How to Buy Insurance for Your Nonprofit Step 9: Review & Discuss

We’re in the home stretch of our series ‘How to Buy Insurance for Your Nonprofit.’  Step 8, chronologically, goes hand in hand with today’s step 9.  It might even be more appropriate to switch them.

But it’s my blog and I make the rules, so reviewing and discussing the proposal is step 9 of the 10 total (if you’ve been following the series, you’ll notice the steps shrank from 11 to 10 with my last post –my graphic has changed ever so slightly).

Buying Process Step 9
Reviewing Your Proposal(s)

When you get the final proposal (or proposals) from the agent (or agents) who have been assisting you, you’ll want to make sure that the thing does what you want it to do. You’ll also want to get buy-in from your key leadership and board.

Some key considerations when reviewing your proposal:

  1. Does it address your organization’s mission?
  2. Can you connect the coverages offered to the three lists you made: your operations, your people and your things?
  3. Are the limits sufficient for your needs? You might have contractual limit requirements, exposure concerns that would warrant higher limits, or high-value assets to protect (including high net worth board members).
  4. Do you understand the purpose of each line of coverage quoted?

Note that most proposals will have value-added endorsements attached to them. In an effort to provide some additional coverages or, at times, limit coverage, insurance companies will add enhancement endorsements on their property and liability policies.

It’s a good idea to get an understanding of the parts of these enhancements that are particularly concerning to you. You will not be able to pick and choose line items and it’s always advisable to keep these endorsements on your proposal.

One of the main purposes of these types of endorsements is to address certain loss exposures that used formerly required a separate policy. These exposures typically aren’t your primary exposures, but if you have a major loss, they will come into play.

In the liability enhancement endorsement, check for automatic additional insured provisions. These provisions are super helpful if you have a lot of ad-hoc partnerships or use non-owned facilities for meetings or special events.

In the property endorsement, look for business income coverages, ordinance and law coverages, and computers and media.

Discuss with Key Stakeholders

No doubt you have this control in place, but as with any major decision regarding a service provider, discuss with your board and senior leadership.

These are the people who will most be at risk in the event of a claim, so it’s important that they understand and agree regarding the coverages to purchase.  More importantly, these are the people who need to agree on what coverages NOT to purchase.

If you decide to self-insure certain exposures, especially liability exposures, your key people need to understand what risk is being assumed by the entity. In other words, if you decide to do without Abuse and Molestation Liability, then your board and leadership need to know that any claim around this will not be covered or defended. If any individual board member is named in such a lawsuit, he or she will not be defended.

It’s okay to choose to go without coverage. It’s just smart to have everybody on the same page.

Back and Forth and Back Again

As you review and discuss, make notes and jot down questions for your agent(s). Don’t hesitate to get clarification and request requotes. It can take time to dial in the policy to your final preferences.

Continue to review with your colleagues and advisers while negotiating with your agent. This is the only way that you’ll be most comfortable about your final decision.

Once you and your team are satisfied that you have the proposal you want, there’s only one step left. As an insurance guy, it’s my favorite step, of course. But it’ll wait until my next post.

Conclusion and Purpose of The Review Step

You simply want to have a final document upon which to base your final decision. If you are working with multiple agents, you’ll want the most complete and tailored options in your hands so you can sign on the best dotted line for you.

Questions
  • What are some practices you and your nonprofit have in place for reviewing vendor proposals?
  • How thoroughly do you review your insurance or do you simply go directly to the bottom line?

 

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