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Business Insurance Coverage for Non-profits

By Compuquotes Team on June 3rd, 2008

Business Insurance

Nonprofits have special needs and concerns when it comes to their insurance coverage. In many cases nonprofit organizations operate on a shoe string budget. So, these organizations are usually attracted to smaller insurance agents and "cheaper" policies. However, there is a hitch in choosing the cheaper policies. Since nonprofits obtain a large amount of funding from grants, they may find that government and funding agencies have specific insurance requirements. Usually these agencies prefer and in some instances require the more commercial lines of insurances versus the specialty or niche packages. While most nonprofit organization officials are aware of the common or more popular lines of insurance coverage, such as general liability, auto liability, etc. There are other types of coverage that should be considered.

Directors and officers or D&O coverage protects an organization against a breach of duty by the directors and/or officers of that organization. This coverage pays for the alleged or actual wrong decisions made by the directors or officers. The most common of these wrongdoings would be the mismanagement of funds or assets. Although this is an important coverage for nonprofits to have, many over look this coverage due to lack of understanding about how it works. There is lots of information available on the topic. However, nonprofit officers should get advice and compare policies before making any final decisions as there is little conformity among D&O policies.

Sexual molestation and physical abuse coverage protects organization from alleged or actual claims of sexual or physical abuse. This coverage is necessary and no nonprofit that works closely with the disadvantaged or vulnerable should be without it. The coverage itself can vary from company to company, but look for coverage that will cover legal expenses and awards. Unfortunately, many organizations fail to obtain this coverage due to its negative connotation. The naivety of these nonprofits is disappointing, because they leave themselves open for claims of abuse and rarely have the liquidity or assets to cover such losses. The average nonprofit leaders convince themselves that their employees and volunteers would never do anything so violent. Yet, at the end of the day you can not watch all of your employees or volunteers all of the time. Let's face it; the average organization could not pay the awards facing the Catholic Church.

Crime or Fidelity policy is another form of protection that nonprofits should consider. Crime policies are commonly referred to as employee dishonesty policies. However, employee dishonesty is only one of the forms of protection afforded under this policy. Other inclusions to the crime policy can be protection against robber and forgery. Crime policies vary, by insurance agent and insuring organization. Understand that if you have had legal woes in the past your premium for this coverage may be a bit pricey.

Then you have a common coverage that many nonprofits don't realize that they need, workers compensation. There are so many misconceptions about workers compensation that a large number of small organizations fail to get this coverage. What most nonprofit organizations fail to realize is that the definition of employee under workers compensation is pretty flexible. There is an employee test with about 6-8 questions that an organization should ask. Many organizations feel that because individuals are paid on a 1099 they do not have employees. Yet, under workers compensation that may not be the case. To be certain, you should contact the insurance commission in your state to learn the rules of workers compensation and to make sure that you are compliant.

Nonprofits need special coverage for their particular risks. So, they should compare insurance agents and make sure that they choose one that they trust. Buying insurance is a lot like buying a car, if you go in not knowing any thing about it, you will either come out with something you don't need, or paying too much for something that you do.

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