04 Nov How Much Insurance Does Your Non-Profit Need To Mitigate Risk?
A warning if your non-profit organization is looking for expenses to cut: Do not skimp on insurance. Should your non-profit experience a fire, major theft, or other catastrophe, you will be glad you have the coverage. Of course, you also may be required by your state, certain funders, lenders, and your own bylaws to carry adequate insurance. Donors certainly expect you to protect their investment in your non-profit by managing risk with insurance. So, to ensure you are not wasting money, consider what you need — and what you might not.
General Liability is Critical
Many kinds of insurance coverage are available but it is unlikely your organization needs all of them. One type you do need is a general liability policy for accidents and injuries suffered on your property by clients, volunteers, suppliers, visitors, and anyone other than employees. Your state also likely mandates unemployment insurance as well as workers’ compensation coverage.
Property insurance that covers theft and damage to your buildings, furniture, fixtures, supplies, and other physical assets is essential, too. When buying a property insurance policy, make sure it covers the replacement cost of assets, rather than their current market value (which is likely to be much lower).
Depending on your non-profit’s operations and assets, consider such optional policies as automobile, product liability, fraud/employee dishonesty, business interruption, umbrella coverage, and directors and officers’ liability. Insurance also is available to cover risks associated with special events. Before purchasing a separate policy, however, check whether your non-profit’s general liability insurance extends to special events.
Because you are likely to be working with a limited budget, prioritize the risks that pose the greatest threats. Then discuss with your financial and insurance advisors the kinds and amounts of coverage that will mitigate those risks.
Be careful you do not assume insurance alone will address your non-profit’s exposure. Your objective should be to never actually need insurance benefits. To that end, put in place internal controls and other risk-avoidance policies such as new employee orientations and ongoing training.
It is About Responsibility
Your non-profit is responsible for securing the safety of its physical assets, your employees, and (in many cases) individuals who participate in your programs. Contact us to discuss how insurance can fit into your larger risk management plan.