A nonprofit organization is a business that does not declare a profit and uses any funds left after normal operating expenses to benefit the public. In addition, donations made to a nonprofit are often tax-deductible. In order to help ensure that the public continues to receive the benefits they depend on, nonprofits should be sure that they have the appropriate types of insurance in place.
The most basic type of insurance that a nonprofit should have is general liability coverage, also known as commercial general liability insurance. This type of policy protects a nonprofit from classic slip-and-fall scenarios that could occur at their offices or special events, and it also covers them against claims of property damage to customers, suppliers, or guests while on the premises. However, it doesn’t cover them for damages caused by their employees, who should be covered separately by workers’ compensation insurance.
Another type of coverage that may be necessary for a nonprofit to carry is professional liability coverage. This type of policy (also known as errors and omissions insurance) protects a nonprofit against claims of negligence or misconduct that may occur while performing their duties, such as when they provide coaching, case management, counseling, educational services, or mentoring. It will usually also include employment practices liability, which can be beneficial in the event that a member of staff is sued for inappropriate behavior or mismanagement.
A comprehensive business owners policy (BOP) will typically offer most of the types of insurance that a nonprofit will need. It will cover the basics of a typical business insurance policy, with several additional policies that are specifically tailored to the needs of a nonprofit added on. These may include:
Other types of insurance that a nonprofit should consider carrying include:
Auto insurance: Nonprofits with cars or vans should have commercial automobile coverage. It will cover damage to the vehicle and the people inside it, as well as liability protection in the event of an accident. Flood coverage: This type of insurance is often required by mortgage lenders for any buildings that are located in flood zones. Nonprofits with offices in these areas should consider obtaining it as well to protect their property against the high cost of flood damage.
Directors and officers coverage: If a nonprofit has board members or executive management, they should consider obtaining directors and officers insurance (D&O). This type of policy will protect them in the event that they are sued for their actions while running the organization. This can include lawsuits related to wrongful termination, harassment, and discrimination.
Other important types of insurance that a nonprofit should consider are workers’ compensation, property insurance, and event insurance. Workers’ compensation will protect the nonprofit in the event that an employee is injured while working, and it will cover their medical bills as well as any lost wages. Property insurance will offer protection for the nonprofit’s office space and the equipment within it, covering it against damages from fires, storms, theft, and other disasters. Event insurance can help in the event of an event being canceled or postponed, and cyber liability will cover the nonprofit’s computers against hackers. what type of insurance does a nonprofit organization need