Thursday, October 3, 2013

Does your nonprofit need better liability insurance?

Unfortunately, there has been another terrible bus crash. The bus was transporting members of a North Carolina church group when a tire failed. It seems like we hear about bad things happening to nonprofit groups far too often.

In a perfect world, bad things wouldn't happen to good people. In the real world it happens every day. I'm absolutely sure that the church didn't start  that day thinking, "Gee, what would happen if the bus caused a wreck and killed and injured a lot of people?"

A lot of things happen. Over and above the tragic loss of lives, survivors sue. If there is evidence of negligence, even something as simple as the tires being overly worn, the church may well be found to be the culpable party.

Nonprofits are probably not statistically more likely to have accidents than any other group. But if your liability insurance only covers the probable, and not the unforeseen catastrophic event, the repercussions are likely to be worse.

In working with many nonprofits, I often see insurances that are the minimum required by law.  Some  nonprofits do not even insure things like their volunteer activities other than through a minimum coverage general liability policy. Some even rely solely on the volunteer's own auto liability policy for protection. Sometimes that is a factor of cost, but in many cases the organization just doesn't think a high-coverage liability policy is necessary.

This all goes back to planning. Some things are obvious. If you rescue animals, it is likely that the animals could hurt someone. If you provide donated food to the hungry, someone could get sick  from eating it. But some things are not so obvious.

I am not an insurance agent. I don't even know any agents as personal friends, so I'm not shilling for the industry. As a small business owner for many years I know that the premiums can be a strain on budgets. But I also know that having to pay a big claim or a damage award can put you out of business.

Under constant pressure to keep administrative costs down, it is tempting to buy the cheapest insurance available, or even to go without it altogether. Don't do it. It's OK to hope for the best, but plan for the worst. 

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