Do Canadian Charities Need Insurance?

Are you part of a charity organization in Ontario? Have you ever wondered if your charity needs insurance? Let's explore why insurance is essential for charities, how it works, and what you should know when buying insurance.

How Insurance Premiums Are Determined
Insurance companies decide how much to charge for a policy based on the likelihood of a claim. Even if your organization has never had a problem, your premiums will be based on national statistics for similar organizations.

Do You Need Insurance?

Charities in Canada are not required to have insurance, except for vehicle insurance for volunteer drivers. However, it's crucial to consider the following:

1. Probability of an Incident:
   • How likely is it that an incident could occur?
   • Could this incident result in a financial catastrophe for your organization?
2. Legal Help:
   • Would you require legal assistance to defend a claim?

For most charities, it makes more sense to pay regular premiums to an insurer than to risk a financial loss that could severely impact their ability to operate. ‍

Types of Insurance Policies for Charities Insurance policies for charities generally fall into two categories:

1. Loss Coverage:
   • These policies provide coverage for items or places that your charity owns (e.g., buildings, vehicles, computers) in case they are lost, stolen, or damaged.
2. Lawsuit Coverage (Liability Policies):
   • These policies cover your organization and people from lawsuits.

Common Policies for Charities:

• Commercial General Liability (CGL):
  • Covers bodily injury, property damage, personal injury, medical payments, tenants' legal liability, and endorsements like non-owned automobile liability.
• Directors' & Officers' Liability:
  • Directors and officers of charity organizations can be held personally liable for their decisions and acts committed by other directors.

Understanding Your Policy When you receive your policy renewal, it's essential to understand what it covers:

1. Exclusions:
   • What is covered and what is not covered?
2. Who is Covered:
   • Look at the groups of people defined as named insureds.
3. Who is Not Covered:
   • Ensure you understand who is not covered, such as volunteers or special committees.

Dos and Don'ts When Buying Insurance What to Do:

• Find the Right Insurance Agent or Broker:
  • Look for someone with strong knowledge of charities.
  • Ask for references from other charity clients.
• Understand What You're Buying:
  • Take the time to understand your policy thoroughly.
• Ask About Better Deals:
  • Inquire about better deals; the cost of insurance is not likely to go down unless you ask.
• Keep Up to Date:
  • Stay informed about market conditions and contact your broker before your renewal date.
• Obtain Independent Advice:
  • If your insurance agent or broker also serves on your board, consider eliminating this conflict of interest.

What Not to Do:

• Assume Premiums Will Decrease:
  • Premiums are only partly affected by your history. Don't assume they will go down over time.
• Assume Insurer's Long-Term Commitment:
  • Insurers may decide not to renew policies, so don't assume they are committed for the long term.
• Be Overly Trusting:
  • Take the time to understand your insurance coverage rather than solely relying on verbal assurances.

By following these guidelines, your charity can ensure it has the right insurance coverage to protect its assets and operations.