What Type of Insurance Does a Nonprofit Organization Need?

There is no one answer to the question of what type of insurance does a nonprofit organization need. This is because every nonprofit organization is different from another. However, there are some core policies that all nonprofit organizations should have. These 7 types of insurance include general liability, directors and officers (D&O) and crime coverage.

A nonprofit organization is a type of business entity that is tax-exempt and has a mission other than profit. They can be educational, scientific, charitable, literary, a trade or professional organization and more. They are often able to accept donations from the public, which are then used for the purposes of the organization.

Nonprofits operate on a tight budget and can be financially devastated by a single unexpected expense. This is why it is so important for these entities to plan ahead and protect themselves with the right kind of 501c3 insurance. These are the bare essentials of the types of coverage a nonprofit needs to be successful.

What Is the Best Nonprofit Insurance?

A common misconception is that a nonprofit does not need a specific type of commercial insurance. While bundle policies like the business owners policy (BOP) contain most of what a nonprofit needs, these are not enough on their own. It is best for a nonprofit to work with an experienced, trustworthy insurance agent or broker that understands and specializes in the nonprofit sector.

Most of the time, the first policy a nonprofit will need is general liability insurance. This will help cover the cost of lawsuits that may arise from bodily injury or property damage. It is also a must if your nonprofit has any visitors on its property or if it offers any products that could cause physical harm.

If the nonprofit has any employees, it should get workers compensation insurance. This will cover the costs of medical treatment and lost wages should an employee become injured or sick while working on behalf of the nonprofit. Many states require this as part of a nonprofit’s standard operating procedures.

Nonprofits that offer coaching, case management, counseling, educational services or mentoring must consider getting professional liability insurance. This type of policy will protect the nonprofit against claims that it’s negligence in providing these services. It will also provide broader coverage than the general liability policy for copyright, defamation, personal injury and more.

Another coverage that’s a must for most nonprofits is crime insurance, which will reimburse the nonprofit for funds stolen by staff or volunteers. Unfortunately, these types of events happen frequently and can be very costly for a nonprofit. In addition, many foundations and government contracts will require nonprofits to have this coverage before they can award grants. This is especially true for larger nonprofits that have large amounts of financial assets at risk.