From commercial property insurance to general liability, learn how to understand and purchase the right insurance for your nonprofit organization. Check out our comprehensive articles and resources to discover how you can protect and grow your organization.
Business Insurance Basics for Nonprofits
Types of Business Insurance for Nonprofits
What nonprofit organizations need insurance?
All nonprofit organizations can benefit from business insurance coverage, even if you aren’t selling a product or service. An errant lawsuit or accident could cause your organization serious financial damage, preventing you from continuing the important work your organization does for the community. If your nonprofit is involved in any of the following, consider researching commercial insurance policies or talking to an agent:
- You own or lease commercial property, including shelters, community centers, and event space
- Members of the public visit your nonprofit location
- Your nonprofit depends on key equipment, including computers, kitchen appliances, HVAC systems, and more
- You store valuable property or money on your business premises
- You hire employees
- Your nonprofit owns or leases vehicles, or employees drive personal vehicles for work purposes
- You digitally store important data on members, clients, and volunteers
- Your nonprofit has directors and officers making critical decisions for the organization
- You provide counseling, training, or other kinds of instruction or services
Business Insurance by Nonprofit Type
Why is business insurance for nonprofits important?
Accidents and injuries that happen on your business property can bring third-party lawsuits.
Benefits: For many nonprofits, the lifeblood of your organization is being able to support members of the community at your physical space, through events, activities, classes, and more. Nonprofit organizations are frequently visited by volunteers and community members, and while this is an important part of your organization, it can also lead to an increased risk of someone getting injured. With general liability coverage, however, you can protect your business against any lawsuits or damages that may arise from third-party bodily injury or property damage.
Risks: Without insurance, a single accident or injury could put your entire organization at risk. If your nonprofit is unable to come up with the funds to pay for damages or pay the legal fees necessary to defend your business, you may need to sell your business assets or declare bankruptcy.
Owning or leasing a commercial space opens your nonprofit up to a number of risks.
Benefits: A nonprofit’s physical space and facilities are critical to serving the community. If a fire, storm, or break-in were to damage your property in some way, it may prevent you from operating and cost you financially. Commercial property insurance can protect your organization in case anything happens to your property, providing funds to repair or replace property that is damaged by a covered peril. If your nonprofit needs to shut down temporarily due to property damage, business interruption insurance can provide funds to cover lost income and operational expenses.
Risks: If your nonprofit heavily relies on a physical space or key equipment, not having property coverage can put your organization at severe risk. If a natural disaster occurs or if your commercial space is burglarized, you may have difficulty recovering financially on your own. Without insurance, you will be picking up the entire cost of repairing or replacing damaged or lost property, and if your organization is forced to shut down temporarily, you will need to pay out of pocket to keep your business going.
Certain types of business insurance may be required in your state.
Benefits: In most states, companies are required by law to carry workers’ compensation insurance. Even in the safest conditions, accidents can happen, which is why insurance is a necessary solution. If an employee is injured while working for you, insurance will cover you financially as well as make your business compliant with the law.
Risks: Without workers’ compensation, your organization is wide open to financial loss should a worker get injured or sick as a direct cause of working for you. Moreover, multiple injuries could lead to financial losses that ruin your business. As many states have made carrying workers’ compensation part of the law, avoiding the coverage can land you in legal trouble resulting in penalties, fines, and in some cases, imprisonment.