In 2016 over 1.5 million organizations were registered with the IRS as nonprofits. It’s estimated that many more exist but fail to register because they have revenues of less than $5,000 per year. Non-profits are a force in the economy and they employ 9.2% of salaried Americans.They also receive charitable donations, which in 2015 reached over $373 billion! Just because some organizations are called nonprofits doesn’t mean that they aren’t looking to make a profit or that you won’t make an insurance commission having them as clients. What nonprofit organizations do is they operate for the benefit of the public or mutual benefit other than making a profit for owners or investors. Some provide social services to the public. Many companies and businesses fall into the non-profit category and can benefit from their special Internal Revenue Code and are tax exempt. To wrap your head around what makes one company a non-profit over another, it’s good to break it down according to field:
- Arts, culture and humanities
- Education
- Environment and animals
- Health
- Human services
- International, foreign affairs
- Public, societal benefit
- Religion related
- Mutual/membership benefit
It’s important to note that there is a 10th classification: “unknown” or “unclassified.” Don’t be surprised if you run into businesses that claim to be nonprofits but don’t fit into one neat category like the ones listed above.
Home-based Nonprofits
Many people run nonprofit organizations out of their homes. Make sure to alert your client if their homeowners or renters insurance specifically excludes coverage of business claims and activity in the home. Your client could potentially lose coverage not knowing that they are forbidden to use their homes for business related activities.
Which Organizations are Nonprofits?
Examples of nonprofits include but are not limited to: soup kitchens, churches, charities, labor unions, museums, self-help groups, hospitals, universities, arts and culture organizations, community health clinics, counseling centers, educational societies, historical societies, environmental conservation organizations, parent-teacher organizations, mental health facilities, shelters (for homeless, battered women, elderly, families, teens), and special needs schools.
Do Nonprofits Need Insurance?
Probably more than most companies, nonprofits need insurance, especially liability insurance. Because most nonprofits operate on such tight budgets, one unexpected expense can have a devastating effect on operations.
Most 501(c)(3) nonprofit companies buy their insurance directly from a trusted insurance agent. Here are some types of coverage you can offer clients who are running a nonprofit organization in your community:
General Liability Insurance: This type of policy covers against falls and slips. This will cover the organization if a visitor, customer, supplier or associate suffers an injury while on the property the organization operates in.
Property Insurance: Your client will need this type of coverage, regardless of whether they rent or own the space. This protection covers not just the building but also fixtures, lighting, carpeting, equipment, furniture, computers, monitors, printers, modems, inventory, supplies, etc. The amount of coverage your client needs to buy is dependent on how much it would cost to replace the loss. As for the deductible on this coverage, try to get your client to agree to a lower deductible so they don’t go broke paying the deductible that must be paid before insurance kicks in.
Flood Insurance: Explain to your client that flood insurance is not included in a property insurance policy. Let them consider what a flood could do to their products/services/property and what it would mean to be uninsured.
Auto Insurance: Many nonprofits need commercial auto insurance for their activities, which can range from transporting artwork and transporting children to driving patient around. It’s important for your client to have a commercial auto insurance policy or a hired & non-owned auto insurance policy. Auto accidents can be a huge expense that your client won’t be happy to foot, so make sure they are protected. This is how it breaks down:
If the organization owns the vehicles for work purposes, your client needs a commercial auto insurance policy. If your client uses it for both personal and commercial reasons, they will still need commercial auto insurance because there will be gaps in the personal policy.
If the owner or employees of your client company drive vehicles for work that the company does not own (rental cars, employee vehicles. car-sharing services, etc.), they will need a type of coverage called hired & non-owned auto insurance.
A personal auto insurance policy may deny a claim if a car is involved in an accident while being operated for work purposes. A hired & non-owned auto insurance policy can protect anyone driving on behalf of your client’s business or service.
Hired & non-owned auto insurance also gives rented cars used for business additional coverage so you don’t have to buy it for more money through the rental company. This coverage also takes care of any losses not covered by the complementary policy that is usually included in a car-sharing services fee.
Product Liability Insurance: If your client’s company sells products, even for fundraising purposes, they will need coverage. Or, if artists at a nonprofit gallery create and sell artwork, it’s wise to have product liability insurance. You never know when a customer will claim an injury, food poisoning or a chipped tooth. This type of insurance will cover legal fees and a portion of the damages to your client’s benefit.
Leads for Non-profit Businesses: Companies like SmartFinancial are here to help you grow your return on profit by offering the best organic leads from business owners in your area. Some of these businesses are non-profits, others are not.
