This is a question we get frequently and it's impossible to answer. We can't look into the future to see what might happen that would result in a claim and even if we could there is no way of knowing what the cost of that potential claim would be. Coverage limit determinations are part of the overall risk analysis all nonprofits should do when reviewing their nonprofit insurance program. Obviously, the higher the potential risk the higher your coverage limits should be.
Here are some questions that can help your organization with this risk analysis:
- What is the potential for claims associated with our activities and operations? Is someone likely to get injured? Is it possible we would give poor advice?
- Do our operations include socially sensitive issues?
- Are we working with an at-risk population (e.g. youth, elderly, etc.)?
- Do we have a significant driving exposure?
- What assets do we have at risk?
- What is the make-up or our board? Does our board include any high net worth or high profile individuals?
I've been working with nonprofits on their insurance programs for over 20 years and for that entire time the basic liability limit has been $1,000,000. Honestly, that seems quite low in this day and age. Especially given our very litigious culture. However, it does remain the entry-level limit for most nonprofits.
Here is some specific advice on limits:
- Buy as much liability coverage as your nonprofit can afford. We understand that insurance costs directly affect your bottom line and therefore the money you have to pay to carry out your mission. However, claims and litigation are expensive so it's vital that you know you have enough coverage if the worst happens. Note that it's often not that expensive to increase your limits.
- Review your grants, contracts, and agreements for limit requirements. These requirements have increased in the past several years so, you want to make sure you stay in compliance.
- Make sure you have the same limits for all of your liability coverages. For example, your General Liability and your Directors & Officers liability shouldn't be different. Statistically, the overall likelihood that you have more risk in one area than another is quite small.
Talk all of this through with a nonprofit insurance specialist as well as your staff so that you can get a better understanding of your risk and how to properly cover those risks. Once you understand what could happen and what the possible costs are then you will be better able to determine the appropriate coverage limits for your organization.
We love to talk about insurance so, feel free to reach out to us if you have any questions about your nonprofit insurance program.