Insurance for Charities: Essential Coverage and Best Practices

Charities play a vital role in society, providing indispensable support and services to those in need.

However, like any organisation, charities face various risks that could potentially jeopardise their operations. To mitigate these risks, it is crucial for charities to have appropriate insurance coverage.

The Role of the Charity Commission
One of the Charity Commission’s roles as the regulator for charities is to promote the effective use of charitable resources. As part of this responsibility, the Commission offers guidance to help trustees determine the appropriate insurance for their charity. A critical aspect of this decision-making process involves assessing the risks associated with the charity’s activities and determining whether insurance is necessary to manage those risks.

When reviewing the Charity Commission’s insurance guidance, trustees should pay close attention to two key terms: ‘must’ and ‘should’. The term ‘must’ indicates a specific legal or regulatory requirement that charities must comply with. In contrast, ‘should’ denotes minimum good practice guidance that charities are encouraged to follow unless there is a valid reason not to.

‘Must’ have insurance for Charities

Employers’ Liability Insurance
Employers’ liability insurance is a mandatory requirement for any charity that employs paid staff. This insurance provides compensation to employees who become ill or injured while performing their work duties. By law, charities must:

• Have at least £5 million worth of cover.
• Purchase employers’ liability insurance from an authorised insurer.
• Display the insurance certificate prominently on the charity’s premises.

Failure to comply with these requirements can result in significant fines. Charities can be fined £2,500 per day for not having insurance and £1,000 for not displaying the certificate correctly.

Motor Insurance
Any charity that operates motor vehicles on public roads is required to have motor insurance. This is in accordance with the Road Traffic Acts, which mandate insurance coverage against third-party injury and property damage. If trustees, employees, or volunteers use their personal vehicles for charity purposes, the charity must ensure that the owner’s insurance policy covers such use. The charity may cover any additional premiums necessary for this coverage.

Special requirements apply to minibuses used to transport people on a hire or reward basis. Charities should seek advice from their insurers regarding these specific requirements.

‘Should’ have insurance for Charities 

While the above-mentioned insurances are legally required, there are other types of insurance that the Charity Commission recommends, which fall under the category of ‘should’ have insurance. These are not mandatory but are considered good practice to ensure comprehensive risk management. Some of these recommended insurances include:

• Public Liability Insurance: This covers claims made by third parties for injury or damage caused by the charity’s activities. Most public liability insurance will cover a set amount of events per year, making sure that your members, guests and volunteers are protected.
• Trustee Indemnity Insurance: This covers trustees against personal liability arising from their decisions and actions on behalf of the charity.
• Material Damage Insurance: This protects the charity’s physical assets, such as buildings and equipment, against risks like fire, theft, and vandalism.
• Hirers’ Liability Insurance: This covers liabilities arising from hiring out premises to third parties, ensuring that the charity is protected against claims made during the hire period.
• Personal Accident Cover: This provides compensation for trustees, employees, or volunteers who suffer injury or death while performing activities on behalf of the charity.
• Business Interruption Cover: This provides financial support to cover loss of income and additional expenses incurred if the charity’s operations are disrupted due to unforeseen events like natural disasters or fire.
• Money Cover: This insures against the loss of money belonging to the charity, whether on the premises, in transit, or in the custody of authorised individuals.

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This article was adapted from an article by Zurich which can be found here.