Insurance Coverage Guidelines For Nonprofits

Insurance is an important component of risk management, and a significant budget item, yet it can be difficult to determine what insurance coverages are really needed. The following overview can help. Our Insurance Basics For Nonprofit Organizations and ‘Need-To-Have’ and ‘Nice-To-Have’ Insurance For Nonprofits resources provide more detailed guidance. Both are available to VIS members in the VIS Vault. (If you are not a member, join now for $25 a year.)

Also, it is important to work with an insurance agent or broker who understands the risk exposures of nonprofit organizations. If you need help finding such an agent, please email volunteers@visvolunteers.com and we will be happy to help you.

General liability – Every organization should have this policy, at a minimum. It protects organizations against claims of bodily injury, property damage, or personal injury. It is generally recommended to have a minimum of $1,000,000 for each occurrence and a $2,000,000 policy aggregate. Rates are based on a number factors, which is why it is important to have an agent or broker who understands your organization. (Does your agent or broker’s Website even mention nonprofit organizations?)

Professional liability – General liability insurance does not provide protection against errors and omissions in your operations, such as in delivery of your professional services. Professional liability policies are designed to fill that potential gap in coverage. Any organization that provides professional services such as counseling, educational instruction, or vocational training should obtain this form of insurance.

Volunteer liability – Nonprofits should insure volunteers separately from the organization and its employees, in order to protect the organization’s own liability insurance limits and claims experience. Volunteer liability coverage (available through VIS)  protects volunteers who are held liable for claims of bodily injury, personal injury, or property damage. It also serves to fill significant gaps caused by exclusions in general liability policies.

Directors and officers (D&O) liability – The board and staff of a nonprofit face many of the same risk exposures as corporate executives do. Directors and officers may be sued for financial mismanagement, harassment, employment practices, and a host of other “wrongful acts” – none of which is covered by general liability insurance. VIS offers a broadly written and competitively priced D&O policy; for information, contact volunteers@visvolunteers.com, or call 800.222.8920.

Workers’ compensation – This insurance provides coverage for job-related injuries and illnesses your employees sustain in the course of their work for the organization.  Depending on your number of employees and your jurisdiction, this coverage may be required by law.  Under the employer’s liability section of the workers’ compensation policy, you are protected in the event the employee decides to sue you for negligence, rather than take the benefits available to them under your state’s workers’ compensation law.

The rating basis for workers’ compensation is your estimated annual payroll for each job classification in your workforce.

State laws vary in terms of whether or not volunteers may be, or must be, covered under workers’ compensation. Where state law does not require that volunteers be covered, many organizations choose to purchase an accident medical reimbursement policy to protect their volunteers in the event they are injured. The policy available through the VIS Volunteers Insurance program provides up to $50,000 for a covered accident.

Auto coverage – There is one main consideration when determining what type of automobile insurance your organization should obtain: whether or not your organization owns vehicles. For nonprofits that do not own their own vehicles, “hired and nonowned” auto liability coverage is recommended.

Organizations that own vehicles should have a commercial automobile policy. Cost and coverages are determined by a range of factors, including types of vehicles to be insured and where they are operated and stored.

Volunteers who operate their own vehicles as part of their assignments rely on their personal auto liability coverage if they cause an accident. VIS offers an excess auto liability policy that covers volunteers whose personal insurance liability limits are exceeded in such an accident.

Employee/Volunteer dishonesty coverage – in any organization, the possibility of an employee or volunteer embezzling funds, forging documents or committing some other such fraudulent act is a very real risk. Dishonesty coverage serves to make the organization whole in these situations.

Again, this is only an overview of insurance for nonprofits. For 24/7 access to the “VIS Vault” with nearly 80 resources on insurance and risk management, including the two documents mentioned at the beginning of this post, join VIS for only $25 a year. For information on the volunteer insurance mentioned in this post, and to apply for coverage, click here.

About VIS

Volunteers Insurance Service Association, Inc. (VIS) was established in 1972 for the purpose of providing insurance and risk management services for volunteer-based organizations. In addition to still providing these insurance services today on a nationwide scale, we have expanded to provide noninsurance resources for members to manage their risks and improve their operations. By transferring the volunteer risk exposure to our program, we can help you protect your organization. Contact us today at (800) 222-8920 for more information on our programs and services. Join now!

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If you have enjoyed this content and find it useful, we invite you to become a VIS member. For $25 a year, members have 24/7 access to over 70 resources on insurance, injury prevention, vehicle safety, event safety, human resources, volunteer management and other topics to help the volunteer-based organization manage its foreseeable risks. New content is added each month. Join now. Questions? Email us at volunteers@visvolunteers.com  or call us at 800.222.8920.