How to make sure your organisation is properly insured
Insurance is part of risk management and a way to manage potential loss for your organisation.
Insurance is not a solution to risk and is not to be viewed as a replacement for strong controls and sound management processes and practices.
There are always policy limits, excesses, terms and conditions, etc - all of which have some bearing on how effective an insurance policy can be as a way to treat an identified risk.
Even where an insurance policy is in place, your organisation, its directors and management remain obliged to take all reasonable steps to manage risks and reduce the likelihood of an incident.
Appropriate policies and procedures, adequate management, supervision and maintenance are all examples of this obligation. When an incident occurs management must take immediate adequate action to stem losses and, importantly, take action to minimise the potential for future loss or danger.
Despite having the best processes and systems to avoid risk, incidents do occur. It is important to ensure your organisation is protected with appropriate insurance, in the unfortunate event of a legal action.
Board members of unincorporated bodies can be sued as individuals.
If your organisation is incorporated, it is a legal entity that is separate from the individual members. Incorporation gives some limited liability for members. However, in cases where negligence can be proven insurance is unlikely to protect your organisation or individual directors.
Here’s a step by step guide on how to make sure your organisation is properly insured.
Work out what types of Insurance your organisation needs
The type of insurance you require will depend on
- your organisation’s activities
- whether your organisation is already covered for some or all of its insurance needs, through a blanket government insurance scheme or a funding body insurance scheme.
It is important that your organisation is insured for exactly what it needs and not for things that are not relevant for the organisation. Consider your organisation's risk profile and what insurance policies can cover and will cost.
It can be worthwhile to discuss your insurance needs with an insurer or broker. However, your organisation must evaluate the advice and seek alternative quotations.
Make sure you are comparing equivalent products and cover. When comparing policy quotes, take particular note of limits, excesses, exclusions and geographic coverage. Policies that sound the same could have exclusions that could make them useless to your organisation.
Make yourself familiar with the types of insurance that organisations have
Below is a list of some of the most common types of insurance that not-for-profit organisations have. Not all of these are needed by all organisations.
Public and Product Liability Insurance
Directors and Officers Liability Insurance
Personal Accident Insurance (Volunteer Insurance)
Professional Indemnity Insurance
Workers' Compensation Insurance
It is important to investigate insurance options that provide your organisation with protection against the impacts and ramifications of client, member or customer privacy breaches. Many not for profit organisations control highly sensitive information about their clients, staff and customers.
Seek professional advice.
Investigate the insurance policies
No person can tell you definitively what type of insurance policy your organisation needs. You could take out every policy available and still not be covered for absolutely everything, or you could end up with inadequate insurance coverage.
It's up to you to understand what each policy offers, assess your organisation's risks and make decisions based on those assessments.
When you have decided on the types of insurances that your board and organisation need, it is wise to secure quotes. You can do this directly or work through an insurance broker. Insurance brokers will be able to help you ascertain your organisation’s needs and work through the nature and limitations of policies offered.
When comparing the quotes, pay particular attention to:
- the limit of cover - how much does the policy cover you for?
- excesses - is there an excess payable if you make a claim? How much? Is the excess payable on each and every claim?
- exclusions - what is not covered by this policy? The exclusions could make the policy irrelevant to you.
- the geographic scope of the cover - does it cover you and your members/staff/volunteers when they are interstate or overseas? Do you need it to?
Be mindful that most policies will cover your organisation, members and volunteers only when they are undertaking authorised activities.
Always notify your insurer of any activities you wish to undertake outside of your normal operations, because they may not be covered or may require you to pay an additional premium. While this may incur additional cost, it is preferable to lodging a claim and then learning that you are not covered.
It is important that you understand the procedure involved in making a claim under any policy. Generally, you are required to notify the insurer as soon as you become aware of an incident that might result in a claim. In addition, you should maintain an incident log and record all first aid treatments.
If you require several different policies, try to package them together as it can lead to savings. A credible insurance broker can assist with packaging.
If you belong to a group that is associated with other similar groups, explore the possibilities of "pooling" your insurance needs. This will almost certainly lead to discounts.
Keep track of renewal dates
It is useful to create a register of your insurance policies and renewal dates. The Board needs to have a monitoring or reporting process in place to ensure required insurances are in place, current and renewed.
Some ways the Board can monitor insurance coverage are through implementation of processes including :
- Establish and management of a compliance monitoring checklist
- Thorough risk management processes
- Board and management education re emerging risks and insurance measures,
- Regular CEO reporting to the Board, or Finance and Risk Committee, re current insurance coverage, emerging risks and insurance recommendations.
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