1.41 million nonprofits operate in the U.S., contributing $905.9 billion to the economy.
As a vital piece to making the world a better place, your organization can’t afford to be unprotected. But, up until recently good insurance was hard to come by. Twenty-five years ago, many social services organizations struggled to find appropriate insurance coverage, yet they still had to show proof of insurance.
Without industry-specific solutions and consultation to rely on, it was difficult to protect an organization against common risks and hazards associated with nonprofit services / functions. Under such an environment, a relatively simple insurance event could result in detrimental financial losses if the proper protection was not in place.
Fortunately, nonprofits no longer have to accept this shortcoming in their insurance program, as the marketplace for nonprofit insurance products has changed. Now, the insurance industry has the necessary resources and knowledge to deliver nonprofits the protection they deserve to help mitigate risk. And the options are abundant.
To help make the insurance and risk management process more manageable, we developed this white paper — a guide to help nonprofit executives and board of directors understand their unique risks and navigate the insurance process in an efficient and systematic manner. You will gain valuable insight on how to:
- Recognize your role in the insurance selection process.
- Research and vet a trusted insurance partner.
- Gain buy-in from key stakeholders.
- Prepare for your initial insurance consultation.
Now, let’s dig deeper to discover how this guide can help you uncover risks and secure the best possible protection through a trusted advisor. With the expertise provided in our guide, you can continue to effectively serve those around you.
Identify Risk to Select Proper Coverage
Your nonprofit is always growing and changing, which means so are your risks and vulnerabilities. As new risks surface, such as updates to laws and regulations, cybercrime and data security, and social media, organizations must understand the insurance implications that come with them.
To help adapt to these changes, run a thorough risk identification process. By working with your insurance specialist, your organization can take a deep dive into major exposures and risks. As part of this process, you’ll want to evaluate a collection of elements that contribute to the organization’s financials and operations — from financial statements and budgets, to the physical assets seen when walking around your premises.Download our white paper for a complete list of assets to review when conducting a risk identification assessment.
Understand and Prioritize Risk
According to INGUARD’s Executive Vice President, Larry McSpadden, “The biggest mistake nonprofits make is considering only the ‘before loss costs’ (premiums) when comparing proposals and not giving due weight to ‘after loss costs,’ or how well the insurance and the risk management program overall will respond when something big and bad does happen.”
To avoid making these mistakes, we recommend you follow these four steps:
- Step One: Recognize the common risks nonprofits face on a daily basis and determine how these could affect your organization.
- Step Two: Evaluate your organization’s unique exposures and/or future setbacks related to common nonprofit risks.
- Step Three: Consider options for handling and managing risks, starting with the top priority and working your way down.
- Step Four: Formally and regularly review your program from top to bottom.
Follow these steps to truly understand and prioritize risks within your organization and the industry as a whole. By doing so, you will discover where your organization’s exposures to loss lie and how you can properly protect them with the right coverage.
Research and Vet Insurance Partners
Prior to selecting an insurance provider, you should conduct thorough research to identify a partner who specializes in nonprofits and has the resources you need to create a sound insurance program.
To do so, evaluate each company on the same criteria and qualifications. Look for a partner that can offer you industry-specific expertise, access to products your nonprofit needs and has the availability support your organization.
When vetting insurance partners that meet your nonprofit’s specific needs, ask questions, such as:
- How familiar are you with organizations like ours?
- How many similar organizations are you working with?
- How are you staffed to support and service our needs?
- Do you have one-on-one consultation?
- How often is your staff available to meet our needs?
Additionally, look for a partner that offers the individual coverages you should have. Some common coverages, include: director and officer’s insurance (D&O), errors and omissions (E&O) and special event or fundraiser insurance.
Gain Buy-In from Key Stakeholders
Gaining buy-in from key stakeholders within the organization is a must to ensure they are on board with the overall insurance strategy. Once you’ve completed the discovery phase, organize your research and recommendations to effectively communicate your findings to the executive team, board of directors and other decision makers. Spell out the need and importance of protecting your nonprofit through a strategic combination of risk mitigation and insurance.
Also consider pulling together a checklist that highlights answers, such as “why,” budget, evaluation, consensus and “appetite for risk.”
For more tips to gain buy-in from your key stakeholders, download our white paper.
Prep for Your Insurance Consultation
Really take time to properly prepare for your insurance consultation to ensure all bases are covered and the right questions are asked. To effectively assess your insurance needs, ask yourself these critical questions:
- What are my organization’s most valuable assets?
- What risks are unique to my organization?
- How do we currently protect our employees, volunteers and boards, if at all?
- How big (or small) is my organization?
- What types of services does my nonprofit offer?
- How many funding sources does my organization have access to?
Answering these questions prior to your meeting will help you and your insurance provider have a better understanding of what types of coverage your nonprofit should purchase to be successful and make the world a better place.
Interested in learning more on how you can properly understand the insurance and risk management process for your nonprofit? Download our white paper.