If you are operating a newly-created nonprofit organization that is looking for insurance for the very first time, there are three types of insurance coverage that you should be well aware of. In fact, these three basic types of coverage will be of great significance in the day-to-day operation of your organization. It is obvious that you need insurance, but do you really know where you should begin? If not, it is very important for you to have certain aspects about these types of coverage explained to you by an insurance professional. This will not only help you choose the type of coverage that is ideal for your organization, but one that complies with your state laws. The three basic types of insurance coverage are explained below.


Statutory Insurance

This type of insurance coverage is usually required by state law and it is generally the basis of your coverage. If you happen to disregard this type of coverage, then it is likely for you to have a big problem with the law. In this type of coverage, employee benefits such as statutory disability, unemployment benefits as well as worker’s compensation are included. It is important to note that, not all-volunteer organizations require this type of coverage. This means that, if your organization operates as an all-volunteer organization, the law may not require you to have this obligation. On the other hand, you may have to consider other types of organizational insurance i.e. insurance coverage for the vehicles that are owned by your organization.

Contractual Insurance

Unlike statutory insurance, contractual insurance is not required or mandated by state law. However, this type of insurance coverage is highly necessary as a result of the contractual obligation with your nonprofit organization. It is important for you to be aware that, there are those grant contracts that will require an insurance clause to be fulfilled before funds are allocated. Another instance whereby this type of coverage will serve its importance is when signing a lease for office space. If you happen to lack this type of insurance coverage at the time that you need it, the operations of your organization can come to a standstill. Therefore, having a clear understanding of your contractual requirements is very important to ensure the continuity of your operations.

Optional Insurance

Among the three types of insurance coverage, this is the most difficult one to determine whether it is essential or not. As stated above, it is very important for you to have an insurance professional by your side before making any decisions that you unsure of. The good thing about consulting a professional is that, you can be advised if you are at any risk in any of the areas of your operations. Some of the areas in which you might be at risk include non-owned auto liability, employee dishonesty or even professional liability. If you happen to be at risk in any of the areas, a professional can be in a better position to advise you on the most ideal type of coverage for you, as well as its overall cost. The fact that there are neither guidelines nor requirements that will be required for you to establish your basis, the decision on whether you will need this coverage and how much should be spent on it is entirely your own.

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