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Understanding Your Insurance Policy

By Heather Brown
July 01, 2016

Shopping for insurance for your nonprofit organization is a daunting task. Especially if you are not previously familiar with the insurance terminology. Common types of insurance purchased by nonprofits includes general liability, accident and health, directors and officers liability, employment practices liability, and special event insurance. Prior to purchasing insurance make sure you understand and are aware of the following important items on your policy:

Policy Term: The dates your policy is in effect and coverage is offered.
Per Occurrence: This is the limit of coverage that your insurance policy will pay out for any one claim.
Per Aggregate: This is the limit your insurance policy will payout per policy year.
Retroactive Date or Retro Date: On policies that are claims made ( i.e. D&O Insurance) this is the furthest date back you are covered for a claim.
Claim Reporting Period: Some policies give you a certain number of days to report a claim and if you do not report it within that window (i.e 60 days) then there is no coverage.
Definition of a Claim: Each policy has a different definition of what constitutes a claim. Some are defined as any incident that could result in a lawsuit and some define it is as the day you receive lawsuit papers.
Exclusions: Just like with definitions of claims, there are also different exclusions on policies. Some policies exclude volunteers as covered insureds and some policies exclude events off site of your nonprofit.
General Liability: This type of coverage provides insurance protection for slip and fall type of accidents that result in medical payments or a lawsuit being filed.
Medical Payments: This is the maximum amount your policy will pay out for medical payments during the policy period and usually excludes volunteers.
Sexual Abuse & Molestation: This is the maximum amount your policy will pay out in the event there is an allegation/claim regarding abuse or molestation.

These are basic items that can be found on most policies and are important for your organization to have an understanding of prior to purchasing insurance coverage.Knowing and understanding these terms will help you identify any potential gaps in coverage.

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