Charities face many risks that can result in loss, damage or liability for trustees – and for the charity as a whole. Risks include a loss of a charity’s assets or resources, damage to a charity’s property and third party liability for professional indemnity or public liability. Part of mitigating those risks is having an appropriate insurance policy. Following is a brief overview of the different insurance for charities to consider.
Compulsory Insurance for Charities
There are types of insurance that charities may be legally required to purchase, depending on their circumstances. These include:
Employers’ Liability Insurance – a charity that employs staff is considered an employer under the law. All UK employers are required to take out this insurance with a minimum cover of £5million for injuries or diseases their employees suffer while on the job.
Motor Insurance – if a charity owns or operates motor vehicles, it must comply with all provisions of the Road Traffic Act – including the requirement to take out insurance against third party injury and property damage. If employees, volunteers or trustees use their own personal vehicles on charity business, the charity must also make sure that the vehicle owner’s insurance covers such use. If it doesn’t, the charity may need to purchase additional premiums.
Common insurance for charities to include:
Even if a charity is not required by law to carry insurance, it should seriously consider including the following covers recommended by the Charity Commission in a charity insurance policy in order to mitigate risks:
- Buildings – charities that are freehold owners of a building should insure it for its full reinstatement value. This is the sum insured, or maximum amount payable by the insurer, should be enough to cover demolition work, site clearing, professional fees and building replacement in case anything should happen to the building. It’s recommended that trustees take advice from a qualified building surveyor to determine the correct sum insured to avoid any potential liability. If the charity is a lessee, the terms of the lease should be reviewed to determine who is responsible for insuring the building – the charity or landlord. Depending on the terms, the charity may also be responsible for repairs.
- Contents – charities need to have a suitable policy in place to cover the contents of the building, such as furniture, equipment and cash. This is commonly done on a ‘new for old’ basis, meaning that the charity is compensated the current market replacement value for the item. Irreplaceable items can sometimes be on an ‘agreed value’ basis on this agreed-upon figure. Charities should also find out whether theft cover is provided in the policy, including the cost of investigating and attempting to recover stolen items.
- Public Liability – this cover protects charities from third party legal liability claims for bodily injuries and illness, and loss or damage to material property while on the premises of the property. This may also be appropriate for charities that carry out business activities away from their own premises. The charity and trustees would be indemnified against certain claims from the public.
- Employee Dishonesty – this insurance covers loss arising from fraudulent or dishonest conduct by employees when handling the charity’s cash and other valuables. It is advisable to extend this cover to volunteers. However, this cover is no substitute for sound financial and personnel risk management. Claims are usually only paid if the charity can show that its arrangements were adequate and the employees were properly supervised.
- Professional Indemnity – whenever a charity provides a professional service, such as counselling, or any form of advice or information, the charity may be held liable if the service, advice or information was provided negligently. The charity could be held legally liable for loss, injury or damage that was sustained when the service was provided, or as a result of following the advice or information.
- Trustee Indemnity – trustees in a charity are required to follow certain duties laid out by law. Trustee indemnity insurance covers trustees from having to personally pay out legal claims against them that arise from negligence or a breach of trust or duty. It can also cover the charity for corporate liabilities that arise from a trustee’s breach of duty or negligence. However, this will not cover costs related to a criminal fine or penalty, or costs from the trustee being convicted of fraud, dishonesty or reckless conduct.
- Additional Covers – depending on your circumstances, your charity may also want to consider cover for events, personal accidents, terrorism and political violence, increased cost of working, staff illness and others.
Volunteer Considerations
Many charities will use the services of volunteers. While volunteers are not considered employees, charities still have a duty to ensure their health and safety and give them proper training and supervision. If a volunteer is injured as a result of the charity’s negligence, he or she could file a claim against the charity or trustees. The charity and its volunteers should also be covered in case a third party is injured due to actions of volunteers. Charities should check their insurance policies for the following:
- Whether the insurance policy includes volunteers, such as employers’ liability extending to volunteers.
- What the policy definition for ‘volunteer’ is
- Whether any upper or lower age limits apply
- What types of volunteer activities are covered
Get help from your Broker
Because each charity’s purpose or public benefit aim is different, it takes an experienced broker with expertise in the industry to create a bespoke policy that makes sure all risks are addressed. Contact Pound Gates today to discuss your charity’s insurance needs.