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As nonprofits face an increasing amount of need by those they serve, they can also look forward to a host of potential pitfalls on the back end.
Nonprofits should keep an eye on several trends that could impact operations by boosting their exposure to risk.
Potential Property Pitfalls
Insurers are continuing to focus on real property valuations (replacement cost). This has been a hot button for the last several years and will continue to be in 2025.
The age and condition of roofs is a big concern for insurers, so much so that some are removing replacement cost coverage on roofs more than 20 years old.
Roofs are commonly impacted by severe weather. As climate change increases events such as heavy rain, flooding and tornadoes, facilities face a greater risk for related damage.
Nonprofits can expect to be called upon to provide even more support as severe weather events such as hurricanes and wildfires impact a wider geographic area for a long period of time.
Sexual Abuse and the Court System
Nonprofits will have a harder time this year getting insurance coverage for sexual abuse and molestation accusations, as insurers are lowering their limits and capacity for such coverage. Just a few years ago, it was common for an insurance company to have $10 million limits. Those limits are now reduced to $5 million.
Rigorous risk management in this space is key.
To avoid a claim, create controls and practice awareness. To lessen the possibility of abuse, nonprofits must be vigilant.
- Establish policies designed to protect children, teens and developmentally disabled individuals from harm.
- Carefully select paid and volunteer staff by doing background checks.
- Properly train and supervise staff and monitor compliance with the organization’s policies.
- Report suspected abuse to the proper authorities.
Cybercrime
Several types of crime are on the rise as cybercriminals become more sophisticated.
Cybercriminals are targeting for-profit businesses and nonprofits alike with personal phone calls and emails, pretending to be someone else to hack into an organization’s account to steal money or information.
A rising number of employees are embezzling money. This becomes more prevalent when the economy is down because it can lead to layoffs, furloughs and salary cuts.
Auto Coverage
Nonprofit work is often spread far and wide, and employees are expected to drive to fulfill demands. For example, an employee or volunteer for a nonprofit may be expected to deliver meals or provide in-home services using their own car. If they accidentally run a red light and cause a multiple-car crash in the intersection, the damage and a large jury verdict could exceed their personal insurance limits, so you could be held liable.
Protect Yourself
Here are a few tips to help minimize your risk.
- Order in bulk to avoid delays in receiving materials.
- Do background checks and run motor vehicle reports on potential employees to make sure they don’t have criminal records or adverse driving records.
- Provide consistent training to employees and volunteers to help them recognize and avoid cyberattacks.
For more information, visit our Nonprofit Organizations page or contact us here.
This article originally appeared in 2023 and has been updated.
