Many nonprofit organization leaders are under the impression that they can’t afford the range of insurance coverages needed to adequately provide protection against their unique risk exposures. In reality, the absence of these protections may place the organization in jeopardy and be far more costly in the long run.
While nonprofits need the basic coverages offered by business insurance- including general liability, property and workers’ compensation - there is a range of other risk management solutions to be considered. Insurance experts should educate their nonprofit clients on the need for cyber liability, management liability, employee dishonesty, non-owned auto and volunteer coverages to help them make informed decisions about the policies that best suit their needs.
Cyber Liability Coverage
Nonprofits are not immune to data breaches, so proper technology coverage must be in place. Information technology systems require monitoring and security policies and protocols as well as adherence to specific rules and government regulations. Many nonprofits have no IT support professionals on staff and no means of ensuring data security measures are implemented. This leaves them vulnerable to cybercrime, which can threaten business continuity, and create financial and legal liabilities.
With data breaches in the news almost every day, insurance agents should educate their nonprofit clients about the importance of cyber liability policies that are designed to protect them from this risk exposure. Clients should understand that cyber liability policies cover expenses associated with data breaches such as credit monitoring costs, notification costs, defense costs related to claims by state regulators, fines and penalties, and losses resulting from identity theft. These policies also protect nonprofits from losses stemming from business interruption, computer fraud, cyber extortion, and data loss and destruction.
Management Liability Coverage
Some nonprofit leaders, especially those whose organizations have few employees, don’t believe they need the management liability coverage that includes employment practices liability, directors and officers, and fiduciary liability insurance. This is a misconception that agents should work to dispel.
In reality, management liability is one of the most important coverages for nonprofit organizations. Leaders should understand that it provides protection from employment practices liability, fiduciary liability and governance liability claims. Agents can point to the frequency and high cost of EPL claims such as defamation, racial and gender discrimination, and sexual harassment to help their nonprofit clients understand the importance of this coverage.
Employee Dishonesty Coverage
Nonprofit organization leaders also may overlook the need to protect their organizations from fraud by neglecting to obtain employee dishonesty insurance policies. The fact that a majority of the more than 1.5 million nonprofit organizations in the U.S. raises funds and accepts donations to use in serving their causes makes them attractive targets for employee theft.
Any employee theft can strain a nonprofit’s resources and adversely impact their ability to deliver services or fulfill their missions. Agents should help nonprofit clients understand their risk exposure to employee dishonesty and aid them in taking steps to protect against financial losses associated with this type of exposure.
Non-Owned Auto And Volunteer Coverage
Another significant risk exposure nonprofits face relates to volunteer and staff use of personal vehicles to conduct business on behalf of the organization. Some nonprofit leaders wrongly assume that the organization will be protected from risk because volunteers and staff are covered by their own auto insurance. Agents should make it clear to their nonprofit clients that a business auto policy, including coverage for non-owned autos, is essential to protect them from this risk.
Nonprofits depend on volunteers to help carry out their missions, and this presents many unique risks to these organizations. Nonprofit organization leaders may think that volunteer risks are covered under general liability and workers compensation. However, this often is not the case. To be fully protected from risks related to volunteer activity, nonprofits need a combination of insurance coverages that include volunteer accident, general liability, non-owned auto liability, and sexual abuse and molestation.
Agents should work with nonprofit clients to help them understand the range of unique risk exposures they face and tailor risk management solutions designed to protect these organizations as well as their board members, volunteers, employees and the people they serve.
Matt Engle is a commercial property and casualty insurance broker with Insurance Office of America. Matt may be contacted at [email protected].
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