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4 Risks Unique to Nonprofits—And How to Insure Them

Posted by Parker Beauchamp on Jun 09, 2015

flickr-nonprofit-719724-editedMore than 1.5 million tax-exempt organizations serve the U.S. population, and accounted for 5.3% of GDP in 2014. And every nonprofit—whether a food bank or a hospital—shares similar characteristics.

Unfortunately, third sector organizations also share similar liabilities. This post outlines four unique risks that are specific to nonprofits, and tips on how you can properly protect against them.

1. Volunteers and Employees

Volunteers and employees are critical to the overall success of any nonprofit organization, so naturally you’ll want to protect them and your organization from harm.

Like any business, you must ensure that you provide the proper coverage for employees; this holds true for your volunteers as well.

Volunteers often make up a large portion of your org chart, and in turn bring a unique set of risks for-profit businesses may not face. Since volunteers are not employed by your nonprofit, they must be insured differently.

Consider coverages such as workers’ compensation and professional liability to provide risk management solutions in the event of work-related claims. 

Regulations are different from state-to-state and can vary on the insurability of volunteers. Research your state’s laws regarding protection for individuals volunteering their time at your organization. If you are unsure whether you have the necessary requirements implemented within your organization, talk to your insurance provider.

In addition to carrying the appropriate coverage for your employees and volunteers, make sure your organization also provides:

  • Appropriate protective equipment.
  • Regular training sessions.
  • Workplace safety resources.

2. Events and Fundraisers

Events and fundraisers help nonprofits generate awareness and revenue. But because many nonprofits host these events off-site, there are external factors that are difficult to control. How can your organization secure itself from an unexpected claim?

General liability coverage is often considered to be the core of nonprofit insurance plans, as it provides broad coverage against negligence claims.

A general liability policy can provide essential coverage in the event of:

  • Slips and falls.
  • Damage to property at venues.
  • Injuries from improper use of equipment.
  • Negligent supervision.

Since no two events are the same, you may also consider special event or fundraiser insurance. This type of coverage can help tailor the specific needs and liabilities each occasion entails, beyond the protection of general liability.

3. Board of Directors

Your board of directors helps ensure the nonprofit runs smoothly, but what can you do in the event things don’t go as planned? To protect your board of directors, purchase Director and Officer’s Insurance (D&O)

Your board of directors helps ensure the nonprofit runs smoothly, so how can your organization step up to help its board should the unexpected claim arise? Directors and Officer’s Insurance (D&O) is often provided to nonprofits to protect individual board members from being held liable for actions taken by the board.

Protect your board in the event a lawsuit is filed against them personally for:

  • Harassment.
  • Bodily injury.
  • Discrimination.
  • Wrongful termination.
  • Financial mismanagement.

 Like any form of coverage, D&O has limitations. This policy typically does not cover claims that include damages caused by criminal activity one board member commits against another. Before selecting a D&O policy, read the fine print to make sure you are getting the protection your organization needs.

4. Recipients of Services

From food poisoning at a soup kitchen to an animal bite at a shelter, you can prevent losses stemming from service delivery. Protect your nonprofit under general liability, professional liability and specialized insurance products.

Nonprofits that often face high risks (and especially need to consider this type of coverage) include those working in the following lines of service:

  • Health care.
  • Human services.
  • Counseling services.
  • Professional services.

Accidents happen, but with the right insurance coverage your organization can avoid negligence claims filed by: 

  • Beneficiaries.
  • Donors.
  • Government officials.
  • Members.

Nonprofits are an invaluable asset to the communities and individuals they serve. Understand and protect your organization’s vulnerabilities so nothing can hold you back from bettering the lives of others. 

Related Resource: Business Liability Insurance

Work with your insurance provider to uncover your greatest liabilities and the best options for your nonprofit.

Want to learn more about insurance and risk management for your nonprofit? Check out our resource library!

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Image Credit: Fort George G. Meade Public Affairs Office via Flickr

Topics: Business Insurance