Nonprofit leaders put everything into their mission, whether that’s feeding families, mentoring youth, protecting the planet, or supporting neighbors in crisis. But even the strongest mission can be knocked off course by one expensive surprise. Insurance isn’t just a box to check. It’s a financial safety net that protects your people, your programs, and your reputation when something goes wrong.
The problem is that many nonprofits carry coverage that looks fine on paper but has real gaps in practice. Below are the five mistakes that show up most often, plus how to sidestep them before they turn into a crisis.
A lot of nonprofits assume Directors and Officers coverage is only for big corporations. In reality, it’s one of the most important protections a nonprofit can carry, no matter the size.
D&O insurance shields board members and executive leaders from claims tied to decision-making. That can include accusations of mismanagement, misuse of funds, lack of oversight, or failure to follow fiduciary duties. These claims don’t just come from outsiders. They can come from employees, donors, clients, or even other board members.
Without D&O, legal defense costs can drain your budget fast, and leaders’ personal assets could be exposed. With it, your board can make hard decisions with confidence, and you’ll have an easier time recruiting strong, qualified people to serve.
General liability is foundational, but it has a clear limit: it mainly covers third-party claims, like a visitor getting hurt on your property. It does not cover problems coming from employees.
That’s where Employment Practices Liability Insurance, or EPLI, matters. EPLI helps protect your organization if an employee alleges wrongful termination, discrimination, harassment, retaliation, or unfair hiring and promotion practices.
Even very mission-driven workplaces can face these claims, especially as teams grow, policies evolve, or remote work blurs boundaries. EPLI gives you a defense budget and support when things get complicated.
Most nonprofits are digital now, even small ones. You store donor information, process online gifts, manage volunteers in cloud tools, and communicate through email and social channels. But many leaders still think cyber incidents fall under general liability. They don’t.
Cyber liability coverage helps with the modern reality of breaches, ransomware, and data leaks. It can cover investigations, legal counsel, notification requirements, and reputation repair. One successful phishing email can cost far more than a year of cyber coverage, and it can damage donor trust even longer than it hurts your bank account.
If your nonprofit touches data, cyber insurance is no longer optional.
Volunteers are the heartbeat of nonprofit work, but relying solely on their personal auto policies is risky. If a volunteer gets in an accident while driving for your organization, the nonprofit can be pulled into the claim. And personal limits may not be anywhere close to enough if someone is seriously injured.
Non-Owned and Hired Auto Liability fills that gap. It protects the organization when volunteers or staff use personal vehicles for mission-related tasks like transporting clients, delivering meals, or running outreach supplies.
It’s usually affordable, and it prevents a well-intended errand from turning into a budget-breaking lawsuit.
Insurance can quietly drift out of date. Construction costs rise, legal expenses climb, programs expand, and property values change. But many nonprofits renew the same limits year after year without checking whether they still match reality.
A property limit that covered a rebuild five years ago might fall short today. A liability limit that once felt high may not hold up against current claim trends.
An annual review helps you spot these gaps early. It also gives you a chance to check for new risks, like added programs, new staff roles, or a growing volunteer base.
Avoiding these five mistakes isn’t about being overly cautious. It’s about stewardship. Your mission depends on stable leadership, safe operations, protected data, and realistic coverage limits.
When you combine core insurance with the right specialty protections and review them regularly, you strengthen your nonprofit’s ability to serve, no matter what comes your way.
Q1 What insurance matters most for nonprofits?
A: Most nonprofits need general liability, property coverage, and workers compensation if they have employees. D&O, EPLI, cyber liability, and non-owned auto are often the next critical layers based on your programs and risk profile.
Q2 Why is D&O insurance important for small nonprofits?
A: Small nonprofits face the same governance risks as large ones, including donor disputes, employee claims, and accusations of mismanagement. D&O protects board members personally and keeps legal costs from draining your mission budget.
Q3 Does general liability cover cyberattacks?
A: No. Cyber incidents require their own coverage because they involve data loss, privacy laws, and digital extortion risks that general liability doesn’t address.
Q4 How can nonprofits reduce volunteer driving risk?
A: Add non-owned and hired auto liability. It protects your organization when volunteers use personal vehicles for nonprofit work.
Q5 How often should a nonprofit review insurance?
A: At least once a year, and anytime you add a new program, hire staff, buy equipment, or expand your facilities. Reviews keep limits realistic and coverage aligned with what you actually do.
