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How to Budget for Insurance

February 28, 2024

Budgeting for insurance requires a strategic approach that balances legal compliance, comprehensive coverage, and fiscal responsibility. Here are some strategies tailored for California nonprofits:

1. Start with a Risk Assessment

Evaluate your nonprofit's specific risks based on activities, size, and the population served. Reviewing funding contracts is an important part of the risk assessment. This assessment forms the basis for determining which insurance policies are necessary and how much coverage is appropriate, ensuring that your budget is spent wisely on mitigating significant risks.

2. Prioritize Essential Coverages

As so many organizations start out as being volunteer-run, General Liability and Directors & Officers Liability Insurance should be prioritized. Hired/Non-Owned Auto coverage is needed even for volunteer-run groups and can often be added to your General Liability policy. Given the legal requirements and the potential risks faced by nonprofits in California, prioritize placing insurance before starting any operations, including holding board meetings. As soon as you have paid employees, add a Workers' Compensation policy.

3. Understand Total Insurance Costs

The total cost of your insurance goes beyond the premium. Deductibles, coverage limits, and the specific terms of your policy can all impact your budget. For instance, a lower premium might come with a higher deductible, which could be costly in the event of a claim. Ensure your budget accounts for these variables.

4. Leverage Experience from Specialized Providers

Navigating insurance requirements and budgeting in California's complex legal landscape is challenging. Partnering with a specialized insurance broker like CalNonprofits Insurance Services can offer invaluable insights. We understand the specific needs and challenges of California nonprofits, providing guidance on compliance, risk management, and access to carriers with cost-effective insurance solutions.

5. Review and Adjust Annually

Insurance needs can change as your nonprofit evolves. An annual review of your insurance policies and coverage levels, in consultation with an insurance expert, ensures that your nonprofit remains adequately protected without overspending. This is also an opportunity to discuss any changes in California's insurance requirements that may affect your nonprofit.

Conclusion: A Balanced Approach to Insurance Budgeting

For California nonprofits, effective insurance budgeting is about more than meeting legal requirements; it's about ensuring the long-term sustainability and protection of the organization. Due to the impacts of financial inflation, a rise in reinsurance costs, and adverse jury verdicts, many carriers are increasing rates. We are seeing rate increases ranging from 5% to 30% in the marketplace. By prioritizing essential coverages, understanding total costs, and leveraging specialized expertise, nonprofits can develop a strategic insurance budget that supports their mission while managing risks. With partners like CalNonprofits Insurance Services, California nonprofits have access to tailored advice and solutions that respect their budget constraints and coverage needs, ensuring they can focus on what they do best: making a difference in their communities. As your independent insurance broker, we are here to find you the best coverage for the best price available among all carriers willing to write insurance in California.

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