The Property & Casualty Insurance Nonprofits Need

Trying to find affordable property and casualty insurance for your nonprofit can feel like an uphill battle. That’s because only a handful of carriers offer P&C coverage for this niche market. With fewer carrier options, insurance premiums are rising. And that’s making insurance one of your top operating costs.  

Deciding what insurance to buy can be confusing. Here’s an overview of basic property and casualty insurance offerings for nonprofit that will help you choose.

Liability insurance

You know how important liability insurance is to your organization. Consider buying a full range of liability coverage.

General liability

General liability insurance helps cover the cost of injury that occurs on your property or during your services. Some suggestions:

• Discuss your company’s growth and operational changes with your broker each year to make sure you have enough coverage.
• You may find increasing your umbrella limit is less expensive than increasing your general liability or other individual limits. (More about umbrella coverage below.)

Employment practice liability

This type of insurance protects you against claims by employees, such as wrongful termination, breach of contract or sexual harassment. Having this coverage is essential because an employer is three times more likely to be sued by an employee than suffer a fire. Also, the average claim for this type of liability is $70,000.

Professional liability

Professional liability insurance, also known as “errors & omissions,” covers costs associated with claims of negligence (alleged or not). Mistakes happen no matter how good employees are at their jobs. So when an error occurs, professional liability insurance covers some legal fees and awards.

Liability coverage for foster care and adoption agencies

As a foster care or adoption agency, you’ve likely seen a major hike in premiums – even higher than for other types of nonprofits.  

These may be some underlying reasons why:

• Improper staffing when case levels are too high
• Inability to adequately monitor foster placements or adoptions
• Improper training or lack of awareness, including failure to report issues or concerns
• Insufficient vetting of foster and adoptive families
• Taking on children with needs beyond the organization’s capabilities

Effectively managing these issues will help lower your premiums.

Workers compensation

This can be a costly part of your property and casualty coverage. But you can take control by managing your safety procedures well.

Each year your organization is given an experience modification rating (also called a “mod”) based on its payroll size and claims experience for the past four years, excluding the current year. A rating of 1.0 means you’re rating is average compared to similar nonprofits. If your rating is below that, you pay less. If it’s above, you pay more.

If you have repeated claims, carriers will see this as a pattern and could deny you coverage. If that happens, you must get costly coverage from your state’s assigned risk pool.

Work with your broker and workers comp carrier to ensure your safety practices are done correctly. Your broker also will serve as your advocate in handling a claim.

Commercial auto insurance                                                                                          

Your employees and volunteers likely transport clients in your organization’s vehicles or their personal cars on your behalf. This can create a huge risk for you.

Rates for commercial auto insurance are on the rise due to rapidly increasing claims.

Here are some ways you can protect yourself:

• Be specific about which vehicles you’re covering, including those owned by your organization, employees or volunteers; or rented on your behalf.
• Require employees to sign a document stating they won’t drive the organization’s vehicle while impaired by alcohol or drugs, or while using the phone. If a worker has an accident while drinking, this agreement can help protect you.
• Require employees to take drivers safety training, which typically qualifies you for a reduced rate.
• Consider installing a telematics device in your vehicles to monitor driving behavior. Insurance companies use this data to determine risk factors and adjust premiums accordingly.

Property insurance

This type of property and casualty insurance covers your facilities. It helps you stay in business by paying replacement coverage when the property is damaged. A few tips:

• Make sure your coverage keeps up with the property’s value. Most values rise 3% to 5% per year. Work with your broker to review your values annually and ensure you have adequate coverage.
• Understand whether your property is covered for “replacement cost” or “actual cash value.” You can lower your premium by choosing coverage for actual cash value, but we rarely recommend that.
• Ask about coinsurance. After you pay your deductible, does the insurance cover 100% of the cost or 80% or less? We advise waiving coinsurance. While coverage containing coinsurance may result in lower premiums, if your property is determined to be undervalued at time of claim, you will be penalized.
• Be sure to buy business personal property insurance to cover furniture; office equipment and technology; and business income in case of a fire or other disaster. Many organizations undervalue this coverage and don’t have enough.

Cybersecurity insurance

While cyber insurance has the fastest rising rates, it’s becoming a necessary cost of doing business today.

That’s because cyberattacks are increasing at an alarming rate. And big corporations and government agencies aren’t the only targets. In fact, small organizations are more likely to targeted by cyber criminals.

Umbrella

An umbrella policy will kick in if your liability, commercial auto or workers comp claim exceeds that policy’s limit.

It’s often more cost-effective to raise your umbrella limit than to increase the limit of an underlying policy. Umbrella coverage is issued in $1 million increments. The amount you need depends on your type of organization.

Controlling insurance costs

Unless there’s a major shift in how juries award damages, insurance options for nonprofits will continue to be limited.

But there are steps you can take to ensure you get the best rate, like reviewing your coverage regularly. This is especially important if:

• You’ve been with the same broker a long time and want a fresh set of eyes on your policies.
• You feel your broker is too big or too small to give you the attention you want.
• Your organization is growing and changing, and you want to be sure your insurance matches your needs.

Your broker’s role

As a nonprofit, the broker you choose is more crucial than for any other sector. The inherent risk within this class increases the likelihood of a loss. And that loss will often be higher when compared to other risk classes.

You need a broker who understands your unique needs. Brokers with a strong knowledge of nonprofits will assist in your risk management. And they’ll partner with you to find the best and right insurance for your organization.