The nature and business goals of nonprofit organizations are unique; therefore, their insurance coverage must be too. Nonprofits employ income-reliant individuals while also facing obstacles such as donor retention, stewardship, and volunteer liability all while championing for a worthy cause. And with different organizational goals also comes different requirements for insurance coverage. In order to provide the appropriate coverage, insurers must understand the key trends in the nonprofit sector as well as the individual needs of each nonprofit. In an effort to highlight the challenges faced, a report was published that surveyed 200 nonprofits about their biggest challenges when it comes to selecting insurance policies. Here are some of the top challenges faced.
Finding the Right Price
While there are some nonprofits that have extremely high revenues and successful executives, they are not intended to make people rich. Just like a small business, one liability claim can wipe out an entire organization. Finding an affordable policy for a nonprofit that will also help it come out on top after a liability claim can be nearly impossible without the proper broker. On top of this, nonprofits face more risks due to the diverse settings in which they pursue their mission. Organizations that work with children, youth, and social services are seeing the sharpest increases in premiums due to a nationwide upsurge in claims.
According to the report, the number one reason that nonprofits will change their insurance provider is because of a significant price increase. To help mitigate the cost of coverage and give insureds more value for their money, insurers often give amenities to nonprofits. These services might include group purchasing discounts, background checks for prospective employees, and consulting services. Working with a broker who deeply understands your organizations specific needs is critical to securing the correct coverage for your mission.
Understanding the Policy and Getting the Right Coverage
In order to understand what types of coverage to purchase, nonprofits must be aware of all their risks, which can vary depending on what types of populations they serve. The use of volunteers also brings different levels of liability exposure. Volunteers can be more prone to injury if they do not know proper procedures and typically possess less loyalty to the organization than a standard employee. These types of risks can be covered by General Liability Insurance to defend against third-party claims.
No two nonprofits have the same exposures, but a needed area of coverage for all organizations is Directors and Officers Insurance. Without D&O insurance, board members can be held responsible for funding lawsuits with their own personal assets. Forty-one percent of nonprofits indicated confusing policies as the reason they would not select a certain coverage, which is why partnering with a specialty broker who has experience working with nonprofits is critical to be properly covered.
Donor retention is a common issue for many nonprofits. Not only is it difficult to attract donors, it is even harder to keep them coming back. The coronavirus pandemic has only made this task more challenging, as all in-person fundraising events had to be made into virtual events where many organizations did not see the same turnout they had the year before. Recognizing this, insurers know that their nonprofit clients base a higher value on the integrity of their relationships than for-profit companies do. While an ever-changing market and other factors make it nearly impossible to determine a recipe for perfect coverage, insurers are working to identify specific trends that cater to the unique goals of those who fight for the greater good. And for that, we applaud them.
When looking for insurance for your nonprofit, it is especially critical to have a broker who specializes in nonprofit needs. Hawley and Associates thoroughly understands your operations and can clearly and effectively articulate your needs to insurers. We work by your side to navigate the insurance marketplace and secure the best coverage at a price your organization can afford. Contact us or request a quote to speak with one of our specialist brokers on how we can best protect your mission.