How to Determine the Insurance Needs of Your Nonprofit

Insurance is a vital component of risk management for every business — for profit and nonprofit — but a nonprofit organization’s insurance needs vary according to the following:

  • Whether it has employees

  • Whether it makes use of volunteers

  • Whether it has direct contact with clients, students, patients, or audiences and the nature of that direct contact

  • Whether it offers services within its own (or a rented) piece of property

Health insurance for the employees of your nonprofit

Beyond the employee benefits required by law, you’ll want to provide health coverage for your employees if possible so they can afford medical attention if they’re sick or injured. Offering this benefit also helps you recruit better-qualified employees.

Insure against nonprofit workplace injuries

If an employee is injured in the course of performing duties for your nonprofit, workers’ compensation insurance covers the cost of medical treatment and — in some cases — the cost of retraining the employee for a different profession.

The cost of your workers’ compensation insurance is calculated according to the number of employees you have, the number of hours they spend on the job, and the nature of the work they do. Rates for office clerks are considerably lower than rates for lion tamers and trapeze artists.

In most states, workers’ compensation insurance is required by law. Therefore, as a nonprofit manager, you don’t have a choice about whether to buy it. As you plan, don’t forget to consider the following:

  • Do you use docents or other consistent volunteers? Include them in your workers’ compensation insurance coverage.

  • If your organization’s staff size or the nature of the work your employees do changes during the course of the year, contact your workers’ compensation insurance carrier and change your coverage accordingly. Don’t forget to make this change in coverage if you make temporary changes in the nature of your employees’ work.

    For example, do you conduct an annual fundraising event for which employees are working on ladders, stringing lights and garlands? If you plan ahead to change the definition of the type of work they perform, you can be confident that they’re covered.

Workers’ compensation insurance is a specialized field of law. If you encounter a legal problem about your coverage, seek assistance from an attorney with workers’ compensation expertise.

Purchase liability insurance for your nonprofit

No matter how minor it may seem, if you make a mistake while performing your organization’s duties and someone is injured as a result, you can be sued.

By purchasing liability insurance, you have access to a source of revenue for settling a lawsuit if someone sues you for this kind of mistake. Your insurance company also may provide legal defense, if it’s needed. Most businesses purchase liability insurance as a matter of course. You may be required to get it if you meet any of the following conditions:

  • You accept a contract or grant from a government source.

  • You rent offices or other facilities.

  • You seek a city or county permit to use public property.

  • You seek an operating or construction permit.

You need to purchase specialized kinds of liability insurance if your organization has significant direct client contact that involves a potential risk. Health clinics and therapy programs need such insurance to protect them if a client is hurt or handled inappropriately. So do programs offering activities with possible physical dangers, such as rock climbing, sail boating, or horseback riding.

If your organization occasionally produces events or conducts work in locations other than its central office or building, check to make sure that you’re covered for these off-site events. rider to your regular liability

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