Did you know there are about 170,000 charitable and non-profit organizations in Canada? These organizations employ 2 million people and have over 13 million volunteers.
Not-for-profits play an important role in Canada. They provide expertise and support in everything from social welfare to sports and recreation. All the money earned by the not-for-profit or donated to the organization must be used in pursuing its objectives.
Most not-for-profits have a small budget but they have all the same risk and liability as a for-profit corporation. They still have the same responsibilities to insure that workers and volunteers are protected. Director's liability is another topic of concern.
Not-for-profit insurance can help organizations focus on their social goals rather than worry about unexpected expenses. Keep on reading for the ultimate guide to not-for-profit insurance and why it’s the right option for your organization.
Who Is Non-Profit Insurance For?
Non-Profit (or Not-for-profit) insurance protects non-profit organizations from claims and unexpected events including cybercrime. A non-profit organization can be set up to support social causes like domestic violence or poverty. They can also focus on community groups, sports or recreation. There are no specific requirements for the purpose, except that their purpose cannot be for profit.
There are many different types of not-for-profit organizations. They can be community groups that bring a variety of activities and services to the community. These organizations are aimed at increasing social well-being and recreation. They can also dedicate their time and effort to:
- To a particular group like seniors or the LGBTQ community
- People from a particular background, culture or race
- People from a particular neighbourhood
They can also be trade organizations designed to promote trade between businesses, provinces, or countries. Not-for-profit organizations government or quasi-government organizations that provide health, education, or social services in the public sector. Their main goal is a public benefit.
Not-for-profit organizations can also be recreational clubs that are solely set up for entertainment purposes and are funded by the local community. They can be set up for sports activities, fairs, and health checkups.
Not-for-profit insurance is especially important if your organization has employees or sets up events with volunteers and the public. If your organization owns or rents office space, you should probably consider not-for-profit insurance to protect your organization in case of unexpected damage.
What Kind of Insurance Do Not-For-Profits Need to Have?
Reviewing all the different types of insurance can be overwhelming. There is specific not-for-profit insurance that can be particularly useful for not-for-profit organizations. The type of insurance your organization need depends on your activities and the service you provide.
Directors and Officers Insurance
As a not-for-profit organization, you will have a board of directors that provides oversight to the organization. The board has a legal responsibility to act in the best interest of the corporation. The vast majority of board members for not-for-profit organizations act as volunteers. They don't receive any compensation.
While directors are not personally liable for the contracts or actions of the not-for-profit organization, they can be held personally liable in certain circumstances. They can be held personally liable for failure to pay withholding tax. As such, directors and officers insurance is essential for a not-for-profit organization to protect its directors and officer.
Directors' and officers' insurance protects against risks that are not covered by general liability insurance. It can cover improper employment practices like wrongful dismissal, discrimination, or harassment. It can also cover defamation lawsuits and breach of fiduciary duties related to conflict of interest.
Car insurance is mandatory in Canada. If your employees have company cars to drive, you need to get auto insurance. The insurance will cover injuries to other people and property if they occur while carrying out the business of the not-for-profit organization.
For example, not-for-profit organizations that deliver food to senior homes or to the homeless population will need a car. This car will be part of the assets of the not-for-profit organization and must be insured by the organization.
If your organization does not own any cars, you can still get auto liability coverage as part of your general liability insurance. This protects the organization from any claims when an employee or a volunteer gets into a car accident while acting on behalf of the organization.
Commercial Property Insurance
Whether you rent or own your office space, you should consider getting commercial property insurance. This insurance provides coverage in the event of a fire, earthquake, vandalism, or storm. Make sure that the insurance covers all the fixtures, office furniture, and inventory is covered under the policy.
You should also make sure that you extend your coverage for any computer or electronic equipment. You can get coverage for losses due to power surges, hard drive crashes, and viruses.
General Liability Insurance
The most common type of policy for a business is general liability insurance. It covers claims for bodily injuries suffered or property damage. For example, if you have visitors or volunteers that slip and fall on your property, they can sue you for damages. General liability insurance will protect your organization in this case.
It will also protect you from personal injury claims like libel, defamation, or slander. Remember that these policies don’t apply to a not-for-profit organization's employees. Those are covered by separate workers' compensation insurance.
What Does Non-Profit Insurance Cover?
Not-for-profit insurance can cover a wide range of people and activities. Whether you have a small office for walks in or hold large events for the public, you can have not-for-profit insurance coverage specific to your needs.
If you have customers or clients that use your services, they can get injured or damage their property while on your premises. It can be as simple as a slip and fall on the icy sidewalk in front of your office or getting injured during a sporting event or a fair that you organized.
If you don’t have any customers or clients, you still need to consider delivery people who have access to your property. Any bodily injuries that they suffer can also result in a lawsuit against your organization.
Any Type of Visitor
At the end of the day, if you have any visitors at your property, you want to make sure you’re protected. No matter how well you plan, accidents happen. Not-for-profit insurance will protect you when the unexpected happens.
On and Off-Site Inventory
Your organization may keep its inventory on-site or off-site. Inventory for a not-for-profit organization can vary depending on the type of services that are offered. Some not-for-profit organizations offer artwork and tickets that can be auctioned off at events or sell homemade candles to earn income for their everyday needs.
On or off-site inventory may be covered under not-for-profit insurance. Check your insurance policy’s fine print to ensure coverage is extended to off-site inventory as well.
A business owner's policy can include general liability, property, and business interruption insurance. Business insurance covers the operating expenses of your not-for-profit organization if your business is interrupted because of an event covered under the policy. This can include theft, storm, fire, and falling objects.
Business interruption insurance can cover the costs of temporarily moving locations until your property damage is fixed. It can also cover payroll and tax payments if your organization is not able to meet its obligations because of the interruption of business.
Your not-for-profit insurance policy may also cover business crime insurance. This will protect your organization from business-related crimes like theft. It can also protect your organization from other crimes like:
- Other business-related crime
For example, your employees can lose a donation cheque or use the not-for-profit’s money for personal gain. In this case, you can get reimbursed for the losses if you have business crime insurance coverage.
In most cases, businesses that deal with cash or online payments are susceptible to business crimes. Your policy may not cover business crime. Check the fine print on your policy to confirm whether your policy includes business crime insurance or whether you need to add it.
Types of Optional Insurance for Non-Profits
Not-for-profit insurance is not limited to these general types of insurance. You can add on optional insurance to cover specific events or protect your business from cybercrime.
Event Liability Insurance
As a not-for-profit organization, you want to thank your generous donors for their contributions. You’re probably considering throwing a charity event in a convention centre or outdoors. If so, you should consider getting optional event liability insurance.
Event liability insurance protects businesses from the risks of hosting an event. It will protect you from claims if anyone gets injured or property gets damaged during the event. Check if your insurance covers it or you need to add it as optional coverage.
Cybersecurity Liability Insurance
If you have an online database with financial information about your donors, then you are at risk of getting hacked. If there is a security breach, your organization could be liable for any financial losses that arose from a security breach. Criminals can hold your data hostage, so you'll be liable for any ransom fee.
Cybersecurity liability insurance can provide an added level of security when you’re dealing with these unexpected events.
What to Look For in a Company That Offers Non-Profit Insurance
You have many different companies to choose from that offer not-for-profit insurance. At the end of the day, you want to look for a company that offers added value to the relationship. As a not-for-profit organization, your reputation is important to you. You want to make sure that the insurance company you choose has the same values that you do.
You also want to look for affordable and stable premiums. You don’t want to work with an insurance company where the insurance premiums increase by more than 5% every year even if you have no claims. You want to make sure that your premiums are affordable so you can stay within your budget and still remain protected.
You want your insurance company to be accessible. Claims can arise at any time. You may even just have questions about your premiums. You want to be able to contact your insurance company quickly and easily.
Another element to consider is ongoing insurability. You want to make sure that your insurance company has open discussions about your ongoing insurability. You don’t want to be in a situation where your insurance company refuses to insure you going forward.
As a not-for-profit, you also want an insurance company that is dedicated to its community.
Typical Costs of Non-Profit Insurance
The typical cost of not-for-profit insurance varies but can cost an average of $45 per month or $500 per year.
The cost depends on the type of not-for-profit organization you have. The insurance company will conduct a risk assessment to determine how likely your organization is to make a claim. If you run public wide events every week, you’ll likely pay a higher premium.
The size of your not-for-profit organization also matters. The more employees you have, the greater the premiums. This is because you may have a higher chance of employee injuries.
Where you’re located could also increase your premiums, especially if it’s a place that has more crime or natural disasters. If you can show that you haven’t filed a claim in the past, this can help reduce your premiums. If you have high revenue, then you can end up paying more premiums because claimants can ask for higher damages in lawsuits.
Keep an eye out for your deductible amounts. This is the amount you have to pay out of pocket. The insurance company will pay the rest.
Remember that as a not-for-profit, you have a lot on your mind. Worrying about unexpected events should not be on your list. Getting not-for-profit insurance can save you from worrying and protect your company.
More to that, choosing the right insurance company to help you navigate the waters of Not-for-Profit Insurance is equally as important. Our partners at APOLLO Insurance employ Canada's most trusted advisors. Engage with them today.