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Nonprofit insurance: What It Is, What It Covers, Cost, & Providers

Nonprofit organizations take on big responsibilities — whether it’s promoting the arts, protecting their communities, dealing with health issues or looking after vulnerable groups of people or animals — and face a broad array of risks. A single accident on a group’s property or at an event, or a lawsuit, could end up costing your organization so much that it could cause it to close down, preventing it from doing its valuable and unique work.

Claims and threats of litigation to nonprofits can come from vendors, donors, competitors, employees and government regulators. In fact nonprofit organizations file twice as many directors and officers (D&O) claims than public and private companies, according to a report from Towers Watson. The report also notes another factor that proves nonprofits face unique risks: 85 percent of claims filed by them are employment related. The prominence of non-profits in their communities also put them at a high risk of a data breach, putting their donor financial files, employee records, client data, and volunteer information in peril.

These risks are why it’s imperative for nonprofits to get business coverage.

Getting this coverage may seem expensive, especially for organizations working with limited budgets, but it’s a smart investment, especially when you consider the consequences of not having it.

In this article, we’ll explain everything you need to know to get complete and affordable coverage for your organization and reveal the top insurers for non profits and what makes each one unique.

What is nonprofit business insurance for?

Nonprofits face many unique risks. They may serve a broad and diverse group of people — often ones who are vulnerable. Business insurance can help you gain control over the risks faced by your nonprofit organization, which are considerable. It provides you with financial protection against losses that occur during the normal operation of your nonprofit. When you have business insurance coverage on your organization, your insurer helps pay the costs of covered losses up to the limits of your policy. Without coverage, you might have to pay for damages or lawsuits out of your operating funds, turn to your donors for help, or worse, cease operation.

Why do nonprofits need business insurance?

The purpose of the insurance is to help protect your organization from common risks many nonprofits face. It can protect the operating funds and endowment of your organization, it’s physical property, employees and intellectual assets from:

  • Lawsuits against the organization, employees and its officers and directors
  • Property damage
  • Theft
  • Vandalism
  • Loss of income
  • Employee injuries and illnesses that are work related
  • And more.

What type of business insurance does a nonprofit organization need?

The most common types they typically get include:

Depending on the size of your nonprofit and the nature of its operations, you might not need all of these insurance coverages. The simplest way to secure all these types of coverage is through a business owners policy (BOP), which typically bundles together business property and liability coverage. Even though you aren’t a business owner, this type of policy can be a good solution for not-for-profits. A BOP makes it easy to add on additional types of coverages beyond these.

The types and amount of coverage you need depend on a number of factors including: 

  • The type of nonprofit
  • The size of it
  • It’s location or locations
  • The number of employees
  • The types of people it serves
  • It’s assets and holdings
  • And more.

At a minimum, you probably want to have liability and property coverage through a BOP. And if you have employees, you’ll likely need workers’ compensation insurance. And because of the unique risks not-for-profits face, directors and officers (D&O) and cyber insurance could be smart add ons for nonprofits. An insurance agent that specializes in working with not-for-profits can recommend the coverages that are right for you.

General liability insurance for nonprofits

General liability insurance or also called commercial liability insurance. Even though your organization does not provide services for commercial purposes, it likely needs this coverage. It helps protect your not-for-profit from claims of bodily injury and property damage that happen at your work or service locations or while your employees are doing their jobs. This is critical coverage for nonprofits that work with elderly or infirm people, or children, who are more likely to slip and fall and become injured. Commercial liability coverage protects against things like visitor injuries that result from a slip and fall in your workplace or property damage that happens because of a worker accident when visiting a person’s home for outreach and other work related reasons.

>>MORE: Best General Liability Insurance Companies

Directors and officers insurance (or D&O) for nonprofits

This policy has become increasingly popular amongst nonprofit organizations. Directors and officers, or D&O for nonprofits, will help pay legal expenses and damages if a director or officer at your nonprofit is sued because of a decision they make about the operation or direction of your organization.

D&O insurance helps attract talents to work for your nonprofit since they know that they are protected and can focus 100% on doing their best job.

>>MORE: Best D&O insurance Companies

Commercial property insurance for nonprofits

Commercial property insurance covers losses in your physical locations resulting from things like weather damages, fire, theft or vandalism.

If your nonprofit owns or rents a physical space for its operations, be it an office, a warehouse, or a building, you’ll need to have a commercial property insurance policy.

>>MORE: Best Commercial Property Insurance Companies

Commercial auto insurance for nonprofits

Commercial auto pays for damage to vehicles and the cost of medical care if any employee is involved in an accident while driving for work related reasons.

If you use a vehicle for your nonprofit activities, you need to have a commercial auto insurance policy. It may be a bit more expensive than personal auto insurance policy. However, it may be a lot more expensive if you skip it. Without a proper commercial auto insurance policy, your personal auto provider will refuse your claims or even worse, they will drop you off altogether.

>>MORE: The Best Commercial Auto Insurance Companies

Workers compensation insurance for nonprofits

If your nonprofit has employees, your state likely requires you to carry workers’ compensation coverage.  This insurance provides benefits to your employees to help them recover from work-related injuries or illnesses. Two examples of these include:

  • A worker at your nonprofit is stocking shelves, slips off a ladder and breaks her leg. This makes her unable to do her job.
  • An administrative assistant at your not-for-profit has been working on a computer while sitting on an ergonomically poor chair and comes down with carpal tunnel syndrome. She is no longer able to do her job because she’s in pain.

Workers’ comp also pays funeral expenses and death benefits to immediate family members should an employee pass away because of a job related incident.

Depending on the type of nonprofit, it might not be the riskiest job in the world. But you never know, you need a workers compensation insurance policy to protect you and your employees.

>>MORE: Best Workers Comp Insurance Companies for Independent Contractors

>>MORE: Best Workers Comp Insurance Companies

Professional liability insurance for nonprofits

Professional liability insurance covers you and the people who work for you if you’re ever sued by someone for giving them bad advice or not performing services to their satisfaction.

Depending on the type of nonprofit, you might not need this coverage. However, if your nonprofit operates by giving advice to your customers or clients, be it medical, legal, or finance-related advice, you will need professional liability insurance policy. In some cases, it might be called malpractice insurance or E&O insurance.

>>MORE: Best Professional Liability Insurance Companies

Cyber insurance for nonprofits

Cyber insurance helps pay expenses related to the theft or loss of critical donor, client, employee or operational information. There are two types of cyber insurance: cyber liability insurance and data breach insurance. Most businesses and nonprofits might just need data breach insurance. If your operations handle a lot of sensitive financial and medical data, you might consider a cyber liability insurance policy.

If your nonprofit stores sensitive data in your computer system, even just a little, you need to get a data breach insurance policy. Nowadays, this has become more and more popular for any type of businesses, including nonprofits.

>>MORE: Best Cyber Insurance Companies

How can I prevent losses at my nonprofit organization? 

Many business insurers offer programs that can help you reduce the risks nonprofits face. This includes doing things like eliminating workplace hazards, encouraging sensible driving habits and promoting safe work practices. By doing these things, you could be able to save on your insurance costs. Check with your insurer to find out whether they offer safety programs.

What coverages should nonprofits with employees get?

As covered in the section above, most states require organizations with employees to carry workers’ compensation insurance. In some states, you may also need to provide disability coverage.

You may also want to consider getting employment practices liability insurance. It helps protect your organization if a current or former employee makes an employment-related claim, something that’s particularly common at nonprofits. For example, if you are sued for wrongful termination or discrimination, employment practices liability insurance can help cover your legal costs.

Also, if you or your employees drive vehicles for work, it’s a smart idea to get commercial auto insurance. That’s because personal auto insurance does not cover accidents that take place while conducting business. If you have a work-related incident, you would have to pay for any damage or injuries that happen to you and your vehicle and anyone else impacted by the accident.

How much does nonprofit insurance cost?

Premium costs can vary dramatically because they’re based on so many factors including:

  • The age and value of your organization’s property
  • The contents of your property
  • Your business type
  • The limits and coverage options you choose
  • Whether or not you choose full or partial replacement cost
  • And more.

What’s important is that you get quotes from multiple providers so you can compare coverages and costs to get the best and most cost effective coverage for your not-for-profit.

How can I find cheap nonprofit business insurance?

Here are some tips to help you find the coverage you need at a fair price:

  • Shop around for the best value. Get quotes from a few companies and compare them to get the right coverage at the lowest possible cost.
  • Don’t stop shopping around. Make sure you get new quotes before you renew your policy.
  • Take advantage of discounts. If they’re not offered to you when getting a quote, ask about them, whether you’re buying online or through an agent.

Taking these steps will help ensure you’re not paying too much for insurance for your nonprofit.

Top 3 non-profit business insurance companies

Here are our top choices for nonprofit insurers in the United States:

  • Travelers: Insurer most focused on the unique needs of nonprofit organizations
  • Progressive: The best for discounted nonprofit business insurance
  • AmTrust Financial: Best for nonprofit organizations that need customized coverage

Travelers: Insurer most focused on the unique needs of nonprofit organizations

Travelers is a leading provider of small business insurance in the United States. The company has been in business for more than 165 years and is the only property casualty company in the Dow Jones Industrial Average.

Travelers has a solid understanding of nonprofit organizations and offers coverage that’s been developed to be flexible enough to meet their unique needs. The Travelers Wrap+ product offers a diverse range of coverages that can protect against management liability risks, a big threat to nonprofits, including exposures faced by directors, officers, managers and organizational entities that arise from governance, finance, benefits, cyber crime and management activities.

Travelers offers local underwriting and claim services that will take the time to understand — and respond to — the nonprofits in their communities.

Travelers is known for its high level of customer service, flexible solutions and cutting-edge innovation. Travelers also uses the extensive experience of its more than 30,000 employees to help organizations reduce risk, which typically results in lower premium costs for nonprofits. 

In the end, Travelers offers quality protection for nonprofits. You owe it to yourself to see if this industry leader could be the right insurer for your organization.

Progressive: The best for discounted nonprofit business insurance

Progressive may seem like a less-than-serious company because of its ongoing series of humorous commercials featuring Flo. You might feel concerned about entrusting your serious nonprofit organization to the insurer.

The truth: It’s a reputable company that’s been in business since 1937. Progressive is known for its flexibility, great rates and highly responsive service.

Progressive is famous for its discounts, which could help you save on your not-for-profit business insurance. You can earn discounts for things like:

  • Purchasing multiple coverages
  • Implementing safe operational practices 
  • Paying premiums annually rather than in smaller increments 
  • Agreeing to autopay.

Because of the complexity of coverage for nonprofits, it’s likely you may have to speak with a company representative to complete a quote, even if you start one online.

AmTrust Financial: Best for nonprofit organizations that need customized coverage

AmTrust is a relatively small insurance provider that specializes in small business and workers’ comp coverage. What AmTrust lacks in size, it certainly makes up for in service. 

AmTrust and their agents make it possible for nonprofits to customize their coverage based on their individual requirements, something many insurers are unable to do. The firm works closely with their agents to design the specific insurance packages nonprofit organizations need. 

AmTrust has excellent customers service ratings and their coverage is surprisingly affordable especially when you consider the level of customization they offer.

>>MORE: Best Nonprofit Insurance Companies

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