Guide to Insurance for Nonprofit Organizations

Though every nonprofit organization operates a little differently, most have unique exposures that companies in the for-profit world might not have. Activities like hosting fundraisers and other events that generate revenue, setting standards, providing professional certifications, and tapping volunteers can place your organization and your assets at risk. Even having a board of directors creates risk, both for individuals and the organization overall. Yet, most nonprofits operate lean, often lacking the budget for an in-house risk manager to identify all the exposures and implement measures to protect against risk.

The nature of your nonprofit organization and the activities you engage in create risks and necessitate insurance obligations that aren’t always simple to understand or fulfill. That’s why many nonprofits enlist the help of an independent insurance advisor.

An insurance advisor provides services that go far beyond a typical agent’s focus on simply securing coverage. They operate entirely independent of any carrier—understanding your business, identifying your unique exposures, and securing the most appropriate coverage for your situation. An independent insurance advisor also provides access to a broader insurance market than an agent who’s aligned with a particular carrier. That means they’re in a stronger position to evaluate various insurance options and negotiate the best solution, which might involve aligning multiple policies to avoid gaps.

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The firm’s structure and ownership are important considerations when choosing an insurance advisor. Some are backed by financial sponsors like private equity groups, which can encourage them to prioritize financial goals over service quality. If they’re too concerned about hitting certain financial targets, they might not invest the resources to ensure the level of service their clients expect and deserve. Alternatively, a privately owned insurance advisory firm has the autonomy to focus on their clients’ best interests, along with a strong incentive to invest in the people, technology, and other resources it takes to deliver high-quality service.

It's equally important to look for a firm staffed with highly experienced professionals that have deep expertise in business insurance generally and nonprofit insurance specifically. They’ll be better equipped to help your organization understand both your risks and your options for addressing them, so you can make the most informed decisions. It’s also helpful to determine which team members you’ll work with day-to-day, which might differ from the team that pitches your business.

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Partnering with an independent insurance advisor that has extensive experience working with a wide range of nonprofit organizations can pay significant dividends.

They’ll understand the nuances of how a nonprofit operates and the unique exposures you face. They’ll also have strong relationships with the insurance carriers that are most amenable to providing coverage uniquely designed for nonprofits. That’s essential, since some insurers exclude the very types of coverage a nonprofit often needs, like political action committee (PAC) insurance and terrorism coverage (critical for nonprofits located in dense urban areas or near major cities). Because they work with nonprofits daily, these advisors know what exclusions and limitations to watch out for, so they can ensure you’re adequately covered.

An advisor that works with nonprofits also understands how insurance can support your mission and how to ensure your insurance and risk management budget is best allocated based on your risk profile and tolerance. For example, a nonprofit with a community youth outreach program will have a different profile than an association that serves professional members in a particular industry. And whatever your mission, they’ll be well-versed in the nuances of easing board members’ concerns about risk.

An independent insurance advisor will serve as an extension of your internal team—a partner that becomes part of your family, equally committed to your success. The best advisors work to take the insurance burden and worries off your plate, so you can focus on your mission.

For example, a skilled insurance advisor understands that nonprofits need to avoid budget surprises and require sufficient time to make thoughtful decisions about coverage options. Your advisor should begin preparing for your policy renewals early, talking with you about any changes that impact your risk, and working with the carrier to come up with the best solution. They should also help you allocate insurance premiums across different programs or business functions, so you can tie your risk mitigation costs back to your budget with accuracy.

Additionally, your insurance advisor should provide value-add services that are particularly important to nonprofit organizations. For example, B. F. Saul Insurance helps nonprofit clients forecast and budget for their insurance needs annually, always keeping current on how the organization’s activities might be changing and the impact on risk and insurance. You should also expect your insurance advisor to identify ways to reduce your risk and prevent losses. For instance, nonprofits that host events might find they can transfer a portion of the risk by negotiating vendor contract requirements.

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Every nonprofit operates differently, so each organization will have some unique policy needs. However, the following tend to rank among the top policies to have in place.

Directors and officers (D&O) liability. Most board members will ask if your organization has sufficient D&O coverage before they agree to serve. They understand that their actions and decisions could expose your organization to a claim of wrongdoing, and they want to ensure you and they are properly covered. If you have higher-than-usual board turnover, your D&O risks will be greater. (Learn more about the factors that affect D&O insurance pricing and how to obtain the best premiums.)
Professional liability (also called E&O). Providing consulting or other fee-for-service offerings, setting standards, delivering training, and providing accreditations are just a few of the many nonprofit activities that create professional liability exposure. An insurance advisor will recommend the right combination of insurance and loss prevention measures.
Cybersecurity. Every business is a potential cybercrime target, but nonprofits are especially vulnerable because they often maintain valuable donor data, solicit donations, have a lean staff, or struggle to invest in the IT resources needed to thwart an attack. An experienced advisor will recommend an appropriate policy from a carrier that’s also uniquely qualified to help businesses with limited internal resources.
Event liability and event cancellation. If you rely on events for a substantial portion of your revenue, you can’t afford to go without coverage that protects against loss of revenue or commitment of expenses if an event is cancelled, postponed, or curtailed for a covered reason. And any event, no matter how small, requires liability insurance to protect against the possibility of a participant or other non-employee being injured at the event, or the event resulting in property damage.
Crime. Employee dishonesty is something most nonprofits don’t want to think about, but it’s a common claim in this sector. An insurance advisor can help ensure trust and goodwill don’t override the need for protection against employee theft or other forms of financial crime.

In addition to these critical coverages, all nonprofits need:

Nonprofits often encounter problems when purchasing D&O coverage, especially when it comes to determining the right coverage amount and policy limits. Some find they’re underinsured, while others end up overinsured because their board mandates excessive policy limits, tying up budget they could allocate to other, equally important coverages. Benchmarking data can help you assess how much D&O coverage your peer organizations are securing, which is often a helpful guide.

Another common pitfall is failing to consider the risks involved when entering into contracts with vendors. Whether it’s a major convention venue or a local photographer, every vendor agreement includes terms that could create exposure or insurance requirements that are costly to comply with. Some nonprofits even forego formal contracts when working with a vendor they know or entering into an agreement with another nonprofit. An independent insurance advisor will carefully review all your contracts, identify the associated risks, and help you transfer or insure against them.

Nonprofits that use volunteers don’t always realize that their existing policies might specifically exclude volunteers from coverage. For example, a volunteer who is injured while working on your behalf would not be covered under a workers’ compensation policy. Conversely, some general liability (GL) policies do cover volunteers; so if they caused damage or injury at an off-site event, it’s likely your GL policy would cover the claim. An independent insurance advisor will review all your policies, determine if volunteers are adequately covered, and recommend solutions to fill any gaps.

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If your organization experiences a covered loss, you need to maximize the financial outcome. But you also need to understand what the claim process will involve and feel confident that a trusted partner is guiding you.

That’s why it’s best to choose an independent insurance advisor that goes far beyond simple claims processing and actually serves as your advocate. An experienced advisor will work to understand the nature of the claim, protect your rights throughout the process, advise you at every step, and negotiate aggressively on your behalf. This claims advocacy approach is essential for mitigating risk and optimizing your claim outcome.

An insurance advisory firm with a practicing attorney within their claims group is a major advantage. They’ll know how to navigate the complexities of the claim process, advocate for your nonprofit, and guide you to an outcome that isn’t possible without the proactive efforts of an insurance law specialist.

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The specialists at B. F. Saul Insurance recognize that every nonprofit has a unique mission, but all share similar concerns about achieving their goals without creating undue risk. We take the time to understand your organization’s mission, objectives, and activities, then recommend insurance coverages and risk management approaches that will reduce your exposure.

Our team works as an extension of yours—recommending ways to transfer or mitigate risk, forecasting premiums to avoid budget surprises, even helping you allocate premiums across various programs. Through it all, we simplify the process by taking the burden off your staff.

Because we’ve been partnering with nonprofits for decades, we have exceptional access to the insurance companies that have an affinity for working with clients in this sector, helping you avoid the exclusions and limitations that other insurers apply. We also understand how to ensure your organization is appealing to board members by addressing the risks they’re likely to care about.

As a privately owned firm, B. F. Saul Insurance brings an objective perspective and the financial resources to invest in delivering the highest quality service. And if your nonprofit experiences a loss, our concierge-level claims service helps maximize the amount you recover and minimizes your staff’s involvement. In fact, we’re unique in staffing a former practicing insurance attorney who’s adept at serving as your advocate and negotiating the best outcome.

Everything You Need to Know About Insurance for Nonprofits

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