Why Every Nonprofits And NGOs Needs Insurance To Manage Risk

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Tuesday, May 1, 2018  09.59AM / Clements Worldwide 

A common misconception about nonprofits is that they’re simply too small to be at risk for liabilities and their employees will be protected because of their status as humanitarians. All organizations – even well-meaning nonprofits – need protection. Organizations of any size are at risk for a variety of legal problems.

With years of experience helping nonprofit organizations stay protected from unforeseen risks, Clements nonprofit specialist, Michelle Brown, knows how closely related a nonprofit’s ability to function and its risk management strategies are. “The purpose of risk management, including business insurance, is to protect the nonprofit’s assets,” Brown says. “If you don’t protect the assets, you risk not accomplishing your mission.”

Here is a sampling of the kinds of claims filed by nonprofit organizations:

  • A student borrowed a car during a trip abroad with a university, lost control of the vehicle due to road conditions, and wrecked the vehicle.
  • A nonprofit employee was bit by a flea during a work-related travel in the Middle East, resulting in emergency air transportation to Germany and two weeks of hospital care.
  • An anonymous individual contacted a nonprofit and claimed the organization’s computers had been hacked, demanding $1 million to keep sensitive data private.
  • A representative of a US-based nonprofit began receiving death threats stating that if he did not leave the country, then he would be killed.
  • A major shipment of humanitarian supplies was stolen from the port after arriving in the destination country.


In each of these scenarios, the risk posed to the nonprofit came through forces that were either unpredictable or outside of the control of the individuals managing the organization.


As well-meaning as a nonprofit's mission and work may be, there are too many scenarios where the actions of volunteers, employees, or others could create liability for the organization or put the livelihood of the employees, volunteers, or contractors at risk.  

How to Mitigate Potential Risk to Your Nonprofit
With so many potentially risk-inducing situations facing a nonprofit, a strategy to manage that risk is essential. Developing a risk management strategy also improves the insurability of your organization. Obtaining the right kinds of insurance coverage should be at the center of this policy. Without the proper coverage, the very mission of a nonprofit could be at risk.


Without proper insurance coverage, Brown says, “a single claim could take out the budget of organization for the entire year.”


“With proper insurance,” Brown continues, “you’re actually protecting the ability of the nonprofit to function.”  

What Types of Insurance Should International Nonprofits Consider?

While the specific needs of each nonprofit will vary depending on the operating regions, type of work performed, and other factors, nonprofits generally look to manage risk with the following types of insurance:

  1. General Liability insurance: Helps protect the organization when someone is hurt or property is damaged in the office, clinic, fundraising event, or other area.

  2. Auto insurance or Fleet insurance: For employees or volunteers who bring their own cars or who hire cars (as is very common abroad); or for support of vehicles. that are critical to accomplish mission objectives such as delivering food or services.

  3. Property insurance: For property (such as computers, equipment, or records) leased or owned by the nonprofit.

  4. Personal Accident insurance: Covers an injury sustained by a volunteer, program participant, gallery patron, or other individual on the premises.

  5. Fidelity insurance (or more commonly referred to as Crime insurance): Protects the organization from criminal acts, including acts performed by employees or volunteers, including wire transfer fraud, embezzlement, and check fraud.

  6. Improper Sexual Conduct insurance: Especially important if an organization works with vulnerable clients such as children.

  7. Errors & Omissions insurance: Protects your organization from claims from your client, i.e. the people you are servicing, for errors in your work or your ability to provide the services you promised.

  8. Directors & Officers Liability insurance: Indemnifies, i.e. reimburses the organization or its directors and officers for losses or advancement of defense costs in the event an insured suffers a loss as a result of legal action brought for alleged wrongful acts in their capacity as directors and officers.

  9. War and Terrorism extension: If you are working in high risk areas, you may need to add an extension to some of the policies described above which typically have exclusions for acts of political unrest, increasingly likely, or terrorism, less likely but potentially catastrophic.

Too Important to Ignore
With so many factors outside the control of the nonprofit, it is important to get protection – especially for small organizations without large operating budgets. “Even if you only have 5 staff overseas or just two vehicles,” says Brown, “it only takes one thing to go wrong and the dream you had to help people could be over.” 

Fortunately, by obtaining risk coverage, nonprofits don’t need to fear liabilities while pursuing their missions. If coverage is needed, Clements Worldwide can assess an organization’s needs and find a risk coverage plan that’s the right fit. 

To gain more detailed insight into the risks nonprofits and NGO face, visit NGO & Nonprofit Industry Hub or e-mail request@clements.com to discuss solutions tailored to your nonprofit's insurance needs.

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Case Studies
Case Study: NGO Member Life Saved by Clements Kidnapping and Ransom Policy  
While rarely publicized, the kidnapping of NGO employees based or traveling overseas is on the rise. In 2009, a member of an NGO in the Philippines was kidnapped by a local gang at gunpoint and held hostage. Through the Kidnap and Ransom extension from Clements, crisis consultants were quickly sent in with travel expenses covered. The consultants were able to negotiate a lower ransom amount and secure safe release for the victim. Thanks to the NGO’s Kidnap and Ransom insurance policy, the organisation was able to safely return its employee while all related expenses were covered. 

Case Study: DBA Provides Lifetime Benefits to US National Employee’s Family
A bomb exploded in an international development group’s Baghdad outpost, killing a US-national employee. As the sole breadwinner for his family with an annual salary of USD 125,000, plus 30 percent hazard pay, the employee was survived by his spouse and two children. 

Thanks to coverage through Clements’ DBA policy, the family received financial assistance following the NGO employee’s unfortunate passing. DBA coverage provided benefits to the family of the deceased, including: funeral expenses and lost wage death benefits of $1325 weekly, which is the maximum allowed by DBA. 

NGO Case Study in Global Risk Magazine

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About the Firm - Clements Worldwide
Clements Worldwide is committed to supporting employees and missions with the goal of improving the lives for the most at-risk populations around the world. The firm has garnered detailed insight into the risks nonprofits and ngo’s face, ranging from how they move supplies in high risk countries like Afghanistan to providing comprehensive medical coverage with medical evacuation standard to kidnap & ransom policies with no country exclusions. 

Clements & Co. are also continuously improving the insurance for nonprofits and NGOs to ensure the safety of employees and their assets. This includes claims only fleet models where you self-insure. Custom emergency evacuation policies are also available, and can be added to an existing kidnap and ransom policy, and well as allows for an evacuation for multiple types of emergencies including political upheaval, security issues, natural disasters, or epidemics. Clements is always on hand to provide you with direct assistance and help you analyze your best options for NGO and nonprofit insurance coverage by assessing which risks are best transferred via insurance. We hope to be a partner in your overall NGO or nonprofit risk management strategy and help you to create emergency & contingency plans for any risk type.  We can help you ask the questions that will ensure your ongoing operations to support your mission.  

Proshare Nigeria Pvt. Ltd.

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