A charitable organisation has philanthropic objectives, but at its’ core, it needs many of the same mechanisms as ordinary businesses.
The law dictates that you have a duty of care – you need to protect your charity’s resources and assets. That includes hiring employees, organising events, and – buying insurance.
If your charity employs paid staff, you should make sure that you’ve covered this insurance aspect. In fact, even unpaid volunteers working for your charity may require employers’ liability insurance.
By law, you’re obligated to have employer’s liability insurance, with the exception of “Statutory” charities (those incorporated by an Act of Parliament) or “Royal Charter” charities (those incorporated by Royal Charter). These charities are normally exempt from insuring their staff/volunteers (as these charities are deemed to be “under the control of a Secretary of State” or “under the control of the Crown”).
Charity public liability insurance is not compulsory at all. But it doesn’t mean that a charity won’t benefit from having it, anyway. In this article, we’ll examine the common pitfalls of purchasing PL insurance for your charity.
The Complexities of Buying Insurance for a Charity
When most people think about charitable organisations, it’s easy to romanticise the idea of how it all works. These institutions have a special place in society, and they often have the welfare of the most vulnerable in mind, such as children and animals.
But on a day-to-day basis, charities need to worry about booking venues, transportation, accommodation, and fundraising. All of which involves an incredibly wide range of risks which may only exacerbate the process of buying an insurance policy.
Charity Public Liability Insurance – How Much Do You Really Need?
Taking out PLinsurance for your charity means making sure your organisation is protected from any future injury claims made by clients, volunteers, contractors, or service users.
If an accident occurs during one of your events, or there’s a loss or damage to third-party property, having public liability insurance can be the one thing standing between your charity staying financially sound (with good PR) and financially going under, with no financial means to pay the claim.
However, the key is knowing how much your public liability insurance your organisation really needs. Depending on the size, income, and activity level, some non-profits organisations might not even need any cover at all, if the risks are minuscule.
On the other hand, factors such as dealing with members of the public regularly and frequent third-party contracts might indicate that you need a substantial insurance policy. Also, how many years the charity has existed, and past insurance claims will also dictate the need for PL insurance.
Things to Avoid When Buying Charity Public Liability Insurance
Even well-established charities can run into a few notable pitfalls when purchasing insurance. As garnering funds for good causes is their primary objective, they may believe a comprehensive insurance policy is a necessity.
But that’s the first error in thinking. That said, a great policy may help, but that doesn’t mean you’re not overpaying.
The second mistake to avoid is not doing the research. Going online to get the first insurance policy that seems like it covers everything might be an easy solution, but it’s not the best. Taking the time to shop around for brokers and insurers is advised.
The third potentially problematic decision is merely asking for a renewal of the charity public liability insurance you had the year before.
Opting for a quick renewal might seem like a good idea, but that means not calculating in the changes that went on in your organisation, the insurance market, and in the world.
Finally, sending only basic data to the insurers could backfire. A spreadsheet of past claims might seem like sufficient information, but it doesn’t paint the full picture. There are more sophisticated ways to show the insurers that you are a good kind of risk. And that you deserve a lower premium. Annual actuarial reviews and multi-media risk presentations are some that come to mind for larger organisations, as cost-effective ways to communicate risk – such projects paying for themselves several times over with the annual premium savings achieved, year after year.
The Long-Term Approach to Charity Public Liability Insurance
Many third-party contractors will require charities to have public liability insurance before they work with them. And many insurers provide extensive charity event insurance policies that cover many potential liabilities during a single event.
These policies may be a short-term solution for charities that do not hold many public events as a part of their programme. For a larger charity, this approach can lead to expensive premiums or insufficient policies.
Most charities have the concept of longevity integrated into their philosophy. They want to carry on and provide an essential service. Many have been in existence for decades – or even longer. And as one of your organisation’s long-term planning strategies, considering public liability insurance can be a step in the right direction.. But if you have longevity, then you are less concerned about the odd claim now and then – taking a long-term view, most claims are predictable. If you are not convinced, a good insurance actuary can help you see this, and how it can translate into premium reductions for you.
Also keep in mind that you can always negotiate your premiums, as long as you know what your levers are and that you understand that not all risk of liabilities can stand on the insurer’s shoulders.
Minimising the Risk of Under-Insurance and Over-Insurance for Charities
The most relevant conclusion to make when discussing charity public liability insurance is that no singular approach will work for every organisation.
Every charity is a separate entity of different size, management, and activity levels. But what they should all have in common when purchasing an insurance policy is that a not buying one at all (ie rejecting all quotes) is usually an option.
Regardless of their stature and funds, research and presentation can substantially impact the quality of the policy they end up buying, if they need one at all.
Author’s Bio:
John is an actuary and owner and Director of HJC Actuarial, which he founded in 2003 and which has advised over 100 clients since it’s’ inception. He has worked in the insurance industry for 30 years, qualifying as an actuary in 1995 and becoming a Partner in a major global consulting firm in 2000. Since 2003 he has provided independent advice to his clients on optimal insurance program design, presentation of risks, and premium negotiation with insurers, insurer solvency assessments, policy wordings, insurer selection, and insurance broker selection.
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