Have a Nonprofit – Consider an Umbrella Policy


Not long ago, I was checking on liability insurance for a nonprofit start-up, a local art, music and literature club. We were looking into real costs for running the group in order to prepare a business plan and the attached proformas. Insurance is a real cost, something the group really needs, and really any group or business must have in this litigious society of ours in the present period. Okay so, let’s talk about what’s needed.

It turns out we can buy insurance through an insurance broker for about $1250 per year our here in California. The company would allow the group to pay 1, 2, 4, or 6 payments, thus spread out the cost throughout the year. This would allow the organization to have blank “Additionally Insured” certificates for the various locations, shows, and art instruction events. What else do we get for this? A one million dollar liability policy and $300,000 per occurrence, perhaps more than we actually need, but surely what some property owners, managers, and government agencies will require for their own risk management strategies.

Now then, having a solid general liability policy is wonderful, but if you read these general liability policies very closely it is truly amazing just how many clauses there are within them which disallow payouts on relatively common liability risks or potential claims. Therefore, it might be wise to have an umbrella policy that starts where your policy leaves off, and then extends itself for another couple of million dollars. This can save you 10s of thousands of dollars in legal fees fighting a bogus insurance claim.

You see, you just never know what might happen and everyone in your group needs to be protected along with the organizers of the group itself. Lastly I’d like to mention the fact that the board of directors of any nonprofit organization ought be concerned with this, it’s something that they need to know, and think about. It would be a dereliction of duty for board members not to address the insurance issue and to have their organizations duly insured. Not only to protect the board members, and the group itself, but all the members, and citizens which come to their events, a general liability policy with an umbrella rider attached might be the way to go.

If you are starting a nonprofit group you should be thinking here, and ask your insurance agent exactly how to best insure your group for the most likely potential losses, and then ask about an umbrella policy to cover the whole thing another once over. Please consider all this and think on it.

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