While nonprofits may not exist for the sole purpose of making a profit, that doesn’t mean they don’t face the same business risks as any other company. In fact, a single unexpected expense could potentially cause financial ruin for many charitable organizations. That’s why it is essential that they take steps to prepare for the unexpected and protect themselves from liability. The answer to the question, do nonprofits need insurance, will differ depending on a variety of factors and should be discussed with a trusted insurance broker who understands the unique needs of charitable businesses.
There are some general policies that all nonprofits should have in place to mitigate risk and protect themselves from potential loss. These include the bare necessities of property and liability insurance. In addition, many charitable groups can benefit from additional coverage to help them meet state requirements or protect their reputation and assets.
Whether they have employees or volunteers, all nonprofits should carry workers’ compensation insurance to help pay for medical expenses and lost wages when an employee is injured on the job. This policy is required by most states, and it can also be helpful to protect against claims of discrimination or harassment.
Since nonprofits operate on tight budgets, it is important that they have a solid property insurance plan in place to guard against unexpected damage or loss. This type of insurance typically covers items such as buildings, vehicles, desks, computers and other equipment. It can also help cover loss of income due to a disaster, such as a flood or fire. Many of these policies can be bundled together into a commercial package policy that may be more cost effective than getting individual policies for each area of concern.
Nonprofits also need to be mindful of data and information security, just as any other business does. This is particularly true if they retain confidential client, donor or employee data. This policy can help to safeguard against data breaches, hackers and other cyber threats.
Finally, it is a good idea for nonprofits to have business interruption insurance in case of a disaster that affects the ability of the organization to make money or fulfill its mission. This coverage can help to offset the costs of operating expenses or even rebuilding if necessary.
While there are a number of different types of insurance available, every nonprofit is unique and will have specific insurance needs. It’s best to work with an experienced insurance broker who can help to identify the most appropriate policies for each circumstance and ensure that all underlying risks are properly covered. A broker can also review pricing and compare policies against those of similar nonprofits in the same industry to ensure that the best deal is being obtained. They can also advise on how to maximize the coverage of existing policies, such as bundling general liability and property insurance into a business owners policy. To learn more about the types of insurance that a charity may need, read this article from personal finance website The Balance.