Regardless of your non-profit’s type, you, your organization, and your board are exposed to risks. Thankfully, a comprehensive non-profit insurance package can help mitigate these risks and keep your organization functioning effectively during claims or lawsuits.
By the end of this ultimate guide, you’ll understand everything there is to know about non-profit insurance and how we can help you get it!
What Is Non-Profit Insurance?
Despite the fact non-profits and charities operate with the best intentions, they’re still susceptible to lawsuits related to their operations and activities.
Non-profit insurance is a bespoke package designed for these organizations to protect from the unique risks and claims alleging fiduciary liability, malpractice, and bodily injury.
Common Non-Profit Insurance Claims Examples
There are endless types of claims non-profits can find themselves stuck in, but here are some common examples:
Example One: Former Employee Claim
You run a cultural education organization. Three of your former employees threaten suit against your organization for:
- gender discrimination,
- a hostile work environment,
- unfair competition,
- constructive discharge,
- failure to pay overtime wages,
- and intentional interference with business relationships.
All of your employees state they were forced to leave your organization and were threatened by you when they tried to start a separate organization.
The matter settled for $150,000, with an extra $14,000 in defence costs. Luckily, you had previously taken out a comprehensive non-profit insurance package that covered the full amount.
Example Two: Mismanagement of Funds Claim
Jackie, one of your board members, is found to have mismanaged government-granted funds. She is personally named in the lawsuit for breaching her fiduciary duties.
The case cost $120,000 in total, which your directors and officers insurance policy covered.
Example Three: Professional Liability Claim
You run a health and fitness organization dedicated to providing keep-fit classes to senior citizens.
Sadly, one of the participants fell and suffered an ankle injury under the direction of your trusted instructor. They end up suing your business, but thankfully, your non-profit insurance package covers the associated costs.
What Does Non-Profit Insurance Cover?
Non-profit organizations and charities should strive to obtain a comprehensive insurance package. The insurance coverages usually included are as follows:
Commercial general liability insurance (otherwise called CGL) provides financial coverage for claims alleging third-party property damage and bodily injury caused by your business or unforeseen events. Depending on your policy, it covers all legal defence and compensatory costs whether you win the lawsuit or not.
While the policy is customizable, it tends to include coverage in these areas:
- Tenant’s legal liability — It gives you the money to replace or repair third-party property that you occupy or lease.
- Bodily injury liability — This part of the policy covers damage or injuries to a third party person or property.
- Product liability — If a product you sell or make causes property damage or bodily injury, your CGL covers the associated costs.
- Personal and advertising injury liability — It includes allegations of slander, libel, defamation, and false advertising.
Typically, commercial general liability policies won’t include coverage for:
- Motor vehicles
- Patent infringement
- Contractual liability
- Professional services (see the next section)
- Intentional criminal acts
CGL is essential for all types of businesses. Consider it the first step on your road to complete coverage.
Sometimes referred to as errors and omissions insurance, it protects you from claims against you alleging financial loss due to your services. Negligence, failure to deliver services as promised, and misconduct are also covered under the policy.
Taking out a professional liability insurance policy ensures coverage for legal costs and damages related to:
- Professional services — Negligent acts, errors, omissions, or failure to deliver fall under this part of the coverage.
- Products — If your product causes physical injury or fails to work as intended, your coverage provides the costs associated with the legal action.
- Media and advertising — Coverage for any media services that get your client sued for slander, libel, or defamation.
Conversely, the policy won’t offer protection for these circumstances:
- Cost guarantees or price estimates
- Violation of securities acts
- Dishonest acts
- Criminal acts
- Fraudulent acts
- Incorrect estimates of economic returns or profits
If your non-profit offers advice or services, we highly recommend taking out a professional liability insurance policy to protect your business and employees from damaging claims.
Does your non-profit organization have a board of directors? Yes? Then directors and officers liability insurance coverage is essential!
D;O policies cover the costs related to losses, legal defence, or indemnification against a person who serves on your NPO’s board.
Your officers and directors can be held liable for a multitude of actions, such as:
- Breach of fiduciary duties
- Violation of federal laws
- Violation of provincial laws
- Breach of responsibility to shareholders
- Decisions that result in adverse financial consequences for the shareholders
- Allegations of misrepresentation
- Negligent acts
- Wrongful dismissals
- Employee discrimination claims
- Reporting issues and inaccurate disclosure
- Misleading statements
Therefore, purchasing directors and officers insurance coverage is essential as it covers the consequent legal and settlement costs of defending members against such claims.
The policy is structured differently from other NPO coverage. It has three clauses to pick from:
- Directors and officers liability (a.k.a. Side A) — Coverage for directors’ and officers’ assets if your organization can’t fund indemnification.
- Company reimbursement (a.k.a. Side B) — It reimburses any legal expenses incurred when defending your director or officer.
- Entities Security Coverage (a.k.a. Side C) — Offers advanced protection for securities-based claims against public companies.
As a non-profit organization, you generally only need an AB policy.
Cyber security insurance covers the costs incurred following cybercrime.
These days, it’s highly likely your organization is at least partially digital. Suppose hackers or other cyber criminals decide to infiltrate your business, steal sensitive third-party data, hold the system hostage, or take over your website. In that case, your non-profit can be held liable for the incident.
Most cyber liability insurance policies include coverage for damages and legal costs related to:
- Legal, forensic, and breach management — This policy section includes coverage for crisis management services, credit monitoring, notification fees, and legal advice.
- Incident response — Coverage for the fees associated with 24/7 access to a cyber incident response hotline. Additionally, it pays for a team of talented individuals to help coordinate a cybercrime response.
- System damage and restoration — It covers the restoration and repair of any software systems damaged during the cyber event.
- System business interruption — It compensates your organization for any revenue losses caused by system outages.
It might be wise to invest in the social engineering endorsement (i.e., a policy add-on). The extra coverage protects your organization if an employee is tricked into allowing system access or sending money to a fraudster’s bank account.
If your non-profit owns or rents a space to conduct business or store equipment, commercial property insurance is necessary.
The policy normally includes coverage for:
- Tenant improvements — This section covers improvements you made as a tenant that can’t be moved (i.e., lighting, paint, and flooring).
- Building coverage — Repairs to the physical property due to unforeseen events like floods or fires.
- Inventory — The policy gives you the money to repair or replace inventory and merchandise damaged or stolen.
- Electronics, equipment, fixtures, and furnishings — It covers the cost of replacing or repairing any electronics, equipment, and fixtures damaged or stolen inside or outside of your organization’s premises.
Abuse Liability Insurance Coverage
Abuse liability insurance protects your NPO against lawsuits alleging actual or threat of physical, mental, or sexual harassment, misconduct, or abuse. The policy provides the finances and advice needed to respond to such claims appropriately.
The most common organizations requiring abuse liability insurance are:
- Retirement and nursing homes
- Sports teams
- Sports leagues
- Faith-based organizations
- Sports and recreations centres
Which Non-Profit Organizations Need Insurance?
All non-profits and charities contain aspects that expose them to lawsuits and risks. You need insurance if at least one of the following applies to your organization:
- You store confidential data.
- You organize and host special events.
- You use an office space or visit your client’s property.
- Your volunteers or staff conduct business off-site.
- Your organization provides advice or services.
- You have a board of directors.
- Your work involves communicating and connecting with third parties (i.e., employees, vulnerable people, vendors, volunteers, and others).
Generally speaking, the type of NPOs that require insurance are:
- Research institutions
- Community centres
- Community service providers
How Much Does Non-Profit Insurance Coverage Cost?
You can expect a standard non-profit commercial general liability policy for a small organization to cost around $450 per year for a $2 million limit.
However, the rates depend on a myriad of factors, including:
- Non-profit type — The type of non-profit you own plays a significant role in the total insurance price. After all, different types of organizations come with varying exposures of risk. If your non-profit is an exceptionally high risk, you should expect to pay more than others. For example, if you run nationwide fundraisers every week, you’ll need to budget more than a small-scale charity.
- The number of employees — The more extensive your operation, the more you’ll pay for insurance. Why? Because it expands your outreach and increases your susceptibility to third-party claims.
- Non-profit location — If your NPO is based in an area prone to natural disasters or crime, your insurance premium increases. This factor is critical when calculating your cost of commercial property insurance.
- Your experience — The more experience you have in your industry, the less you’ll pay for coverage. Essentially, a proven track record shows insurers you know what you’re doing, decreasing the likelihood of claims. On the flip side, if you’ve never handled donations or organized a fundraiser, protecting your NP becomes more expensive.
- Non-profit revenue — Yes, even though your foundation is not-for-profit, your revenue still factors into your premiums. In the event of a claim, parties request more in damages if they know your non-profit is financially strong.
- Non-profit insurance claims history — Insurers look at your past claims history to decide whether you’re likely to make another one. A clean record means lower premiums.
How to Get Non-Profit Insurance in Canada
With LiabilityCover, getting insurance for your non-profit organization is simple. Just follow these four steps:
- Submit a request on our website using our secure form.
- We take a look at your insurance requirements.
- One of our expert team members connects you with a licensed insurer with specialized experience providing insurance packages to non-profit organizations.
- The insurer contacts you to guide you through the insurance acquisition process!
Why Choose LiabilityCover?
Our process is wonderfully accessible, and our outstanding relationships with the country’s best insurers allow you to rest easy — you’re in well-versed hands.
Getting the insurance your non-profit needs is straightforward with LiabilityCover. Why choose anyone else?
Frequently Asked Questions
Do Non-Profit Directors and Officers Have the Same Responsibilities as Corporate Board Members?
Absolutely! Members on corporate and non-profit boards must exercise their fiduciary duties in the business’ or organization’s best interest.
Specifically, they have three levels of fiduciary duty:
- Duty of obedience
- Duty of loyalty
- Duty of care
It’s also worth noting that individual members on the board in both settings can be held personally liable for breaching their responsibilities.
What’s The Difference Between Commercial General Liability Insurance and Public Liability Insurance?
The main difference between CGL and public liability insurance is the types of risks they cover, as you’ll discover below:
- Commercial general liability insurance — Coverage for a wide range of third-party claims, such as personal and advertising injuries.
- Public liability insurance — Coverage against the public’s claims made against your business for bodily injury or property damage.
What Are Some Examples of Non-Profit Directors and Officers Claims?
The most common directors and officers claims are listed below:
- Employee allegations (for instance, gender discrimination)
- Mismanagement of government funds
- Mismanagement of donor money
- Inaccurate disclosure of what funds are used for
- Poor corporate governance
- Mistakes in financial statements
Does Non-Profit Insurance Cover Volunteers?
It depends on the policy; don’t just assume your non-profit insurance policy covers volunteers. The risk level changes across all roles and thus requires different types of coverages and limits.
When you speak to one of our leading brokers, ask them whether your policy extends to volunteers. If not, you should think about acquiring extra coverage.