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Insurance Needs of a 501c3 Nonprofit Organization

Many people dream of creating a nonprofit organization to give back to the community, fund research for diseases and help others in need. But making that dream a reality requires more than passion and good intentions. Nonprofits are accountable to state and federal agencies, including the IRS, and must follow a set of guidelines and rules to remain compliant. This includes securing 501(c)(3) status, a tax-exempt designation that makes the organization eligible for grants, donations and charitable giving. It also means a nonprofit must purchase and maintain the right insurance policies to protect its staff, assets and volunteers.

As with all types of businesses, no two nonprofits are exactly alike and their insurance needs can vary greatly. In general, a 501c3 will need general liability and directors and officers (D&O) insurance, but they may also require other types of coverage depending on their operations. Listed below are 7 key insurance policies a 501c3 may need to consider for their business.

Liability insurance is the most essential nonprofit policy and should cover all of the organization’s operations. When hosting events, a nonprofit will likely have dozens or even hundreds of volunteers and vendors on its property at one time, as well as attendees. This influx of people increases the chances of an accident occurring. That’s why a general liability policy is a must for any 501c3.

Another type of insurance a nonprofit can buy is workers’ compensation, which covers employees if they are injured on the job. This is a must-have for any business, but it’s particularly important for nonprofits because their employees work without pay. In addition to workers’ compensation, a nonprofit should consider purchasing an umbrella or excess liability policy that provides additional limits on its business auto, commercial general and D&O insurance.

Finally, a nonprofit should look into buying crime insurance to protect its financial resources. This coverage can help protect the organization if it becomes a victim of theft or a data breach by its employees or volunteers. It can also cover any legal fees that may be incurred to defend the organization against criminal charges brought against it by third parties.

To determine the specific insurance needs of a nonprofit, it’s recommended to contact an experienced broker or agent. They can review the organization’s activities and suggest the right policies to help it succeed. They can also provide a list of insurers that offer the most competitive prices for the desired policies. A broker or agent can also recommend a package policy that bundles the organization’s general liability, directors and officers liability and crime insurance into one policy for greater savings. For example, a commercial package policy with a combined limit of $2,000,000 would typically cost about the same as separate policies with a combined limit of $1,000,000 each. This is a great way to save money on insurance for a 501c3. To learn more, visit UpCounsel’s marketplace and post your legal needs. Experienced attorneys are ready to help. does a 501c3 need insurance


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