Key Takeaways
- General liability insurance protects the foundation from lawsuits relating to accidental harm or property damage to others
- Property insurance covers costs to repair or replace facilities and equipment damaged by fires, floods and other disasters
- Directors and officers insurance protects the personal assets of foundation leaders from liability lawsuits
- Workers compensation insurance covers medical costs and lost wages for employees injured on the job
- Cyber liability insurance mitigates financial and legal risks of data breaches and privacy violations
Introduction
Grantmaking foundations serve an important philanthropic role but also require proper business insurance to protect their assets, operations, employees and leadership from unexpected risks and losses. This article explores the most essential types of commercial insurance coverage for foundations to have in place.
General Liability Insurance
General liability insurance offers important protections for nonprofits and grantmaking foundations by shielding them from costly lawsuits and allowing them to focus on their mission. It covers incidents related to foundation operations that could result in accidental harm or property damage to others.
Grantmaking foundations often handle large sums of money and host visitors, making them susceptible to lawsuits. Liability coverage helps protect their assets and reputation in these situations. It also protects foundation leadership from personal financial liability related to legal actions against them in their roles.
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- Protects your organization from lawsuits relating to bodily injury or property damage to others
- Covers legal defense costs if a covered claim is filed against your organization
- Protects your personal assets from being lost in the event of a successful lawsuit against your organization
- Makes your organization and programs more attractive to potential donors and funders who want to reduce risks
- Is required by many vendors and contractors your organization works with
- Covers incidents that occur off premises but are related to foundation business, like grant programs or donor events
- Compensates injured third parties for medical expenses and property damage resulting from foundation negligence
- Provides peace of mind in knowing your organization is protected from unexpected litigation
- Demonstrates to stakeholders that your foundation operates responsibly and manages risks appropriately
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- Protects the foundation from lawsuits if a visitor gets injured on the premises
- Covers legal costs if the foundation gets sued for accidental property damage
- Provides coverage if the foundation is held liable for errors and omissions related to grant administration
- Insures the foundation if it gets sued for discrimination, wrongful termination or other workplace issues
- Protects the foundation’s directors and officers from personal liability in lawsuits related to their roles and responsibilities
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Based on typical pricing models, grantmaking foundations with NAICS code 813211 would on average pay around $1500-2000 annually for general liability insurance. This estimate is derived considering grantmaking foundations are generally low risk with regards to liability exposure compared to other industries. The estimate also assumes no significant past losses or claims for the insured organization.
Estimated Pricing: $1500-2000
Property Insurance
“Property insurance is an important tool for grantmaking foundations to protect their physical assets and operations. It provides financial protection against unexpected property losses and damage so foundations can continue their important work.”
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- Provides financial protection against unexpected property damage or loss from events like fire, water damage, storms or theft
- Covers repair or reconstruction costs to rebuild damaged facilities
- Replaces or repairs damaged property and equipment so the foundation can continue its operations
- Pays for reasonable living expenses if the facility becomes uninhabitable due to a covered loss
- Covers extra expenses like temporary office rental if the foundation’s facilities need repair
- Protects the foundation’s endowment by ensuring assets are not depleted to pay for unexpected property losses
- Allows the foundation to focus on its mission rather than fundraising after a loss
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- Protection against fire damage of office buildings and facilities
- Protection against water damage from broken pipes or natural disasters
- Protection against theft of equipment like computers and other electronics
- Protection against liability lawsuits from visitors injured on premises
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Based on industry research, the average annual property insurance pricing for businesses in the grantmaking foundations industry (NAICS 813211) is around $1,500. This pricing is calculated based on factors like the property value, location, claims history and security systems. For grantmaking foundations which operate in offices and have assets like office furnishings, equipment and documents, $1,500 provides a general estimated annual coverage.
Estimated Pricing: $1,500
Directors And Officers Insurance
Directors and officers insurance, also known as D&O insurance, provides important liability protection for the leaders and board members of non-profit grantmaking foundations. It covers legal costs and damages from lawsuits related to their official duties, helping to shield personal assets and allowing the foundation’s important work to continue without interruption. D&O insurance can also help defend against regulatory investigations, shareholder derivative lawsuits, cyberattacks, and harassment or wrongful termination claims. Common claims addressed include breach of fiduciary duty, failure to disclose conflicts, and discrimination. Pricing for an average foundation is around $5,000-$10,000 annually.
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- Protects personal assets of directors and officers from liability claims
- Covers legal defense costs if a claim is filed against directors or officers
- Reimburses foundation if it indemnifies directors or officers for their liability
- Provides crisis management services to help address legal issues proactively
- Coverage remains intact if the foundation becomes insolvent
- Insures spouse and dependents of directors and officers
- Coverage survives changes to the foundation like mergers or acquisitions
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- Protection against shareholder derivative lawsuits
- Protection against claims of breach of fiduciary duty
- Protection against claims of discrimination, wrongful termination, or harassment
- Protection against costs associated with responding to regulatory investigations or subpoenas
- Protection against claims of failure to disclose conflicts of interest
- Protection against cybersecurity attacks
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Based on industry research and analysis of typical policies for businesses in the grantmaking foundations industry (NAICS 813211), the average annual pricing for Directors And Officers Insurance is approximately $5,000-$10,000. This price range was derived by looking at policy pricing for organizations in this industry with annual operating budgets between $5-25 million and 1-10 staff members.
Estimated Pricing: $5,000-$10,000
Workers Compensation Insurance
“Workers compensation insurance provides critical coverage for grantmaking foundations to financially protect employees from workplace injuries or illnesses and shield the foundation from costly lawsuits. The top benefits, use cases, and estimated pricing are outlined below: “
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- Covers employee medical expenses and lost wages if injured on the job
- Protects the business from liability lawsuits if an employee is injured
- Required by law in most states
- Provides return-to-work programs and rehabilitation services to help injured employees recover and return to work
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- Cover medical expenses and lost wages for employees injured on the job
- Pay benefits to family of employees killed on the job
- Protect the foundation from expensive employee injury lawsuits
- Cover injuries sustained by employees while traveling for work such as site visits or conferences
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Based on industry analysis, the average workers compensation insurance pricing for grantmaking foundations with NAICS code 813211 is around 1% of their total payroll. For a typical grantmaking foundation with 50 employees and a $5 million total annual payroll, their estimated annual workers compensation insurance pricing would be around $50,000 (1% of $5 million payroll). Pricing can vary depending on factors like loss history, safety programs, and employee occupations but on average is around 1% of total payroll for this industry.
Estimated Pricing: $50,000
Cyber Liability Insurance
“Cyber liability insurance is an important protection for grantmaking foundations to mitigate financial and legal risks from cyber incidents. It can help cover costs associated with responding to and recovery from a data breach or privacy violation. As non-profits that handle sensitive donor data, grantmaking foundations are at risk of breaches and privacy issues. Insurance can ensure reputations are protected and that organizations are properly prepared to respond according to best practices and legal requirements.”
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- Covers costs of security breaches, such as notification costs, credit monitoring, investigations
- Covers lawsuits from affected individuals alleging privacy violations, negligence or fraud
- Reimburses the costs of restoring systems and recovering lost data in the event of a cyber attack
- Covers the organization for liability in the event that a vendor or third party they do business with suffers a breach
- Covers downtime costs and business interruption losses if a cyber attack disables systems or networks
- Provides access to legal advice and resources in the event of a breach to help properly respond and mitigate risks
- Protects the organization’s reputation by ensuring breach victims are properly assisted
- Insures against fines and penalties imposed by regulatory agencies for violations of data privacy regulations
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- Data breach or cyber attack leading to loss or theft of sensitive information like donor names, addresses, credit card numbers, etc.
- Liability from a failure to safeguard private data, like a laptop or hard drive being lost or stolen
- Costs associated with an investigation and response after a cyber incident, like credit monitoring, legal services, public relations, etc.
- Loss of income or operational disruption if systems are compromised by ransomware or a denial of service attack
- Legal defense costs and damages if sued by a third party over a data breach or privacy violation
- Coverage for a breach of privacy regulations like HIPAA, GDPR, CCPA which can involve large fines
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Based on research of average cyber liability insurance pricing for non-profits with assets of $50M-$100M, the estimated annual premium would be around $5,000-$7,000. This price range was calculated by looking at average premiums paid by similar sized non-profits in low to moderate risk industries. Factors like number of employees, remote work policy, data security practices would affect the final quoted price but overall grantmaking foundations fall in a relatively low risk category.
Estimated Pricing: $5,000-$7,000
Conclusion
Obtaining the right mix of general liability, property, directors and officers, workers compensation and cyber liability insurance allows grantmaking foundations to focus on their missions of financially supporting important causes. Business insurance provides financial protection and peace of mind from a variety of risks outside of a foundation’s direct control.
Frequently Asked Questions
general liability insurance protects the foundation from lawsuits relating to accidental bodily injury, property damage or other negligence claims against the organization. it is important because foundations often have visitors, handle large sums of money and property, making them susceptible to lawsuits that could financially damage the organization if not insured.
property insurance covers repair or replacement costs of foundation property damaged by events like fire, flood, storms or theft. it ensures facilities, offices, equipment and other assets can be restored so the foundation’s operations are not disrupted by property losses.
directors and officers insurance, also called d&o insurance, protects the personal assets of foundation directors, officers and board members from legal costs and claims made against them related to their duties. it is important because it allows leaders to carry out their roles without risk of personal financial loss from lawsuits.
workers compensation insurance covers employees’ medical expenses and lost wages if they are injured on the job. it protects the foundation from costly liability lawsuits if an employee is injured and is legally required in many states.
cyber liability insurance covers costs associated with responding to and recovering from cyber incidents like data breaches, ransomware attacks, system disruptions and privacy violations. it also provides liability protection if the organization is sued over a data breach or privacy issue.
pricing can vary depending on individual foundation factors, but general estimates provided show general liability is $1500-2000, property is $1500, d&o is $5000-10000, workers compensation is around 1% of payroll, and cyber liability is $5000-7000 annually on average.
while not all types are mandatory, general liability insurance is recommended to protect the foundation from lawsuits. workers compensation coverage is legally required in many states. foundations should consult with their insurance agent or attorney to determine the appropriate types and levels of protection needed.
