What Insurance Limits Does My Nonprofit Need?

December 7, 2022
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A nonprofit organization should have enough insurance to cover its activities, property, employees, and volunteers, regardless of whether it is a startup or an existing organization.

Nonprofit organizations should perform a risk analysis, including deciding their insurance coverage limits. Every organization must consider its unique challenges as part of its risk management plan while reviewing its insurance policy. As the potential risk increases, the insurance limits should increase as well.

Factors to Consider for Your Insurance Policy

When a nonprofit and its members face a potential liability claim, the maximum amount an insurer will pay out depends on the liability limit. The following factors influence both the liability limits you may need, as well as what limits the carrier may be willing to provide:

•  The nonprofit’s core mission, and that mission’s impact on the likelihood of claims.  For example, a nonprofit providing thrift-store services carries a risk of product liability claims if a defective item sold injures a customer.

•  The mission and operations of the nonprofit involve sensitive issues and engage an at-risk population, such as young children.

•  The use of vehicles by the nonprofit’s employees and volunteers increases the likelihood of accidents and claims.

•  Liability related to special events, food, and alcohol, which each carries unique risks and potential for claims.

•  The potential for cyber-attacks, influenced by the complexity of your IT infrastructure and cyber-security efforts in place.

•  The composition of the nonprofit board of directors, including any well-known members or individuals with a high net worth.

Tips for Buying Nonprofit Insurance

An experienced insurance specialist can counsel a nonprofit about the insurance coverages required according to your state. They can also talk about the impact of decreasing and increasing the liability limits on insurance costs. Keep these tips in mind for your organization as you shop for an ideal nonprofit insurance policy.

1.  Make sure your nonprofit has adequate liability coverage

Although insurance costs can be expensive and take up much of your nonprofit’s budget, ensuring you have enough coverage is vital. Sufficient coverage can help you in case of a potential claim or lawsuit.

2.  Check your contracts, grants, and agreements for limit requirements

Contracts between government entities, companies, and other nonprofits may require an organization to carry general liability insurance policies. In addition, state and municipality laws can also mandate coverages for a nonprofit to operate in the state. Make sure you comply with these requirements before you speak with your insurance specialist.

3.  Ensure your core liability coverages have the same limits

Ensure your insurance limits have the same coverage limits. General Liability and Directors and Officers Liability can have the same limits. This approach can help you avoid paying too much for one type of coverage while under-insuring other coverages, such as auto insurance for the organization’s cars.

4.  Bring Up Past Claims

Prepare your nonprofit against potential risk with supporting documents for any past claims made against your organization. Be ready to answer the specialist’s questions about the claim’s circumstances. Bring up any issues you encountered during the claims process, such as the potential of going over your limits so that the specialist can adjust the limits in your policy.

5.  Discuss Hidden Costs

As you finalize your coverage, ask your insurance specialist if there are hidden costs within your policy. Find out if there are any exclusions, such as the Directors and Officers Liability not covering personal injuries. The specialist may recommend you buy an umbrella policy in case claims exceed your policy limits.

Speak with Lamb Insurance About Your Nonprofit Coverage

Since every organization’s needs are unique, working with an insurance agent who understands the nonprofit sector is essential. Lamb can put together a quantitative risk analysis with you so you can obtain adequate coverage for your nonprofit.

Get in touch with Lamb Insurance Services today to learn more about nonprofit insurance.

Lamb recognizes that COVID-19 has created many challenges for nonprofit and human service organizations. That’s why we’ve made it EASY for you to submit changes to payroll for your workers’ compensation policy and vehicle schedule for your auto policies. Click below to proceed with your change requests.