What types of insurance does my organisation need?
- THE TAKEAWAYS:
- Insurance is not a substitute for risk management. Getting insurance should only come into the picture when you've done all you can to minimise risk.
- No one can tell you what sort of insurance you need - you need to consider your organisation's own risk profile and appetite against what insurance policies can cover and will cost.
- When comparing policy quotes, make sure you take particular note of limits, excesses, exclusions and geographic coverage.
Some not-for-profit organisations believe that because they have become an incorporated association, they cannot be sued. This is not the case.
Incorporation creates a legal entity that is separate from the individual members. Board members of unincorporated bodies can be sued as individuals. Incorporation provides a certain amount of limited liability for members. However, it may not protect the organisation or individual directors in cases where negligence can be proven.
The more you can minimise your exposure to risk through rigorous processes and procedures, the better off everyone will be.
For most not-for-profit organisations, insurance is an essential component of risk management and a key way to manage losses. Even the most prudent and effective organisations can't foresee everything and prevent accidents from occurring.
You want to make sure that the people who help you and are part of your organisation are covered for any potential liability, injury or loss. You also want to ensure that your equipment, materials and property are protected.
A major reason why you need insurance is to ensure that you are not forced to close if you are exposed to a claim. While not all claims are enormous, the possibility of a multi-million-dollar claim does exist.
Burglaries and thefts are also a very real possibility for most organisations and the effects of losing equipment can be devastating.
Obviously, insurance costs money, so it is important to verify that you are insured for exactly what you need and not for anything you don't really need.
Are you already covered?
Check to see if you are already covered by a blanket government insurance scheme or a funding body scheme. In some states, some government departments will provide coverage or partial coverage for the groups they fund.
If you are included in a blanket coverage scheme, check your own insurance cover and make sure you're not over-insured or double insured. There may be components of your organisation's policy that you can scale back.
The different types of insurance
Some of the insurance detailed below will not be applicable to all organisations. It is worthwhile to discuss your particular insurance needs with an insurer or broker.
It's important for you to evaluate that advice and seek alternative quotations, making sure you are comparing equivalent products and cover. Policies that sound the same could have exclusions that could make them useless to your organisation.
The types of insurance most commonly applicable to not-for-profit groups in Australia are outlined below.
A public liability insurance policy is necessary for an organisation to protect itself against claims of negligence made by third parties in relation to injury or property damage arising from the organisation's operations.
For example, it is likely to cover a person who enters your premises, slips on a wet surface and sustains a serious head injury.
The policy may also cover injuries resulting from products sold or supplied by your organisation. You should check the extent of your cover to ensure that product liability is included in your policy if relevant. This is particularly important for organisations that sell food or products as part of their day-to-day activities or for fundraising.
You should also check to see to what extent your volunteers are covered. Regardless, it is important to keep detailed records of all your volunteers, and to establish and communicate clear guidelines setting out volunteers' roles and activities.
As mentioned above, while incorporation does provide some protection to board and committee members, it does not protect individuals from being sued for acts of negligence. A board member who negligently gives wrong advice, asks someone to perform a dangerous task or dismisses staff without proper authority or process exposes themselves to being sued.
Where such cases can be proven, the personal assets of negligent board/committee members can be seized to meet any damages. This is where Directors and Officers Liability Insurance comes in.
It is worth noting that generally under such policies the organisation itself is not covered for the wrongful acts. This would generally be covered through the public liability insurance.
This is similar to household property insurance and generally covers an organisation's physical contents against fire, storm damage, accidental damage or theft.
You can minimise the cost of this type of insurance by protecting your property with deadlocks, an alarm system, security lighting, security signage, etc. The longer it takes a potential burgler to enter your property, the less likely you are to suffer a break-in.
Depending on where your property is located you can also think about working with neighbours to provide out-of-hours protection. For example, you might share the cost of a security patrol with a neighbouring business.
Building insurance covers your physical premises (offices, clubrooms) against events such as fire, storms and vandalism.
This insurance is generally not required if you do not own the facility (e.g. if you hire the facility or use council or crown land premises) because the owner will generally have their own insurance, but do check the lease or hire agreement.
Fidelity insurance covers your organisation against misappropriation of funds by employees or committee members.
You should consider the cost of this type of insurance, like any other type, in relation to your budget and the risk of misappropriation.
Personal accident insurance (or, as it is sometimes known, volunteer insurance) generally covers members, volunteers, officials or participants for any out-of-pocket expenses following accidental injury, disability or death while carrying out their work on behalf of the organisation.
It normally covers loss of income, too, if the injured person is unable to work as a result of the incident.
This is different from public liability insurance, which protects the organisation and volunteers against negligence involving third parties.
Professional indemnity insurance covers individuals against claims for breach of "professional duty" arising out of any negligent act, error or omission committed or alleged to have been committed during the conduct of professional activities.
This insurance is particularly relevant for organisations involved in providing services such as health care, or those providing advisory services.
Much like a personal travel insurance policy, an organisational travel insurance policy covers the organisation against the risks involved in travel, both domestic and international.
In almost all cases, a workers' compensation policy is compulsory for organisations that have paid employees. It covers expenses such as wages and medical bills if a person is injured at work.
It is your organisation's responsibility as an employer not only to have workers' compensation insurance, but also to maintain a safe workplace and protect yourself and your workers from financial hardship in the event of a workplace injury.
If you employ contractors, you should check to see whether your policy covers them too.
No matter how robust your information technology controls are, chances are you will not stop a hacker who is determined to infiltrate your systems. While you may not be able to prevent a cyber attack, a cyber insurace policy could assist in minimising the effect on your business.
Cyber policies generally cover direct losses suffered by your organisation, and also your liabilities to customers or other third parties arising from system breaches.
No person can tell you definitively what type of insurance policy your organisation needs. You could take out every policy available and still not be covered for absolutely everything, or you could end up with woefully inadequate insurance coverage.
It's up to you to read what each policy offers, assess your organisation's risks and make a decision based on those assessments.
Once you've decided what type of policies you need, it's time to start getting some quotes. Ring around.
When comparing the quotes you have gathered, pay particular attention to:
- the limit of cover - how much does the policy cover you for?
- excesses - is there an excess payable if you make a claim? How much? Is the excess payable on each and every claim?
- exclusions - what is not covered by this policy? It could well be that the exclusions make the policy irrelevant to you.
- the geographic scope of the cover - does it cover you and your members/staff/volunteers when they are interstate or overseas? Do you need it to?
Be mindful that most policies will cover your organisation, members and volunteers only when they are undertaking authorised activities.
Always make sure you notify your insurer of any activities you wish to undertake outside of your normal operations, because they may not be covered or may require you to pay an additional premium. While this may not be great news for your group, it is preferable to attempting to make a claim and finding out that you are not covered.It is important that you understand the procedure involved in making a claim under any policy. Generally, you are required to notify the insurer as soon as you become aware of an incident that might result in a claim. In addition, you should maintain an incident log and record all first aid treatments.
If you require several different policies, try to package them together as it can lead to savings.
If you belong to a group that is associated with other similar groups, explore the possibilities of "pooling" your insurance needs. This will almost certainly lead to discounts.
Our Community and Aon have come together to provide risk management tools and tailor-made insurance for not-for-profits. Find out more about the different types of insurance available for not-for-profits and to find a product that fits your needs.