How Non-profits and Insurance Connect:
Nonprofit associations play an important role in today’s society. Public and private partnerships often rely heavily on nonprofit organizations to reach communities and meet the needs of those communities through programs, fundraising and more.
Nonprofits are operated similarly to any private business. Although identified differently by the IRS for tax purposes, all nonprofit associations must still report earnings and follow the same laws required of any business.
Any company that is in the nonprofit sector will need various forms of insurance that match up with the same types of insurance common among private businesses.
Read on to see what type of insurance your business may need.
Which Nonprofits Need Insurance?
If your organization is classified as a nonprofit, you will need to purchase many of the same insurance policies as a for-profit business. A common misconception is that only businesses classified as a 501(c)3 organization by the IRS are considered nonprofit organizations. However, there are several other nonprofit classifications. Any number from 501(c)1 through 501(c)27 are considered specialized nonprofits. There are 6 others beyond 501(c) organizations: 501(d), 501(e), 501(f), 501(k), 501(n) and 521(a). These cover religious associations, cooperative health organizations, child care organizations, charity risk pools and farmers’ coops. In all, there are over 30 nonprofit classifications provided by the IRS Internal Revenue Code.
The needs of any nonprofit organization will vary, as will the risks involved in running these businesses. However, all charities will need coverage for liability concerns that are extremely common among all companies. Typical types of Nonprofit Associations and Other Organizations Insurance include:
- Churches (all religions)
- Education Charities
- Health Charities
- All Nonprofits
Still not sure what you need?
CoverWallet's Insurance Checklist , you'll find a list of insurance types needed for your specific business or industry.
What Insurance Do Nonprofits Need?
The nonprofit sector in the USA is fairly large. Nonprofits are one of the few classifications that cover every industry, as any company can be a nonprofit so long as it is not a profit-driven enterprise. The following insurance policies should cover the basic needs of most every nonprofit organization.
General Liability Insurance
General Liability Insurance is a go-to product for most businesses. This highly common insurance policy is designed to protect your business from insurance claims as a result of incidents for which either you or your employees are responsible. This can include:
- Personal Injuries that occur on your property (limited to non-employees)
- Damage that either you or an employee inflicts on someone else’s property
When Should You Get General Liability Insurance?
- Immediately. Every nonprofit that does hands-on work, or completes work that utilizes an office space, should purchase General Liability Insurance.
For Example:
- If a client accidentally slips and falls while in your business office, your business will be liable for personal injury damages.
Other Things to Note:
- General Liability Insurance is designed for any business that deals directly with individuals but does cover basic concerns for every business. Even if your business works remotely and never physically interacts with clients or customers, you will need to be insured in case your business is sued for a reason covered by this insurance.
Workers Compensation
- Injuries within the nonprofit sector can vary depending on your specific industry. If your business involves any form of personal risk to your employees, you should strongly consider Workers Compensation.
When Should You Get Workers Compensation?
- Check with your state’s legal requirements for having a Workers Compensation policy. Many states have very minimal employment requirements in place that demand businesses purchase a Workers Compensation policy.
For Example:
- If an employee for a health services nonprofit is accidentally exposed to a virus while administering inoculations, he/she may qualify for Workers Compensation.
Other Things to Note:
- Workers Compensation plans are not a substitute for a healthcare policy. However, they will cover some medical expenses. Workers who were injured as a result of completing required tasks may still receive compensation benefits even after they have already returned to work. Employee lawsuits against companies are often the result of Workers Compensation grievances.
Commercial Property Insurance
Commercial Property Insurance is designed to protect your business in the case that you lose valuable property. The loss of property can cause an immediate interruption in your business, something that some businesses are unable to recover from. The type of properties covered by this plan include:
- Buildings, warehouses, offices or other physical properties that are used for the business
- Physical assets such as office equipment and computers
When Should You Get Commercial Property Insurance?
Once your business begins to acquire physical assets, you should consider purchasing this insurance policy. This is especially important if your business cannot operate without these assets.
For Example:
If a heavy storm causes a tree to fall on and damage your office, you may lose valuable property and experience a significant stop in business. This insurance policy will cover any lost property that is insured under the policy.
Other Things to Note:
Commercial Property Insurance does not cover all types of natural disasters. Be sure to ask what accidents are not covered under your plan.
Other Insurance Types to Consider:
- Directors and Officers Insurance: Many nonprofit organizations are run by a board of directors. If shareholders or others sue the nonprofit, they may specifically target board members. Insuring against such claims is important, particularly for larger nonprofits.
- Commercial Auto Insurance: If your nonprofit utilizes company vehicles, these should be insured to avoid expensive payments in the case of an accident.
- Errors & Omissions Insurance: E&O Insurance is designed to provide coverage for your business when errors or omissions occur while providing services. This insurance provides for legal defense as well as damage payouts.
How Much Does Nonprofit Insurance Cost?
Insurance costs will vary from nonprofit to nonprofit because every nonprofit organization has different needs. The size of your organization and the exact nature of what your organization does will impact the final cost for your insurance policies. The best way to understand cost is to get a quote.