Some non-profit organisations believe that they cannot be sued because they have become incorporated associations. This is not the case. An incorporated association is a legal entity that is separate from the individual members of the board.
For an unincorporated body, board members are often personally liable for their decisions and negligence. While incorporation does provide a certain amount of limited liability for members, it may not protect the organisation or individual directors in cases where negligence can be proven.
The more you can minimise your risk exposure through rigorous processes and procedures; the better off everyone will be.
Most non-profit organisations need business insurance to protect their infrastructure, personal property and volunteers from potential risks to avoid being forced to close. Even the most extreme precautions cannot prevent all accidents, but insurance can help you move forward and recover if something goes wrong.
You want to ensure that those who help you and become part of your organisation are protected from potential liabilities, injury claims, and equipment and materials loss. You also want to ensure that your property is covered by insurance. Of course, business insurance also costs money, so it's essential to verify that you are covered for what you need and not for more than you need.
Knowing If You’re Covered
Check whether a government-sponsored health insurance plan already covers your organisation. If you are, find out what’s covered and what will be excluded.
If you are part of a government-funded research group, you might still have to apply for separate insurance or seek funding from a non-profit foundation.
If You Aren’t Yet, Here Are Some Business Insurance Types
Some types of insurance that apply to not-for-profit organisations in Australia are outlined below.
It is worthwhile to discuss your insurance needs with an insurance broker or agent. You need to evaluate their advice and seek alternative quotations, making sure you compare equivalent products and cover. Policies that sound the same could have exclusions that could make them useless for your organisation.
The most common types of insurance commonly applicable to not-for-profit organisations in Australia include:
Building: Building insurance protects against fires, storms and vandalism. If you rent your office or use a council or crown land building, this insurance can be required. Check your lease or hire agreement.
Directors and Officers Liability: Directors are liable for the negligence of their actions. If lousy advice is given, or if a dangerous task is asked, or if staff are dismissed without the proper authority, their assets can be seized to cover any damages. This is where Directors and Officers Liability comes in.
Fraud/Fidelity: Fidelity insurance protects an organisation’s money. However, you should weigh the cost against the risk.
Property: Home Insurance covers physical damage and losses from burglary, fire, storm and other disasters. You can reduce your home insurance costs by keeping your property secure with alarm systems, locks and other deterrents. Neighbours can share the price of a security patrol on their block to prevent burglaries.
Public and Product Liability: Public liability insurance is essential for organisations selling food or running events to protect against negligence claims. For example, an organisation might be sued if someone slips on a wet surface and sustains a severe head injury. Don’t forget product liability insurance if you sell food or do fundraisers. Keep detailed records of all volunteers, including their roles and activities.
The variety of business insurances in the market are tools that meet the risk factors for non-profit and retail organisations. Thus, it is dependent on the management to finalise which would serve them best in disadvantageous circumstances. The above choices should help your company determine which one, two, or more you need.
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