Nonprofits do important work with limited budgets, and many depend on volunteers and board members who donate their time. That makes protecting the organization, its people and its assets especially important. A lawsuit, injury, data breach or theft can drain resources from the mission. This guide explains the coverages nonprofits commonly need, from small community groups to established charities.
Directors and officers (D&O) liability
D&O insurance protects board members, officers and the organization itself against claims alleging wrongful acts in managing the organization, such as mismanagement of funds, breach of fiduciary duty, failure to follow bylaws, or decisions that harm a stakeholder. Claims can come from donors, members, regulators, vendors, or employees.
Why it matters:
- Volunteer board members can be named personally in lawsuits.
- Defense costs can be significant even for unfounded claims.
- Many qualified board candidates won't serve without D&O coverage.
Federal and state volunteer protection laws provide some protection. The federal Volunteer Protection Act of 1997 limits the liability of volunteers acting within the scope of their responsibilities, with significant exceptions, such as gross negligence, willful misconduct, and operating vehicles. It doesn't protect the organization itself or prevent lawsuits from being filed. California law provides additional protections for volunteer directors and officers of nonprofits in certain circumstances, sometimes contingent on the organization carrying insurance. D&O policies are usually claims-made; see our E&O guide for how claims-made coverage works.
Employment practices liability (EPLI)
Many D&O policies for nonprofits include or offer employment practices liability, covering claims by employees (and sometimes volunteers) alleging wrongful termination, discrimination, harassment or retaliation. Employment claims are a common source of nonprofit D&O claims, so confirm that EPLI is included and check limits.
General liability
Commercial general liability covers bodily injury and property damage claims, such as a visitor who falls at your office or event, or damage to a rented venue. Landlords, venues and grant funders often require it, with additional insured status.
Abuse and molestation coverage
Organizations that serve children, seniors, or vulnerable people need abuse and molestation coverage, which is often excluded from general liability or provided only by endorsement with sub-limits. Insurers will ask about background checks, training, two-adult rules and reporting procedures. Prevention policies protect people first and also support insurability.
Volunteer accident insurance
Volunteers generally aren't covered by workers' compensation. Volunteer accident insurance pays medical expenses for volunteers injured while serving, typically on an excess basis over their own health insurance. It's often inexpensive and helps recruit volunteers.
Workers' compensation
If you have employees, workers' compensation is typically required. In California, any employer with one or more employees must carry it: California DIR – Employer information. Some states allow nonprofits to elect coverage for volunteers.
Property and business income
Insure offices, equipment, supplies, inventory for thrift stores, and donated goods. Business income coverage helps sustain operations if a fire or other covered loss interrupts programs. If you rent space, confirm what your lease requires you to insure.
Special events
Fundraising galas, runs and festivals bring liability, liquor and cancellation risks. See our special event insurance guide. Venues commonly require certificates naming them as additional insureds.
Crime and fidelity coverage
Nonprofits can be vulnerable to embezzlement because of small staffs and trust-based controls. Crime insurance covers employee theft, forgery, computer fraud and funds transfer fraud. Strong financial controls, such as dual signatures, segregation of duties, and board review of statements, reduce risk. Some grantors require fidelity coverage.
Cyber liability
Nonprofits hold donor information, payment data and sometimes health or client records. Cyber insurance helps with breach response, notification, ransomware and social engineering fraud. See our cyber insurance guide.
Auto coverage
- Commercial auto for vehicles the organization owns.
- Hired and non-owned auto for staff and volunteers driving their own cars on behalf of the organization. Volunteers' personal auto insurance is typically primary, and the organization's HNOA provides protection for the organization.
- Screen drivers and set policies for transporting clients.
Professional liability
Nonprofits that provide counseling, social services, health care, education or advice may need professional liability coverage for claims arising from services. Some policies combine it with general liability for social service organizations.
Fiscal sponsorship and grants
Projects under fiscal sponsors should confirm whose insurance applies. Grant agreements often specify insurance requirements; review them before signing.
Tax-exempt status resources
The IRS publishes guidance for charities and nonprofits, including governance and annual filing requirements: IRS – Charities and nonprofits. In California, charities register with the Attorney General's Registry of Charities and Fundraisers: California Attorney General – Charities. Good governance and timely filings reduce regulatory claims.
How to buy nonprofit insurance on a budget
- Package policies: many insurers offer nonprofit packages combining general liability, property, D&O and crime at a lower cost than separate policies.
- Share risk information: a written risk management plan, volunteer screening procedures and financial controls help underwriters price your organization fairly.
- Review annually: as programs, staff and events grow, update limits and coverages.
- Plan for funder requirements: some funders and partners require specific insurance limits; include those premiums in grant budgets.
Nonprofit insurance checklist
- ☐ D&O with EPLI
- ☐ General liability
- ☐ Abuse and molestation coverage if serving vulnerable populations
- ☐ Volunteer accident insurance
- ☐ Workers' compensation for employees
- ☐ Property and business income
- ☐ Special event coverage
- ☐ Crime and cyber
- ☐ Hired and non-owned auto
- ☐ Professional liability for service providers
- ☐ Review grant and lease insurance requirements
Contact Alishahi Insurance or call (877) 711-4545 to review nonprofit coverage.
Frequently asked questions
Do nonprofit board members need D&O insurance?
D&O protects board members and the organization from claims about management decisions. Many board members won't serve without it.
Are volunteers covered by workers' comp?
Generally not. Volunteer accident insurance can cover medical expenses for injured volunteers.
Does the Volunteer Protection Act protect my nonprofit?
It limits some volunteer liability with exceptions, but doesn't protect the organization itself or prevent lawsuits.
What is abuse and molestation coverage?
Coverage for claims of abuse, which general liability often excludes or limits. Organizations serving vulnerable people should consider it.
Do nonprofits need cyber insurance?
Nonprofits that hold donor or client data can face breach costs and fraud, which cyber insurance helps address.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.