Why is insurance a must for charities?
If a volunteer is injured or a board member is sued, the resulting costs could derail your organization's mission. Business insurance helps pay for unexpected medical bills, legal fees, and repairs, so you can keep supporting your cause.
Find coverage that matches your risks
6 insurance policies every charity organization should consider
Business insurance covers costly accidents and lawsuits, and certain policies may be required by law. These insurance policies protect against the most common risks faced by charitable organizations.
General liability insurance
A general liability policy covers third-party lawsuits related to injuries, damaged property, and other accidents involving customers and clients.
- Bodily injuries
- Accidental property damage
- Slander and other advertising injuries
Business owner's policy
Small charities with few risks can bundle general liability coverage and commercial property insurance together in a business owner's policy, or BOP. It costs less than buying the policies separately.
- Slip-and-fall injuries
- Copyright infringement claims
- Business interruption incidents
Professional liability insurance
This policy covers lawsuits related to harm caused by your charitable organization's professional services. It's sometimes called errors and omissions insurance (E&O).
- Errors and oversights
- Missed deadlines
- Breach of contract
Directors and officers insurance
D&O insurance protects your directors and officers from legal costs related to the decisions they make on behalf of your charity. They may ask for this coverage before they'll join your organization.
- Breach of duty
- Mismanagement of funds
- Failure to act in the company's best interest
Workers' comp insurance
Most states require charities that have employees to carry workers' compensation insurance. Personal health insurance won’t cover work-related injuries, which makes this policy crucial for sole proprietors too.
- Work-related hospital bills
- Disability benefits
- Legal costs from workplace injuries
Employment practices liability insurance
If a worker sues your charity for wrongful termination or another violation of their rights, this policy will pay for your legal costs. It's also referred to as EPLI.
- Unfair hiring and firing practices
- Sexual harassment
- Discrimination
Charity insurance costs
From our customer data, here's a quick look at average premiums for charities:
General liability: $42 per month
Business owner's policy: $46 per month
Workers' compensation: $55 per month
Factors that influence a nonprofit's insurance costs include:
- Type of charity, such as food bank or environmental organization
- Charity's size and revenue
- Number of employees and volunteers
- Types of insurance purchased
- Policy limits and deductibles
- Claims history
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Common questions about business insurance for charities
Why is directors and officers insurance important for charities?
Directors and officers insurance provides crucial protection for every charity's board of directors. Here are a few reasons why your charity needs D&O:
- It pays for lawsuits against your board. If a board member makes a poor investment or other decision that causes a financial loss, D&O insurance can help pay for legal costs if they're sued.
- Board members may require it. Some individuals may refuse to join your board of directors if you’re uninsured. They want to know they can make decisions for your company without worrying about out-of-pocket legal expenses.
- It helps attract talent. Providing D&O insurance to your board members and elected officers shows them your organization is reliable, and helps attract talented individuals to fill these roles.
Some insurance companies offer a discount when you bundle D&O insurance with other types of management liability insurance, such as employment practices liability insurance.
What's the difference between a nonprofit and a charity?
There are a few key differences between nonprofit organizations and charities.
First, a charity is a type of nonprofit organization. Specifically, it's a nonprofit that collects funds to benefit the public or improve the community in some way. Charities are classified as 501(c)(3) organizations, which means that donations are tax-deductible and they are exempt from federal income tax.
Examples of charities include:
- Environmental organizations
- Nonprofit hospitals
- Disaster relief organizations
- Groups that provide financial assistance to low-income students
- Organizations that fight poverty, hunger, or disease
- Churches and other religious organizations
The term nonprofit refers to a more general category of organizations that are centered around a purpose other than making money. Nonprofits include both organizations that benefit only their members, such as homeowners associations and private clubs, and charitable organizations that benefit the general public.
Nonprofits, also called not-for-profits, have a wider range of classifications beyond 501(c)(3). For example, social and recreation clubs are classified as 501(c)(7).
What other kinds of insurance does my charitable organization need?
Small charities face a wide range of risks depending on their operations and activities. The following policies protect against specific risks such as data breaches, employee theft, and auto accidents:
- Business interruption insurance: If your charity is forced to close temporarily due to a fire or other covered property claim, this policy will help cover lost revenue and daily operating expenses until you can reopen. It's also called business income insurance.
- Commercial auto insurance: This policy covers the cost of an accident involving a vehicle owned by your charity. If your charity relies on personal, rented, or leased vehicles, look to hired and non-owned auto insurance (HNOA) instead.
- Special event insurance: You may need special event insurance to cover activities outside your typical operations, such as a bake sale, 5k run, or other fundraiser.
- Cyber insurance: This policy helps your charity recover financially after a data breach or cyberattack. It helps pay for data breach notification costs, cyberextortion payments, and similar costs.
- Commercial crime insurance: Crime insurance refers to several types of coverage. You can get a property insurance endorsement that protects your business against theft, or a fidelity bond that provides reimbursement if an employee steals from a client or donor.
- Fiduciary liability insurance: A type of management liability insurance, this policy covers legal costs related to mismanagement of retirement plans and other employee benefit plans.
- Umbrella insurance: This policy boosts the protection of your underlying liability policies, such as general liability, commercial auto, and employer's liability insurance (part of workers' compensation), when they reach their limits on a claim.
Our licensed agents can help you choose policies that match your insurance needs, help you comply with state laws and other requirements, and also help you save money on coverage.
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