Insure Your Nonprofit, Not Just Your Special Event or Project

I recently had three phone calls within a four hour period from leaders of small nonprofits.

All three had a contract at stake – two with a large food service organization that provides concessions services at large arenas and one with a large box store’s charitable foundation (where the foundation would offer free materials… as long as the nonprofit had general liability and volunteer accident insurance).

And all three wanted to focus on getting coverage for special project or fundraising activity that brought up the contractual issue.

I could probably find an insurance resource for those exposures. It would take me a bit of time and a lot of insurance acrobatics, but I could do it.

Two of these callers would require concessionaires’ general liability while the third would require general liability for a renovation contractor.

Of course, all three organizations also have their ongoing nonprofit work: raising goods and funds for overseas missions, mental health and transitional housing for military veterans, and foster care support services, respectively. Concessions insurers and renovation contractor insurers don’t like nonprofit work, hence, the overarching problem.

Insurance for Nonprofits fundraising and special events

photo credit: peterkreder via photopin cc

What is the Solution?

Organizations way too often try to insure to a contract versus insuring their actual operations.  This tendency, especially for small nonprofits with no prior coverage, can lead to a real mess down the road.

These same organizations are super cost-sensitive, so they focus on the thing that requires the coverage – the opportunity to do concessions at Philips Arena as a fundraiser  or the opportunity to get building materials to bring a facility up-to-snuff as a transitional house for military veterans.

The solution is to step back a bit and think about the organization as a whole and insure the organization’s main operations.  This removes the stress of finding an insurance company who will provide general liability for concessions while excluding all of the main nonprofit work.

Let me break it down further.

Why Focusing on Insurance Special Project or Event Isn’t a Great Idea

Here are a few reasons:

  1. There will be no cost savings: If there is, it will be only slight and would definitely not be a savings on an annual basis.
  2. These ‘special’ policies are severely limiting in their coverage. You’ll see ‘General Liability’ and limits on the declarations pages, but you’ll see a long list of exclusionary insurance forms attached to the policy.
  3. Your main operations as a nonprofit will be compromised and, more than likely, uncovered or excluded: After all, your main operations are most important, right?
  4. Additional insured issues: It’s much more complicated to add additional insureds to the types of policies that might be available for a special renovation project or concessions fundraiser.

How to Solve the Problem

I would suggest going through my ‘How to Buy Insurance’ series and establish your insurance program the right way and for the right reasons.

But since you’re probably in crunch time, here’s what I suggest (remember all situations are different, so take my suggestions to your agent or give us a call):

  1. Find an insurance company that specializes in nonprofits: Most of these companies will include special events, fundraisers, and special projects.
  2. Insure your nonprofits’ operations: Related to finding a nonprofit specialty company, pull back from the contract, and think about who your organization really is and what it does. Insure that.
  3. Small nonprofits often qualify for minimum premiums: The cost for an annual general liability policy will be as good or better as a policy for the special project or fundraising activity (occasionally a small special event might be extremely cheap, but annualized, you’re always better with the normal policy).
  4. Add a volunteer accident policy: Volunteer accident policies, in a way, protect your general liability policy. Your agent should be able to help you. Minimum premiums might be $300 or $500, depending on the company you approach. Having the volunteer policy helps grease the wheels if an insurance company is a little nervous about a special project.
  5. Realize that your nonprofit is a businessAll businesses require some amount of investment, consequently…
  6. Budget for insurance: General liability only can be found for around $800-$1,200 (there might be something slightly lower, but for a service oriented nonprofit, this is a good benchmark (then the $150-$500 for accident insurance).  Plan for some expense, but know that when you have the policy in place, it’ll open up all kinds of other fundraising options as you’ll now have the right coverage in place!

How to Discuss with Your Insurance Agent

The main action point is to tell your agent about the contract, but then discuss what the two options would look like: (1) Insuring the event/contract only or (2) insuring your overall operations.

From there, go through the process of applying and gaining coverage. The process for insuring your nonprofit as a whole will be much cleaner than trying to fit your nonprofit into a different liability classification that doesn’t truly reflect your mission and vision.

In the long run, you will be much better served and be more able to engage fundraising activities or other special projects with a policy tailored to your work as a nonprofit.

Questions:

  • What has your experience been with insurance special situations for your nonprofit?
  • Has your nonprofit policy been enough to insure your events, fundraisers, or other projects?

 

**Sign up for email updates of blog posts and other special content up in the righthand sidebar.

 

Speak Your Mind

*