Nonprofits – Why You Are Not too Small to Need Insurance to Manage Key Risks
A common misconception about nonprofits is that they’re simply too small to be at risk for liabilities and their employees will be protected because of their status as humanitarians. All organizations – even well-meaning nonprofits – need protection. Organizations of any size are at risk for a variety of legal problems.
With years of experience helping nonprofit organizations stay protected from unforeseen risks, Clements nonprofit specialist, Michelle Brown, knows how closely related a nonprofit’s ability to function and its risk management strategies are. “The purpose of risk management, including business insurance, is to protect the nonprofit’s assets,” Brown says. “If you don’t protect the assets, you risk not accomplishing your mission.”
Here is a sampling of the kinds of claims filed by nonprofit organizations:
- A student borrowed a car during a trip abroad with a university, lost control of the vehicle due to road conditions, and wrecked the vehicle.
- A nonprofit employee was bit by a flea during a work-related travel in the Middle East, resulting in emergency air transportation to Germany and two weeks of hospital care.
- An anonymous individual contacted a nonprofit and claimed the organization’s computers had been hacked, demanding $1 million to keep sensitive data private.
- A representative of a US-based nonprofit began receiving death threats stating that if he did not leave the country, then he would be killed.
- A major shipment of humanitarian supplies was stolen from the port after arriving in the destination country.
In each of these scenarios, the risk posed to the nonprofit came through forces that were either unpredictable or outside of the control of the individuals managing the organization.
As well-meaning as a nonprofit's mission and work may be, there are too many scenarios where the actions of volunteers, employees, or others could create liability for the organization or put the livelihood of the employees, volunteers, or contractors at risk.
How to Mitigate Potential Risk to Your Nonprofit
With so many potentially risk-inducing situations facing a nonprofit, a strategy to manage that risk is essential. Developing a risk management strategy also improves the insurability of your organization. Obtaining the right kinds of insurance coverage should be at the center of this policy. Without the proper coverage, the very mission of a nonprofit could be at risk.
Without proper insurance coverage, Brown says, “a single claim could take out the budget of organization for the entire year.”
“With proper insurance,” Brown continues, “you’re actually protecting the ability of the nonprofit to function.”
What Types of Insurance Should International Nonprofits Consider?
While the specific needs of each nonprofit will vary depending on the operating regions, type of work performed, and other factors, nonprofits generally look to manage risk with the following types of insurance:
- General Liability insurance: Helps protect the organization when someone is hurt or property is damaged in the office, clinic, fundraising event, or other area.
- Auto insurance or Fleet insurance: For employees or volunteers who bring their own cars or who hire cars (as is very common abroad); or for support of vehicles. that are critical to accomplish mission objectives such as delivering food or services.
- Property insurance: For property (such as computers, equipment, or records) leased or owned by the nonprofit.
- Personal Accident insurance: Covers an injury sustained by a volunteer, program participant, gallery patron, or other individual on the premises.
- Fidelity insurance (or more commonly referred to as Crime insurance): Protects the organization from criminal acts, including acts performed by employees or volunteers, including wire transfer fraud, embezzlement, and check fraud.
- Improper Sexual Conduct insurance: Especially important if an organization works with vulnerable clients such as children.
- Errors & Omissions insurance: Protects your organization from claims from your client, i.e. the people you are servicing, for errors in your work or your ability to provide the services you promised.
- Directors & Officers Liability insurance: Indemnifies, i.e. reimburses the organization or its directors and officers for losses or advancement of defense costs in the event an insured suffers a loss as a result of legal action brought for alleged wrongful acts in their capacity as directors and officers.
- War and Terrorism extension: If you are working in high risk areas, you may need to add an extension to some of the policies described above which typically have exclusions for acts of political unrest, increasingly likely, or terrorism, less likely but potentially catastrophic.
Too Important to Ignore
With so many factors outside the control of the nonprofit, it is important to get protection – especially for small organizations without large operating budgets. “Even if you only have 5 staff overseas or just two vehicles,” says Brown, “it only takes one thing to go wrong and the dream you had to help people could be over.”
Fortunately, by obtaining risk coverage, nonprofits don’t need to fear liabilities while pursuing their missions. If coverage is needed, Clements Worldwide can assess an organization’s needs and find a risk coverage plan that’s the right fit.
To gain more detailed insight into the risks nonprofits and NGO face, visit our NGO & Nonprofit Industry Hub.
Call us today at +1.202.872.0060 or 800.872.0067 or e-mail firstname.lastname@example.org to discuss solutions tailored to your nonprofit's insurance needs.