Learn about basic types of insurance for non-profit organizations. 501(c)'s have unique operations and have specific coverage needs - from the office where they assist their communities, to the employees & and volunteers that help them fulfill their missions.
Types Of Insurance For Non-Profit Organizations
Non-profit organizations do great things, despite the limited funds they have available. And even with their efforts to cover all of their bases and make sure that they are following everything by the books, there's always a chance that something can go awry.
Given the limited budgets that non-profits work on, should some sort of legal liability issue arise, the expenses associated with legal fees could send them into financial ruin and stop them from helping people.
Most of the claims reported by non-profit organizations are accidents and injuries in automobiles, or slips and falls at nonprofit offices and at special events. The best way for a 501(c) to protect itself from the financial peril that legal liability could cause is by purchasing the right coverage. Here's a look at the basic types of insurance for non-profit organizations that all 501(c)'s should consider.
Commercial General Liability
If there's only one type of insurance coverage a non-profit has, it should be commercial general liability. Most providers offer coverage for bodily injury and property damage that occurs on your property or happen as a result of the operations, services, or products you offer.
Should a client, supplier, visitor, or anyone else (other than an employee) slip and fall on your property and take legal action, a general liability insurance policy will cover the cost, including attorney fees and any compensation that may be awarded. The same is true if someone else's property is damaged on the site of your non-profit, or if you offer products and they malfunction and cause injury or damage.
Employee Benefits Liability
Types of insurance for non-profit organizations. This coverage is typically bought as an endorsement on the general liability policy. It can help cover damages from your organization's negligent handling of the administration of your employee benefits program.
An example would be an employee who was supposed to be include in the group life insurance plan, but an oversight caused them not to be. If the employee dies, the beneficiary could sue the organization for the death benefit.
Directors And Officers Liability (D&O)
Directors and officers coverage is another types of insurance for non-profit organizations. In the event that a lawsuit is filed against one of the members of your board, this type of coverage will protect your organization. Directors can be sued for things like fraud, misconduct, and the mismanagement of finances.
For instance, if one of your board members partakes in lewd behavior with a client and that client takes legal action, a directors and officers policy will cover the cost of legal defense and any damages. There are exclusions, however; for example, most insurance providers will not cover damages that are associated with criminal activity.
Professional Liability (Errors & Omissions)
This important protects your organization from claims due to errors, omissions and negligence in performing their duties. If your nonprofit organization offers coaching, case management, counseling, educational services, mentoring and more, you should seriously consider this coverage. General liability will not protect you if someone sues for negligence.
Employment Practices Liability Insurance (EPLI)
Employment practices liability insurance protects your 501(c) in the event of the following types of allegations:
- Hostile Work and/or Volunteer environment
- Sexual harassment
- Unfair hiring practices
- Wrongful termination (including volunteers)
In American today, employees that have been laid off are looking for ways to find money - and are filing more and more allegations against their previous employers in the hopes to get a payout.
Sexual Abuse & Molestation
Any non-profit organization that offers services to youth, developmentally disabled persons, or senior citizens should carry this coverage. Abuse & molestation coverage helps respond to allegations of sexual abuse - and the costs and reputational damage that can happen - even if the employees and volunteers are unfairly accused.
Employees are the life-blood of a non-profit. They handle all of the most important details and allow these organizations to accomplish their mission. That's why it's important to keep them - and the organization - protected.
Workers comp insurance covers any work-related injuries or illnesses that employees may experience. For example, should an employee trip up the stairs on a non-profits property and break a leg, or should something fall and a staff member's head and cause a traumatic injury, workers' compensation insurance will cover the employee, as well as your organization. It will cover medical expenses, rehabilitation, lost wages, and assist with helping the employee find other employment should he or she be unable to return to work as a result of the accident. This insurance provides employees with the financial assistance they may need, and it protects the non-profit organization from having to pay out of their own pocket for employee injuries or illnesses.
Commercial Property Insurance
Whether the space a 501(c) works out of is owned or leased, property insurance is a worthwhile investment. This type of insurance provides coverage for any damages that the property may suffer. For instance, if a pipe bursts and floods the building, a hurricane causes structural damage, or a fire breaks out, property insurance can provide coverage for losses. Losses include furnishings, inventory and supplies, equipment, machinery, and repairs to the building.
If the employees or volunteers for a non-profit use a vehicle to conduct activities on behalf of the organization, commercial auto insurance is a good idea. If any employee or volunteer is involved in an accident, this type of insurance will cover the cost of medical bills and lost or damaged property, including the vehicle and any contents inside.
Hired And Non-Owned Auto (HNOA)
Types of insurance for non-profit organizations. If your employees or volunteers use their own cars on company business, hired and non-owned auto is a must have coverage. The purpose of the HNOA policy is to provide liability coverage in excess of an employee's or volunteer's personal auto insurance. The coverage will kick in if the organization is held liable for the employee's or volunteer's at fault accident that caused bodily injury or property damage to a third party, in their own vehicle - and the limits of the personal auto insurance policy have been exhausted.
For example. An employee is asked to pick up the 501(c)'s mail and the post office. The employee drives their own car and on the way rear ends another vehicle, causing serious injuries tit he driver. The employees personal insurance limits are only $50,000/$100,000, but the ensuing lawsuit and award turns out to be $250,000. Where foes the extra $200,000 come from? The non-profit's bank account - unless the have an HNOA policy to cover these types of claims. Non profit insurance cost, non profit insurance quotes, do nonprofits need insurance?, 501c3 insurance requirements, cost of d&o, insurance for nonprofits, event insurance for non profit organizations, list of non profit insurance companies, certificate of insurance for non profit.
Types Of Insurance For Non-Profit Organizations - The Bottom Line
We hope this article on types of insurance for non-profit organizations was informative. It's important for 501(c) organizations to have the best interests of their mission, their staff and volunteers, and the people they serve in mind. These types of insurance policies will ensure that all parties associated with a non-profit are properly protected in the event that any legal liability issues arise.
Further Reading On Non-Profit 501(c) Insurance
- Directors And Officers Insurance For Nonprofits - Learn about D&O liability insurance for 501(c) non-profit organizations.
- Errors And Omissions Insurance For Nonprofits - Learn about E&O professional liability insurance for 501(c) non-profit organizations.
- Insurance For Churches And Ministries - Learn about what type of business insurance that 501(c)(3) nonprofit religious organizations should have.