Nonprofit Best Practices for Minimizing Risk and Insurance Costs

The Toole Agency has been insuring nonprofits for many years, and recently we had an unfortunate situation where an organization’s treasurer was able to embezzle $20,000 before being caught. The risk of this happening would have been substantially reduced if they had put two simple procedures in place.

I am confident that the majority of nonprofits know that minimizing risk is critical for meeting their mission. However, many are not sure how to go about it. Below are some Best Practices I would recommend your organization adopt:

1. Typically, the first step is to identify the organization’s risks. Nonprofit organizations need to make sure they are looking at their overall risk, not just insurance premiums. Insurance premiums are only a portion of an organization’s risk cost.
2. Risk identification is not a one-and-done process. Risks are emerging that may affect your organization, and an annual review of an organization’s risks is strongly encouraged.
3. Identify ways to minimize risks. The preferred way to do this is through policies and procedures. Strategically the last option should be insurance or risk transfer.
4. When reviewing insurance quotes, don’t be fooled by low-premium policies. Policy forms are not standard. They vary from carrier to carrier. When comparing policies, a thorough review of the coverages, limits, and policy forms is needed to make an educated decision regarding which policy to purchase. Ideally, your agent is providing this comparison.
5. Insurance could be viewed as a commodity as you are purchasing a product – a policy. However, going from agent to agent for quotes is not in your best interest. The preferred strategy is to interview an experienced and trustworthy agent (advisor) specializing in nonprofit organizations. An insurance agent should be part of your advisor group, which includes your accountant and attorney. Professionals you trust will provide the best advice and secure the best products. Trust and experience win every time.

Utilizing these tips will help your organization control the overall cost of risk, including the insurance premium. Now it’s time to focus on your mission.

Kim Baker, Senior Account Executive/Toole Insurance Agency