Nonprofit and non-for=profit organizations have always been an active part of American society, recruiting volunteers in different activities such as sports, charity, mentorship programs and many others. But because such organizations are closely involved with serving the public, they usually face higher risk compared to typical profit organizations. So getting such an organization insured is an important aspect of its success. Fortunately, there are incentives for nonprofits concerning insurance in the federal legislation and this could be a very good stimulation of covering your nonprofit organization to the right extent.
As with any other organization, a nonprofit organization should carry commercial general liability insurance in order to cover claims due to third party damage or injury. There’s no way going around it. However, the amount of coverage can vary significantly. The standard is $1 million, since such an amount of coverage will be enough to pay for 95% of claims a nonprofit can face.
Another aspect of insurance for a nonprofit organization is auto insurance. Volunteers often use their autos or the organization can have some vehicles on its own. Hired or rented vehicles are usually covered by business insurance liability policy. This will cover any liability that arises in accidents caused by vehicles the organization doesn’t own (rented vehicles or volunteers’ vehicles). However, if the organization has its own vehicles it should purchase commercial auto insurance policy. Having individual auto insurance policies is important, however they won’t help much if the volunteer or organization executive operates a vehicle owned by the nonprofit during the accident.
If the organization owns or rents any property it should also include property coverage as part of its business insurance policy. However, you should see what different companies carry under this coverage, since the difference can be substantial from one provider to another. Some policies limit this coverage only to the building and property owned or rented by the organizations. While other providers also include contents such as files, computers, equipment and other significant objects to this type of coverage as well. And you definitely want to have the latter type of provider for your nonprofit, since the contents are often too important for the organization to have them uncovered.
A type of insurance coverage that management in nonprofits tends to overlook is the directors and officers insurance. This type of business insurance protects the management and key employees against claims by third parties. The problem with nonprofit organizations is that managers there end to believe that no one will ever file a lawsuit against them due to the type of activity they are undertaking. However, they are not immune against legal action and many nonprofit managers have faced substantial court bills without any coverage. Of course, a nonprofit organization is less likely to face legal action if compared to a typical business, however people still have the right to do so and some may exercise their rights if they believe that your organization has done harm to them.
It is very important for a nonprofit organization to consult with an insurance expert and analyze its activities in order to get the right types and amounts of insurance coverage. Because of the kind of activity, such an organization can face different risks from those a typical business company faces, but it doesn’t mean that insurance is not required. On the contrary, you organization may need a special type of insurance so make sure to get it covered properly.