directors and Officers Liability Insurance, also known as D&O insurance, is essential when it comes to safeguarding the decisions of the board members and officers. Wrongful termination, harassment, and discrimination are covered.
Auto Insurance
This type of insurance protects the cars and vehicles used for non-profit business, and physical damage to the vehicles and liability for injuries are covered by auto insurance. Volunteers may benefit from a non-owned auto insurance policy.
Cyber Liability Insurance
Cyber liability insurance is advantageous for organizations that manage confidential and personal data. This coverage includes protection for data breaches resulting from intentional or accidental information release.
Workers’ Compensation Insurance
This insurance provides protection and coverage for employees who suffer work-related injuries. Lost wages for on-the-job injuries and medical expenses are covered by workers’ compensation insurance.
Crime Coverage
Crime coverage is a form of insurance that manages losses from dishonesty and theft by volunteers or employees. However, off-premises and on-premises coverage is limited.
Professional Liability Insurance
Professional liability insurance is also known as errors and omissions insurance. What’s more, it covers claims due to omissions or mistakes by board members.
Employment Practices Liability Insurance (EPLI)
EPLI, also known as employment practices liability insurance, is a type of coverage that offers protection against claims associated with employment practices like discrimination, sexual harassment, wrongful termination, and other employee-related circumstances or situations.
Do Nonprofits need Liability Insurance?
Certainly, nonprofit individuals and businesses need liability insurance to get protection against different potential risks. Although they are dedicated to doing good, they are not entirely free from claims and lawsuits. Thus, without this form of insurance, nonprofits can experience significant financial burdens if they get sued. As a result, there is service disruption and important resource loss. So, to cover the damages, legal fees, and settlements, liability insurance is necessary, as it mitigates the associated risks as well.
Nonprofits That Need Nonprofit Liability Insurance
Here are some organizations that should consider purchasing a nonprofit liability insurance policy:
- Social clubs.
- Charities.
- Voluntary employee benefit associations.
- Business associations and organizations.
- Churches.
- Healthcare nonprofits.
- Political organizations.
- Community centers.
- Trade associations.
- Summer camps.
- Labor and agricultural organizations.
- Educational nonprofits.
- Human rights organizations.
Common Claims Against Nonprofits
Nonprofit businesses and individuals are exposed to different forms of claims, like the following:
- Property damage.
- Slip and fall accidents.
- Contractual disagreement.
- Employment practices.
- Personal injuries.
- Professional mistakes.
- Discontented donors.
- Financial reporting.
All of these claims can lead to major legal settlements and costs, making having this form of coverage important.
Non-Profit Insurance Cost
The cost of purchasing a nonprofit insurance policy is based on several factors. Here are some instances:
- The size of the organization.
- Location.
- Level of risk.
- Coverage type.
- Claims history.
- Insurance provider.
- Number of employees.
- Nature of the work.
Meanwhile, on average, for small nonprofit organizations, the cost of general liability insurance is around $500 to $1,500 per year. On the other hand, other comprehensive quotes with additional coverage can increase the premium cost. Nevertheless, you can compare policies among insurance companies for competitive rates.
How to Choose Liability Insurance for Nonprofit
Choosing liability insurance for nonprofits can seem challenging, especially if this is your first time. But with the right steps and guidance, you can purchase a good policy that meets your needs:
- Evaluate your risks.
- Work with an insurance broker.
- Compare insurance quotes.
- Look for exclusions, premiums, and coverage limits.
- Purchase a quote.
- Make premium payments to activate coverage.
- Review and update your insurance policy regularly.
- Consider add-ons.
By choosing and maintaining enough liability insurance carefully, nonprofit individuals and organizations can manage risks, safeguard their assets, and focus on working with security and confidence.