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.
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:
The following insurance policies should cover the basic needs of most nonprofit organization.
General Liability is a highly common insurance policy. It 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) and damage that either you or an employee inflicts on someone else’s property.
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.
Commercial Property Insurance is designed to protect your business in the case that you lose valuable property, which can cause an immediate interruption in your business. The type of properties covered by this plan include buildings, warehouses, offices or other physical properties that are used for the business and physical assets such as office equipment and computers.
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.
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.
Once your business begins to acquire physical assets, you should consider purchasing Commercial Property Insurance. 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.
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.
Having the right insurance for your religious organization covers your members and your house of worship for the many risks it could face. It protects your organization from all possible risks including your volunteers and other members of the organization.
Insurance for Voluntary Health Organizations will cover the costs of defense and court fees if your employees get sued, and it also pays for the property repair and replacement due to covered incidents.
It is the best way to manage risks if there is a liability claim against your charity. The cost of the subsequent damages awarded could not only destroy your charity's finances but could damage your reputation as well.
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