A nonprofit organization may need a variety of insurance policies to protect against potential liability claims, property loss and other risks. In most cases, a nonprofit will need general liability insurance and directors and officers (D&O) insurance. However, other policies such as commercial auto and workers’ compensation may also be needed depending on the type of work being done by a particular nonprofit.
D&O insurance protects the board of a nonprofit from liability for alleged mismanagement, including financial mismanagement and misconduct such as sexual harassment or discrimination. The policy typically covers the cost of legal representation and damages resulting from a claim against the nonprofit. It also usually includes employment practices liability insurance (EPLI) to protect against workplace-related claims brought by employees or volunteers.
Property insurance, or commercial package policy, offers financial protection for the furniture, fixtures, office equipment, inventory and other assets owned by a nonprofit. It also offers coverage for damage to others’ property caused by the nonprofit’s vehicles, such as a vehicle collision with a pedestrian or another vehicle. In addition, the policy often includes crime coverage for theft by employees or volunteers.
For non-profits that sell goods, such as clothing or food, product liability coverage is a must. It pays for the cost of legal defense and damages resulting from a claim brought by a customer who has suffered a physical injury or damage to their property due to the negligence of the nonprofit’s staff or volunteers.
Professional liability insurance, which is sometimes called errors and omissions insurance or malpractice insurance, works much like D&O insurance. It offers coverage for claims involving professional errors or omissions, such as failure to properly perform a service, failing to diagnose an illness or injury, miscommunication and more. This type of policy typically covers the director, officers, staff, volunteers and even the nonprofit organization itself.
Umbrella or excess liability insurance can provide additional liability coverage above the limits of the nonprofit’s general liability, business auto and workers’ compensation policies. It also offers broader property protection than the standard business package policy, as well as additional crime coverage not included in the standard business auto policy.
Some states require nonprofits to carry workers’ compensation insurance for full- and part-time employees, which helps pay for medical bills and lost wages if an employee is injured on the job. Other state laws may require the nonprofit to have general liability, property and crime insurance. A thorough review of the organization’s unique needs and risks will help determine what types of coverage are most important. what type of insurance does a nonprofit organization need