Insurance Coverage for Nonprofit Organizations

 

The main difference between nonprofit organization and other businesses is nonprofits do not profit from their goods and services.  They are tax-exempt by the Internal Revenue Service (IRS), but they still must protect their interests, including their assets and their workforce.

In order to protect the organization’s commercial property, equipment, its reputation, and its staff they need much of the same type of coverage as for-profits, including general liability, property insurance, professional liability, auto insurance, and Directors & Officers insurance.

The right insurance can help minimize financial losses by protecting an organization from liability and property damage claims. 

The Affordable Care Act (ACA) does not require nonprofit employers to offer health coverage, but those with 50 or more full-time (30 hours per week or a minimum of 130 hours per month) workers may face a penalty if they fail to offer medical insurance. Nonprofits should consider offering health insurance, as it shows that the organization is interested in its employees and their health. For this reason, it is a draw for being competitive in recruiting and retaining top talent.

Although nonprofits are often limited to a small budget, sometimes relying on grants and donations for financial support, they should not cut corners on business insurance. The type and amount of insurance needed depends on the industry and the level of risk, but nonprofit organizations should consider policies that include the following coverage:

• General Liability, including third-party bodily injury; third-party property damage; advertising injury and reputational harm.  General liability can help cover legal costs of defending a business.
• Property Insurance, which can protect physical assets from theft, storms, burst pipes, vandalism, explosions and fires. The building itself, plus contents (business personal property) inside the building, as well as exterior signs, fencing, and more can be covered with property insurance.
• Workers' Compensation, including medical expenses, vocational rehabilitation, and missed wages for an injured employee.  A worker's comp policy typically covers death benefits such as funeral expenses, for an employee that passes from a work-related illness or injury.
• Auto Insurance - Commercial auto coverage protects the business against accidents that involve business-owned vehicles.  
• Directors and Officers Liability is a type of coverage intended to protect directors and officers from personal losses if they're sued while working for an organization. 
• Professional Liability Insurance, also referred to as "PLI," protects professionals against claims from clients for negligence, malpractice, and misrepresentation.
• Cyber Liability insurance protects organizations against data breaches of sensitive customer information, as well as other cybercrimes. In addition to covering defense expenses, these policies generally also cover the cost of recovering compromised data; notifying customers when breaches occur, repairing damaged computer systems, and restoring the personal identities of affected customers.