Myths About Nonprofits: How to Protect These Organizations

There are about 2 million nonprofit organizations in the U.S. With their entrepreneurial spirit and mission-guided purposes, these nonprofits play a tremendous role in our society. Nonprofits champion humanitarian goals, advocate charitable causes, lead the forefront in scientific research, serve as guardians for the environment, and more. 

Take note, though, that despite their significant contributions, there are still some misconceptions about nonprofits even today. Let’s dispel some common myths revolving around the nonprofit sector so agents and insurers can better serve nonprofit leaders. Here are three:

  1. Nonprofits Run Similarly to Other Business Organizations 
    Nonprofits tend to be charity-driven organizations with a passion for having a positive impact on the world. Their desire to implement world change can include establishing water wells to bring access to clean water to communities in need, preserving the ecosystem, providing food and other household items to low-income families, and more. 

    The common perception is that because of their focus on charity, nonprofits aren’t businesses. But in fact, the opposite is true. Nonprofits must utilize a business mindset in order to thrive. For example, any given campaign project involves myriads of planning and logistics. For this reason, nonprofits have separate departments dedicated to fundraising, human resources, and information technology, to name a few. Understanding the organizational structure of a nonprofit will help insurers better identify their unique needs and recommend the optimal solution. 
  1. Nonprofits Are Exposed to Just as Many Risks (and Need Specific Insurance) 
    The world of nonprofits isn’t always rosy — they face risks like everyone else. But it’s still widely believed that nonprofits somehow have it easier than standard businesses. Sure, nonprofits may face different risks than traditional companies, but they are exposed to difficulties and roadblocks capable of disrupting operations. Some of the risks that nonprofits face are:
  • Fundraising Fraud: Unfortunately, nonprofits can become a target of scammers attempting to exploit their mission. Scammers will take the organization’s logo, hold a fundraising event, and keep the funds for themselves, which can damage the organization’s reputation and negatively impact donors’ trust.
  • Theft of Funds: Nonprofits can experience theft of their funds, which draws resources away from their campaign goals.
  • Cybersecurity: Even nonprofits can be exposed to cyberattacks. When donor information is stored in a database, a cybersecurity breach can be very costly and damage a nonprofit’s reputation.
  • Volunteer Staff: Nonprofits may rely on volunteers for many of their efforts. However, this can expose a nonprofit to certain liabilities such as theft, injury to volunteers, and accidents that can occur in the workplace. 
  1. Nonprofits Have a Stellar, Talented Staff
    There is a misconception that volunteers make up the entirety of a nonprofit’s staff. Although volunteers often are the lifeblood of these types of organizations, nonprofits invest in their staff as much as any other business. Hence, those staff members come equipped with a high level of work experience in sectors like computer science, research, and business management as well as industries and demographics supported by the organization. By getting to know the staff members of your nonprofit or social services clients, you’ll be better equipped to build positive working relationships and be the insurer that they go to and trust in times of need. 

There are many more myths revolving around nonprofits. You can learn more HERE. 

Looking for Nonprofit Insurance? MiniCo understands nonprofit risks, and we have nearly 50 years of experience working alongside mission-driven organizations. Contact our experienced team to discuss our customized Nonprofit and Social Services program and get a quote.

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