Recently, there has been increased exposure for nonprofits when it comes professional liability insurance as well as general liability insurance. It goes without saying that even with the goodwill surrounding many nonprofit causes there still needs to be a responsibility of the nonprofit to those serving in the decision making and responsibility positions of the boards.
The unexpected expenses caused by events such as accidents and misrepresentation of members innocently posting a comment online could impact a nonprofit and cause them to experience financial ruin well beyond the organization itself.
Here’s a list of the types of insurances which non-profits should consider:
General Liability Insurance
This insurance insures your organization against scenarios like the classic slip and fall. It will cover your nonprofit for damages that it’s ordered to pay to someone (such as visitor, customer, supplier, or associate) who is inured in the organization’s property.
Property Insurance
Whether you own or rent the space, your nonprofit needs to consider property insurance to cover the lose from a fire, earthquake, vandalism, storm, or even more.
Auto Insurance
Does your staff or volunteers use their vehicles? Some states require that you have a minimal amount of coverage. Check with us to see if you are required to coverage insurance.
Product Liability Insurance
Does your nonprofit sell products to the public? For example, you raise funds by selling baked goods, or your artist-clients create and sell sculptures out of recycled products. You need to consider buying product liability insurance. It will protect your organization from lawsuits by customers claiming they were hurt by an unsafe or defective product you provided. For example, if a customer breaks a tooth on a walnut shell baked into your cookie or slices a hand on a sharp-edged sculpture, this insurance will cover the legal defense and a sizable portion of the damages.
Directors and Officers Insurance
Your nonprofit’s board of directors and officers (many of whom are volunteers) could be personally named in a lawsuit against your nonprofit alleging fraud or financial mismanagement. Here’s an example, a board member invests the nonprofit’s assets unwisely and loses everything, a creditor might sue the nonprofit as well as its directors and officers. In such a case, you’d want directors and officers (D&O) insurance to cover the cost of defending the directors and officers and pay any resulting money damages. I know for a fact that there are companies who will not allow their clients to serve on a board of an organization if they do not have D&O Insurance.
As with any insurance coverage, it’s important to understand what kind of claims are and aren’t covered by a D&O policy. Typical exclusions include damages arising from criminal or fraudulent behavior and claims brought by one director against another. But make sure your policy doesn’t exclude employment-related claims, which are the most common ones filed against directors and officers.
Professional Liability Insurance
Similar to D&O coverage, professional liability coverage (also sometimes called “errors and omissions” or “malpractice” insurance) protect against liabilities resulting from mismanagement of the organization, as well as workplace-related claims such as discrimination or sexual harassment. It covers not only directors and officers but also staff, volunteers, and the nonprofit organization itself.
These are the types of insurances nonprofit organizations should consider to protect themselves, their members and their products or services offered. It is best to make certain you have the necessary insurance coverage for your organization.
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