Which Insurance Should Your Social Service Buy Based on the Size of your Operation

I’m going to start this article with a disclaimer.? There’s no way for me to give advice for every single organization based on their unique needs in a 1,163 word article.? That’s not what I’m setting out to do.?

What I’m attempting to do is provide the framework that I use when I talk to prospective clients.?

When I talk to someone, I have a checklist in front of me that I go through with each client, regardless of size.? I have assumptions about what I think they are most likely to need and buy based on the size of the organization.? I use the conversation to challenge my own assumptions and identify flaws in my logic.

Without a conversation, I can’t challenge my own assumptions.? But I can give you my assumptions so you can do this for yourself.

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Just Getting Started – Less than $50,000 in Revenue.? Very Little Assets.? Just starting to bring the dream to life.

Most times, this call comes from a Social Service Entrepreneur with a dream.? They’ve identified a need.? Maybe the youth in the community need a community center.? Or perhaps there is no cold weather shelter serving the local homeless community.

They’ve created an organization to address this need, and now an outside organization is requiring proof of insurance.

They have no insurance currently.? They have no idea what they are supposed to buy.? They don’t own a building.? They may or may not have any employees.? They have very little money to buy that insurance, and they need to know what they need that they can’t live without.

The first policy most organizations will buy is some kind of general liability policy.? It will address the direct damages from their operations.? It will help you get the doors open.

If you are nonprofit many agents would put Directors and Officers Liability as mandatory.? My personal assumption is that it should be strongly considered.? Here’s my line of logic:

The most common claim for Directors and Officers Liability has to do with misappropriation of funds.? Most organizations with less than $50,000 in revenue don’t feel concerned about this kind of lawsuit because there is no money in the organization.? Even if the insurance is cheap, they don’t perceive enough risk to buy the insurance.

That equation changes as soon as they try to recruit board members.? It is impossible to recruit prominent board members if there is no Directors and Officers Liability insurance in place.

Mandatory

General Liability Insurance

Abuse and Molestation Liability Insurance – If you’re serving vulnerable individuals

Professional Liability insurance – If you’re serving vulnerable individuals

Workers Compensation – If you have paid employees

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Strongly Consider

Directors and Officers Liability Insurance – declining to buy will risk having board members that choose not serve

Accident Medical – for youth and volunteers in your program

Hired and Nonowned Auto insurance – especially if employees and volunteers use their personal vehicles for the business.

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On Your Radar for the future

Accident Medical – for youth and volunteers in your program

Employment Practices Liability – when you start to hire and fire people.?

Cyber Liability

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Getting Bigger – Between $50,000 and $500,000 in revenue.? Buying some buildings.? Maybe bought your first vehicle.? There are people on the payroll!

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If I’m meeting this prospect for the first time, they usually bought their first insurance policy online.? They bought some kind of liability insurance policy so that they could comply with a contract and took the path of least resistance.

Then they hired their first employee.? They bought their first vehicle.? They bought a building.? And for the first time, insurance was complicated to manage.? There are multiple policies and there is no one around to answer their questions.? For the first time in the lifecycle of the business, there are assets to protect.

The biggest change at this phase is the organization needs a qualified independent insurance broker to help them buy insurance.? This requires a mindset shift.

If the organization is nonprofit, Directors and Officers Liability is no longer optional.?

There is probably an owned vehicle, which means vehicle insurance is a necessity.

There are enough employees in the organization that there should be concerns about disgruntled employees suing the organization for wrongful termination.

The list of coverages look similar, but a couple from the “Strongly Consider” category move into the “Mandatory” category.

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Mandatory

Property Insurance

Crime Insurance

General Liability

Abuse and Molestation Liability Insurance – If you’re serving vulnerable individuals

Professional Liability insurance – If you’re serving vulnerable individuals

Auto

Workers Compensation – If you have paid employees

Directors and Officers Liability

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Strongly Consider

Employment Practices Liability

Cyber Liability

Accident Medical

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On Your Radar for the Future

Umbrella

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Between $500,000 and $1,000,000 in Revenue.? There is at least one building.? Maybe the vehicle list is starting to grow.? And now you’re hiring people regularly.? Maybe you even have more than 10 employees.

At this point, even if the organization feels small, they have all the needs of a large organization.? They just need it on a smaller scale.

The organization has assets.? Perhaps you even have multiple buildings.? The vehicle list may have multiple units.? The staff could have grown to more than 10 people and there is routinely hiring and firing.? The organization has a database of donors and an IT infrastructure.

At this phase, the questions isn’t “If” you need all the coverages in the list… it’s “how much”.?

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Mandatory

Property Insurance

Crime Insurance

General Liability

Abuse and Molestation Liability Insurance – If you’re serving vulnerable individuals

Professional Liability insurance – If you’re serving vulnerable individuals

Auto

Workers Compensation – If you have paid employees

Directors and Officers Liability

Employment Practices Liability

Accident Medical – If relevant

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Strongly Consider

Umbrella Liability

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Over $1,000,000 in revenue – It’s not coverage any more… it’s risk management.

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After this point, the insurance programs grow in scale, but for the most part, the names of the coverages don’t change.? There are nuances to each of these coverages.? Hopefully by this time you have a qualified insurance broker that can grow and scale with you.

The things that will change the most have to do with risk management guidance and resources available to you.? Here ideas for different ways brokers and insurance can help:

1.????? Estimates on rebuilding structures

2.????? Sample policies and procedures for abuse and molestation prevention

3.????? Discounted background checks

4.????? Free telematics units for your vehicles so you can monitor how they are used.

5.????? Employee safety training to prevent lifting and slip and fall injuries

6.????? Proactive cyber monitoring through cyber insurance companies.

The game changes from making sure you are covered, to identifying the ways you will have claims, and taking proactive steps to prevent those events.

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Conclusion:

As I mentioned in my introduction, these are my frameworks.? Every organization is different.? Every organization requires a conversation to identify their own insurance needs.

But it helps to have a checklist.? And these are mine.