What is Nonprofit Insurance & Who Needs It?
The public doesn’t always recognize nonprofits as a business, primarily because of their philanthropic charitable activities or single-focus function like social clubs. But no matter their goals and activities, or whether a nonprofit organization is huge or tiny, it is a legally organized business entity. As with any business, to safeguard its financial wellbeing and longevity, a nonprofit needs the protection only adequate insurance can provide for its people and assets.
The prospect pool for agents selling nonprofit insurance coverage is substantial. According to the National Center for Charitable Statistics, more than 1.5 million nonprofits are registered in the US. The types of nonprofits in the stats include both public charities and private foundations. Examples of other nonprofits include:
● Counseling Centers
● Group Homes
● Boys & Girls Clubs
● Performing Arts groups
● Vocational/Adult schools
● Chambers Of Commerce
● Labor Unions
● Civic Leagues
● Social And Recreational Clubs
● Childcare-Related Organizations
Types of Nonprofit Insurance
As with any broad category of business entities, individual nonprofits will have varying needs for insurance coverages. Nearly all need professional nonprofit risk management advice. However, certain types of nonprofit liability insurance policies, such as general liability, are musts for consideration as part of every review. The following guide to insurance for nonprofit organizations details the primary coverages available to nonprofits depending on their needs.
General Liability (CGL)
General liability is also known as a commercial general liability (CGL) and is the nonprofit coverage purchased most often by nonprofit organizations. It covers when the group or its employees are at fault for injuries and damages to the persons and property of others. The types of coverage included in a CGL are bodily injury, property damage, personal injury, defamation, and advertising injury. Usually, there is a low limit for “no-fault” bodily injury where the nonprofit does not need to be negligent for the low-limit coverage to apply. A $1 million per claim and $1 million in the aggregate limit are the most commonly purchased entry-level limits for a CGL policy. Large organizations often buy policies with higher limits.
Property policies cover damage or loss to buildings, office equipment and machinery, computers and tech gear, inventory, furniture, fixtures, lighting systems, carpeting, and merchandise that the nonprofit owns. Fire, theft, windstorm, hail damage, and vandalism are typical claims. Damage from floods, earthquakes, and windstorms in some regions require a supplemental endorsement.
This coverage also goes by commercial auto and business auto. It protects the nonprofit board or staff use a vehicle for business. Whether the nonprofit owns cars, relies on personal use by organization members, or rents as needed, it needs auto liability coverage. Virtually all states have requirements for automobile liability, personal injury protection, uninsured/UIM, and other auto liability-related coverages. Your business auto policy covers vehicles for auto liability and physical damage. Those nonprofits that do not own vehicles should purchase hired and non-owned auto liability coverage.
A Business Owners Policy (BOP) combines coverages into a policy for a lower premium, which makes it attractive to smaller organizations. General liability insurance and commercial property insurance are typical BOP coverages. Policy endorsements for additional insurance needs are often available under a BOP.
Directors and Officers (D&O)
D&O coverage protects the organization, directors, officers, employees, and volunteers against accusations of wrongful acts, such as fraud and financial mismanagement, breach of duty, and errors and omissions in the course governing and managing the organization. Should the nonprofit publish a newsletter or similar communication, its D&O policies need to include personal injury and publishers’ liability to cover defamation, libel, copyright, or trademark violations excluded from its CGL policy. Protection from claims of negligence, misuse of funds, embezzlement, wrongful termination, and harassment claims are covered in a nonprofit D&O policy.
Product liability insurance covers nonprofits that sell items helps to protect the organization from legal defense and settlements by paying some of the costs resulting from lawsuits by customers claiming injuries suffered by unsafe or substandard products.
D&O insurance protects a nonprofit’s management team and Professional Liability, also known as Errors & Omissions (E&O) insurance, covers malpractice by persons representing the nonprofit. Professional Liability helps pay for claims caused by the nonprofit’s employees or representatives for events such as misrepresentation, poor advice, negligence, and violations of good faith and fair dealing.
Cyber insurance typically comes in a bundle of policies. Coverages include Privacy Liability (including Employee Privacy)for losses due to the unauthorized release of Personally Identifiable Information (PII), Protected Health Information (PHI), and corporate confidential information “Data Breach” policies. Security Breach Response Coverage reimburses insureds for costs incurred in the event of a security breach of personal, non-public information of their customers or employees. Security liability covers “Security Wrongful Act” allegations. Multimedia Liability covers defamation, libel, slander, emotional distress, right to privacy invasion, copyright, and other intellectual property infringement claims.
Workers’ comp insurance protects people who are injured or become ill at work with coverage for their medical bills and lost wages. It varies by state and is a state-mandated coverage. Nonprofits need the coverage, although they have unique needs due to having volunteers on staff who need a qualified employment status to meet coverage standards. The rules also vary by state.
Employment Practice Liability (EPL)
EPL works the same for nonprofit organizations as for-profit businesses because employment-related claims are the same for both. EPL protects against claims from volunteers, employees, and third-party allegations, including:
● Sexual Harassment
● Wrongful termination
● Unfair hiring practices
Depending on the nature of the business, whether it has employees, and other conditions, a nonprofit may need additional insurance coverage from the list below:
● Inland Marine
● Sexual Abuse/ Molestation
● International Coverage
● Accident / Health
● Liquor Liability
Nonprofit Insurance Costs (and what factors affect the price)
Many variables, including the number of employees, number and size of buildings and facilities, and activities by organizations and employees. It makes estimating costs difficult for many coverages found in nonprofit insurance programs. However, there are some median figures that shed light on nonprofit insurance costs. See the information below.
Data on some coverages offer insights. Insureon estimates that nonprofit organizations pay about $45 per month, or $500 per year, as a median rate premium for general liability insurance. It also estimates professional liability insurance for nonprofits has a median premium of $50 per month or $575 annually.
Best Nonprofit Insurance Programs
When clients require the best nonprofit insurance programs, it’s important to dig beyond nonprofit insurance basics to make sure you give them complete protection. For the most reliable source of nonprofit insurance quotes, check out the ProgramBusiness.com Market Directory.
In the Program Business Market Directory, you’ll find top-notch nonprofit insurance brokers that have a wealth of experience and deep connections to nonprofit insurance companies. A prime example is Charity First Insurance Services. It provides specialty Insurance for nonprofits and social service agencies. Charity First offers specialty Insurance solutions for everything from community action agencies, counseling centers, and group homes to the Boys & Girls Clubs, performing arts groups, vocational/adult schools, YMCAs/YWCAs, and much more. Its program is available nationwide (except Hawaii) on admitted, A.M. Best rated A++ XV paper.