For nonprofits, getting your organization insured is one of the most important things you need to consider, whether you’re starting a brand-new nonprofit or leading an existing one.
As you know, starting and running a nonprofit is a full-time job — and sometimes more than that. Now, on top of that, you’re expected to find insurance, too?
You’re probably not an insurance expert, you just wanted to serve your community, so how are you supposed to know how to choose the right insurance and avoid making every mistake in the book?
In this article, insurance experts and brokers share how your nonprofit can avoid common mistakes nonprofits make when it comes to insurance so you can focus on doing what you do best — serving your community.
Be Sure You’ve Got Adequate Coverage
First things first, you’re going to want to be sure that you’ve got insurance coverage that covers all your nonprofit’s operations.
To do that, you’ll need an independent insurance broker who has experience working with nonprofits. This is the first person you should call for all things related to your insurance.
When you begin looking for insurance, you and your broker will have a deep conversation so they can learn as much as they can about your nonprofit — what it does, who it serves, how it’s funded, your plans for the future, and more.
Once your broker is familiar with your nonprofit and its needs, they’ll use that information to find coverage options that fit your needs and your budget.
“I always start it out with a conversation,” says Kevin Cothron, president and CEO of TCG Insurance Programs, a Florida-based insurance broker firm specializing in nonprofit clients.
“Once I have a better grasp of what the nonprofit is doing, then I can talk to them about the right kind of policies for them.”
Not every nonprofit is going to need the same coverage, says Melissa Dalske, chief experience officer for Nonprofits Insurance Alliance (NIA), and having a broker that understands your specific nonprofit can help to ensure you’ve got adequate coverage where you need it most.
For example, if you run a health clinic, you want a policy that’s going to cover you for slip-and-fall incidents. Or, if you’re out visiting a senior in their home, you’ll want coverage that will cover bodily injury or property damage.
“Understanding exactly what your nonprofit does helps the broker make appropriate suggestions to help you get the right coverage in place,” Dalske says. “Whatever you do, your broker should be able to relate what your operations are and how that policy will provide coverage.”
Understand Your Policy’s Exclusions and Limitations
When your nonprofit gets insurance coverage, there are two basic forms of coverage: General Liability coverage and Directors and Officers coverage.
Those two types of policies cover a lot of your nonprofit’s activities — but not everything. Some activities will require additional or specialized insurance policies to have full coverage.
So, how do you know when you’ve reached the limit of what your policy covers?
Once more, the answer is a call to your nonprofit’s insurance broker!
“I consider General Liability and Directors and Officers a foundation,” says Cothron. “For everything else, we have to build off of that, depending on what the nonprofit is doing.”
Cothron explains that many nonprofits make the mistake of assuming that their primary insurance policy covers more than it actually does — only to discover that they’re not covered when an incident occurs.
“The big misconception is that nonprofits think General Liability is the end-all of coverage. That it covers their board, their employees, for all actions,” he says. “Do not assume you’re covered — call us to get confirmation.”
That simple call to your broker whenever your nonprofit makes a change — a new event, an expanded program, a big purchase, a new source of funding, etc. — can save you a lot of headaches.
“Whether you’re adding a service, if you’re getting additional funding, hosting a special event — whatever it may be, just contact us and let us know what you’re doing,” Cothron says. “We’ll let you know if coverages need to be expanded or if you’re already covered.”
“The last thing anybody wants to hear is, if they have a claim, that it’s not covered. So don’t allow yourself to be in that situation — not when a phone call or an email can take care of whatever the issue is.”
The Cheapest Insurance? Or the Best Fit?
When you’re running a nonprofit, you want to be sure every penny possible is going to support your mission. So, if you can find a way to pay less for something, you’re probably going to jump at the opportunity.
But is your insurance coverage the place you should be cutting corners?
It depends.
While the cheapest insurance may sometimes be your best option, Dalske suggests a cautious approach when choosing coverage, and doing some comparison shopping with your broker before making a decision.
A cheaper quote may not cover everything you need it to — and you don’t want to find yourself high and dry when you need to make a claim.
“Are you paying less because the coverage is less? Or is it really just a competitive quote?” she says. “A broker should be able to walk you through and show you side-by-side comparisons of what you’re getting with each of those insurance companies.”
Cothron cautions that what looks to be the more affordable insurance option may have gaps in coverage that could leave you in a bind if you need to make a claim.
Other times? Maybe it’s just a good deal.
“Let me do a coverage comparison,” he says. “If it’s a good policy, great for you — keep it and take the savings. If there’s gaps in coverage, then I’ll let you know and you can make the decision.”
Cothron and Dalske both agree that it’s the gaps in coverage that you really want to watch out for. If you have an area where your insurance doesn’t cover, you’re still on the hook if something goes wrong. You’ll just be without a safety net.
“Often, people lose sight of the fact that, just because you have a gap in coverage, it doesn’t mean you’re not liable for that claim,” Dalske says. “You’re still paying that claim, you just don’t have any insurance to collect on it.”
Cothron says that the sticker shock of coverage costs are nothing compared to the potential costs of settling a claim without insurance.
“Insurance is only too expensive if you never need it,” he says. “The first time you need it, the costs you’ve been paying all of a sudden seems cheap compared to what the cost of the claim is.”
“A $600 policy pales in comparison to the costs you’d face in legal fees on your own. Without insurance, a good liability attorney — not a great liability attorney — is going to cost you $450 an hour.”
Conclusion
These are just some of the pitfalls to be on the lookout for as you take your nonprofit along its insurance journey.
You may not have all the answers when it comes to insurance, and that’s okay! Your broker is standing by, ready and willing to help you any way they can.
Regular communication with your broker — even when you think you might not need to — is one of the best moves you can make to protect your nonprofit.
