Nonprofit Insurance

Nonprofit organizations operate with the goal of helping people, communities or other causes, as opposed to making profit for their owners. While these businesses may have different objectives compared to other types of companies, they face many of the same risks. Whether your nonprofit works to rebuild communities, advocates for certain groups, aims to protect the environment, or any other cause, having the right nonprofit insurance is crucial to protect your mission, staff, volunteers and assets.

Jump To:

• What is Nonprofit Insurance?

• Why Do Nonprofits Need Insurance?

• Who Needs Nonprofit Insurance?

• What Types of Insurance Do Nonprofits Organizations Need?

• How Much Does Nonprofit Insurance Cost?

• FAQs

• Explore Your Coverage Options Today! 

What is Nonprofit Insurance? 

Nonprofit insurance consists of multiple different policy types, each of which are designed to protect businesses who are legally defined as nonprofit organizations. While nonprofits operate differently than typical businesses and generally tax-exempt, they still face a number of different risks. Each type of coverage that makes up the term “nonprofit insurance,” has its own purpose and protects against different types of incidents. 

Why Do Nonprofits Need Insurance? 

Nonprofits need insurance for the same reason that any other organization needs insurance, to protect against unexpected incidents. Additionally, some types of insurance are legally required or simply an industry norm. For example:

 

• Any company or organization with employees is required to provide workers’ compensation coverage (except for Texas employers).
• If your nonprofit uses vehicles for business purposes, a commercial auto insurance policy is legally required (in all states except New Hampshire).
• Lastly, while not legally required, many clients and partners will not sign contracts with nonprofit organizations if they don’t have general liability insurance. 

In addition to legal compliance and partnership requirements, there are many other insurance policies necessary to protect nonprofits against risk such as:

 

• Lawsuits stemming from accidents, negligence or mismanagement. 
• Property damage caused by natural disasters, storms, fires, theft or vandalism.
• Third-party bodily or property damage
• Cyber attacks, and much more. 

Who Needs Nonprofit Insurance?

Nonprofit insurance is important for a wide-variety of individuals and organizations that are legally defined as nonprofits. Some specific examples include:

 

• Charitable foundations
• Religious organizations
• Educational nonprofit
• Advocacy groups
• Arts, cultural and educational nonprofits
• Political clubs
• Animal shelters
• Community centers
• Environmental organizations, and many more

 

What Types of Insurance Do Nonprofit Organizations Need? 

Depending on the nature of your nonprofit, and the specific associated risks, you’ll likely need multiple types of insurance. The following policies are commonly acquired by nonprofit organizations, and each serve a unique purpose:

 

• General Liability Insurance: Covers claims relating to third-party bodily or property damage. If someone gets hurt on your premises or someone’s property is ruined due to your operations, general liability will help cover the associated costs such as legal expenses and payouts. 
• Workers’ Compensation: Nonprofits with employees are legally required to provide workers compensation coverage (unless operating in Texas). Workers’ compensation works by paying for medical bills and lost wages if any employee becomes sick or injured due to a work-related incident. 
• Commercial Auto Insurance: Commercial auto insurance is required by law (in all states except New Hampshire)  if a nonprofit uses vehicles in its day-to-day operations. It covers the cost associated with vehicle damage, property damage, and liability resulting from an auto accident. 
• Directors and Officers (D&O) Insurance: Protects high-level individuals like executives and board members from personal liability if they’re sued. Common lawsuits that D&O insurance helps to cover include mismanagement, misuse of business funds, and wrongful termination. 
• Commercial Property Insurance: If your business property is damaged in the event of a storm, fire, robbery or vandalism, commercial property will help to cover the repair and replacement costs. These policies generally cover buildings, office spaces, inventory, equipment and furniture.  
• Professional Liability Insurance (Errors and Omissions): Protects nonprofits against claims of negligence, mistakes, misrepresentation, or the failure to deliver promised services. If your organization specializes in counseling, social services, consulting or training, professional liability is vitally important. 
• Cyber Liability Insurance: Helps cover the costs of incidents relating to cyber attacks and data breaches. These policies usually pay for data recovery costs, client notification expenses, and other legal fees. 
• Business Owners Policy (BOP): An insurance policy combining both general liability and commercial property insurance at a discounted rate. 
• Tools and Equipment Insurance: Also called contractors insurance, this policy protects tools and equipment used in daily operations against theft, vandalism or damage. Nonprofits that build structures or are involved in construction, should invest in this coverage to protect their essential assets. 
• Group Health Insurance: Nonprofits with employees should consider investing in group health insurance which provides workers with essential healthcare benefits. Additionally, if a nonprofit has 50 or more full-time equivalent employees, they are required to provide health insurance under the ACA. For nonprofit business owners operating independently, check out our Individual Health Insurance Overview to review your coverage options.

How Much Does Nonprofit Insurance Cost? 

The cost of nonprofit insurance can vary greatly from organization to organization. With that said, on average a Business Owners Policy (BOP), which provides property and general liability insurance, typically costs nonprofits $80-$85 per month. 

 

Insurers evaluate a variety of factors to determine specific rates of business insurance policies. These factors include: 

 

• Number of Employees: The size of the organization affects insurance costs differently for different policies. For example, the rate for a workers’ compensation policy will increase with more employees. On the other hand, health insurance providers often offer discounts to organizations with a high number of employees. 
• Location: State regulations and local risk factors can affect the cost of certain insurance policies. 
• Industry: If your operation includes high-risk duties, such as construction work, your premium costs may come at an increased cost.  
• Claims History: Businesses with a lengthy record of claims or lawsuits may see increased costs. 
• Coverage Limits: Policies with high coverage limits offer more protection, but are more expensive compared to policies with lower coverage limits. 
• Number of Policies: If an organization only needs one or two of the above listed policy types, overall costs will be lower compared to organizations requiring all of them. 

FAQs

Are volunteers covered by nonprofit insurance?

This varies by policy type and insurer. For example, some workers’ compensation and general liability policies will extend to volunteers, but others will only cover paid-employees. To gain a better understanding about coverage of your nonprofit’s volunteers, talk to a licensed insurance agent. 

 

Do nonprofits have to provide health insurance? 

Only nonprofits with 50 or more full-time equivalent employees are legally required to provide health insurance, according to the Affordable Care Act. 

 

Do nonprofits have to pay taxes on insurance?

Nonprofits that are 501(c)(3) tax-exempt organizations, usually do not pay any federal income taxes on their insurance. As for state income taxes, regulations vary. For example, some states require nonprofit organizations to pay taxes on their insurance premiums, while some do not. To determine whether or not your nonprofit is required to pay taxes on insurance, visit your state’s department of revenue, or talk to an insurance expert at EZ.Insure. 

 

How can nonprofits save money on insurance? 

To cut costs on insurance, we recommend comparing multiple different plans and insurers through an online broker like EZ.Insure. Additionally, bundling policies or purchasing combination policies like a BOP, helps to cut costs. Lastly, some insurers will offer discounts to organizations that provide teams with risk management training.

 

Explore Your Coverage Options Today!

Running a nonprofit can be extremely rewarding, but also comes with a variety of unique challenges, but getting insurance doesn’t have to be one! EZ.Insure makes it easy to find nonprofit insurance that meets your organization’s needs and budget. Our user-friendly platform offers free, no-obligation quotes, side-by-side plan comparisons, and 24/7 expert assistance from licensed insurance agents.

 

To get started, simply click the button below, or call us directly at (844)-770-0876.