Insurance For 501c3 Nonprofits
Many people start 501c3 nonprofits to address social issues or populations they care about. While these groups operate for the good of the community, they also carry risks that could jeopardize their financial stability and ability to fulfill their mission. As such, they need to protect themselves with the right insurance coverage.
While every business is unique and requires its own insurance policy, a nonprofit has special needs that distinguish it from for-profit businesses. As a result, it is crucial that a nonprofit works with an insurance professional who understands those needs and is knowledgeable about the policies available to meet them.
Choosing the wrong type of insurance coverage can have serious consequences for a nonprofit and leave it vulnerable to liability lawsuits. The most common errors include overlooking legal language, misinterpreting coverage exclusions and failing to consider the specific needs of a nonprofit organization.
In addition to general liability insurance, a nonprofit should also have commercial property insurance. This type of policy protects the nonprofit’s physical assets, such as furniture, fixtures, office equipment and inventory, from damage or loss. It should also cover the building the nonprofit uses to house these assets, as well as any other structures on the property. If the nonprofit produces products, a product liability policy is also a must. Finally, a crime policy can protect the nonprofit from theft by employees or volunteers.
The next type of coverage that a 501c3 should have is directors and officers insurance, which covers the nonprofit’s leaders for claims related to wrongful acts. These claims can include allegations of abuse or harassment, inappropriate conduct and discriminatory practices. The insurance coverage should pay for defense costs, settlements and judgment awards.
Nonprofits also need workers’ compensation insurance to protect their employees in the event of an injury on the job. This policy pays for medical bills, lost wages and other expenses associated with an employee’s injury or death. It is important that a nonprofit carefully considers the needs of its staff and compares the options available for workers’ comp coverage to ensure it has adequate protection.
Another important consideration for a nonprofit is the need to have auto insurance. Volunteers and employees may often drive on behalf of the nonprofit to transport children or seniors to events, drop off food or library books, pick up donations and more. Without the proper auto insurance, a nonprofit could be held liable for accidents and injuries. A nonprofit should purchase non-owned and hired auto insurance to avoid liability risks.
Lastly, a nonprofit should consider purchasing an umbrella policy to provide additional limits for catastrophic liability claims that exceed the standard limits of its general liability, commercial auto and business owners policy. This type of insurance is typically affordable and can be purchased through the same agent or broker who provides the nonprofit’s other insurance policies. Getting the right insurance coverage for your 501c3 is essential to protecting its people, assets and mission. does a 501c3 need insurance