11 December 2018

How can charities avoid underinsurance?

Not-for-profits and community organisations constantly face challenges with resources. The threat of underinsurance is often ignored, particularly by smaller charities.

Underinsurance is a simple concept but one that could cripple a charity: should a claim exceed the maximum that can be settled by an insurance policy, you’re underinsured and may be in for serious financial losses.

No matter what size of charity you run, arranging the right level of charity insurance is essential to protect its future.

Why do charities underinsure?

Charities can underinsure for a combination of factors, including an attitude of treating insurance as a box-ticking exercise, a disruption or something that could lead to an increase in annual premiums.

Many directors may not be fully aware of the liabilities they might face. They may be liable for any obligations the group takes on and for any judgments made against the group by the courts. We recommend that directors consider cover for their own personal liability risks.

As a trustee you have a duty of care to protect your charity’s assets and resources. Depending on what your charity does, insurance solutions will be available to protect money, staff, property and reputation. For example:

• insurance covering loss of funds or damage to its property and possessions
• travel insurance for staff and volunteers if staff travel for your charity
• insurance against fraud and dishonesty (known as fidelity insurance)
• cover for a service you provide, such as giving advice 

Managing insurance risks

Embedded processes, good habits and regular reviews can help organisations identify and reduce underinsurance risk, However, with time and resource pressures that many charities face, sometimes this doesn’t happen.

Using a specialist charity insurance broker is a wise move for charities. They provide the support and impartial guidance of experts, and can tailor charities’ insurance solutions to cover all their needs. Working closely with your insurance broker is a way to make sure you have a clear, in-depth picture of cost, value and liability that is both current and accurate, and keeps pace with inflation.

Our brokers can help you conduct audits or valuations to ensure you understand whether your cover is sufficient. Things that might be included:

• Rebuild: your overall sum insured is the most you would need to rebuild from scratch. Have you got the amount right that would be needed to rebuild your
• business premises?
• Limits: are the policy limits sufficient? Check them against the needs of your organisation.
• Values: are you updating insured costs of plant, assets and premises for your organisation annually?
• Recovery: what’s a realistic indemnity period within business interruption insurance that gives your organisation enough time to recover?

Help with charity insurance

We are passionate about the fantastic work the charities we have been involved with deliver. We appreciate that charities have to run on a tight budget, and our aim is to get the best possible insurance package for your charity at the best price by possible using our size, networks and international reach.

Our teams of charity insurance brokers are proud to play their part in helping New Zealand charities have a secure future.