What You Need to Know About Non-Profit Liability Insurance


Non-profit organizations bring incredible contributions to society. Employing approximately 10% of the workforce in the United States, non-profit organizations make all of our lives better directly and indirectly through their charitable work. But while non-profits do a lot of good, they also face a lot of risks. These risks can hinder or even prevent a non-profit from carrying out its mission.

That's where non-profit liability insurance comes in. These insurance policies are designed to protect non-profit organizations and give them the backing they need to survive damaging liability claims. At Philadelphia Insurance Companies (PHLY), we have a long history of serving the non-profit sector. Our experts are here to help break down the risks non-profit organizations face, what coverage they should seek, and how to choose the right insurance provider.

Risks to Non-Profit Organizations

While non-profit organizations face many of the same risks as for-profit organizations, their limited budget capacity and reliance on volunteers and donors make mitigating these risks a unique challenge for the sector. Without proper insurance, the claims generated from these risks can be enough to halt an organization entirely. Below are some of the most critical risks facing non-profit organizations:

  • Employment Practices
    Just like the individuals that compose any other organizations, non-profit employees and prospective employees can be subject to real or perceived wrongful treatment. Employees or candidates may bring forth costly legal grievances for all types of unfair treatment including discrimination based on race, age, sex, and disability. Employees can also file claims of unfair dismissal and sexual harassment.

  • Harm caused by executive mismanagement
    The board and executive team of a non-profit organization handle countless critical issues each day. The jobs directors and officers do also come with liability risks; issues such as misallocation of funds, misleading reports, and waste of assets are all real risks for non-profit organizations.

  • Reputational damage
    Non-profit organizations are particularly reliant on their reputation for donations. Positive public perception can increase confidence in the organization and enable them to carry out their missions. Negative perceptions, however, can greatly hinder them, making them especially vulnerable to reputational damage.

  • Data breaches
    In the information age, virtually all organizations are vulnerable to cyber breaches. But non-profit organizations are particularly vulnerable. Hackers can target organizations that accept online donations to steal personal information.

    Even if a non-profit organization does not store personal data, cyber criminals can wreak havoc in other ways, such as holding the organization's network hostage and demanding a ransom. Many are non-prepared for this scenario; according to a report from Microsoft, nearly 75% of non-profit organizations surveyed had not implemented basic critical security measures and were vulnerable to a data breach.

Types of Non-Profit Liability Insurance to Consider

Liability insurance is vital for mitigating risks to non-profit organizations. A policy can replace critical equipment that has been damaged or destroyed that would otherwise be too expensive for a non-profit to pay for. Insurance can also cover the costs associated with public relations management or the fallout from a data breach. While there are many types of insurance policies to choose from, here are a few coverage options that non-profits should strongly consider:

  • Directors and Officers (D&O) Liability
    Non-profit organizations are particularly vulnerable to D&O claims, as they often face increased scrutiny and are held to high legal standards. Defense costs for these types of claims can be crippling for non-profit organizations, with costs potentially rising to well above $500,000. To cover these costs, we offer defense costs in addition to the limit of liability. We also include the most favorable venue wording for punitive, multiple, or exemplary damages with our policies.

  • Cyber Liability
    A single cyber breach can cost a non-profit thousands of dollars or more, result in catastrophic data loss, and erode public trust in the organization. Having a response plan can make the difference in surviving a breach. Our cyber liability policies include free access to the eRisk Hub portal, which offers extensive resources and tools to form a plan and mitigate a breach. Our policies also include high limits of up to $20M for qualified applicants.

  • Crime Liability
    Non-profits work with a range of internal employees and external partners, often on dedicated projects on a short-term basis. Theft can come in the form of transaction fraud, credit forgery, and theft of other digital or physical assets. PHLY Crime Protection Plus protects non-profit agencies against losses incurred by theft from full-time employees, seasonal employees, interns, and volunteers.

  • Employment Practices Liability
    Employees, and even official volunteers, can make accusations of discriminatory or illegal employment practices against a non-profit. These may include discrimination, wrongful termination of an employee, or harassment. For non-profits with limited budgets, dealing with even a single employment practices liability (EPL) claim can be devastating without adequate coverage. That's why PHLY offers EPL insurance and has also partnered with in2vate to provide web enabled EPL risk management services.

What to Look for in an Insurance Provider

Non-profit organizations should choose carefully when an insurance company for non profit liability insurance. Below are some criteria to consider:

  • Community Involvement
    An insurance carrier that has ties to its community is more likely to embody and understand the values of the non-profit sector. At PHLY, we have a long history of community involvement, having contributed nearly $50 million dollars to charitable organizations since 1980. We also received the first-ever Community Outreach Project of the Year award from Business Insurance magazine, a testament to our commitment to our community.

  • Experience
    An insurance provider that understands the needs of non-profits will have experience in the sector. Non-profit insurance has long been a bedrock of what we offer. We have more than three decades of experience in the non-profit sector, offering tailored policies that are designed to meet the unique needs of non-profit organizations.

  • Financial Strength
    Financial strength is important for demonstrating the creditworthiness of an insurance provider. We have a strong track record of financial stability, including an A++ (Superior) rating from the AM Best company and an A+ rating from Standard & Poor's, both indicating exceptional credit and financial strength.

For all the support non-profits offer, they can use a little support themselves when it comes to insurance. At PHLY, we're here to offer the same dedicated support we've been offering for more than 50 years. To learn more about what we have to offer non-profits looking for liability coverage, visit our product page or fill out our contact form today!

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