Insurance is an important method of managing risk, and should always be considered as part of a governing body’s review of risk controls. Ideally, a named post holder (such as the Treasurer, Head of Finance, or Chief Executive) should have explicit responsibility for ensuring that an organisation has the necessary and appropriate insurance policies for its activities, and that the organisation’s insurance needs are regularly reviewed by its governing body.
However, there are so many different kinds of insurance available that it is easy to get carried away with the idea of insuring your organisation against every conceivable risk. It can be difficult to know which types of insurance are necessary and appropriate for your organisation, and which types would not benefit you. To complicate matters further, the names of insurance policies are not used consistently, so that two identically titled policies from different providers may offer substantially different cover.
There are a few basic types of insurance that are required by law for the majority of groups. Other types of insurance may be necessary or advisable, depending on the size and specific activities of the group. There is often overlap between one type of insurance and another.
If you are a Charitable Company, Charitable Incorporated Organisation (CIO), Community Interest Company (CIC), or Co-operative/Community Benefit Society, your organisation takes out insurance in its own name. If you are an unincorporated Charitable Association or Trust, your insurance policies will be held in the names of one or more individual members of your governing body/management committee. This is important to recognise, as if the person or people in whose name the insurance is held leaves your governing body, protection would not be transferred to the other members – they would have to be appointed and the insurer notified of this.
The following information is simply a set of guidelines and should not be taken as legal advice. To ensure you obtain insurance appropriate to your needs, you should consider taking advice from a solicitor or qualified insurance broker/insurance intermediary. You may also find it useful to read the Charity Commission’s own guidance on insurance, Charities and Insurance.
The need for the following types of insurance will depend on the organisation’s activities and circumstances. Many types of insurance become more relevant as an organisation gets larger. Your management committee will need to decide if each type of insurance is something you need, based on the following questions:
- Is it appropriate for your organisation and its activities?
- Would it be in line with your organisation’s policies or good practice guidelines to get this type of cover?
- Are the arguments in favour of getting insurance (i.e. the potential risks) more significant than the cost to the organisation?
- Does your own experience (or that of other similar organisations) suggest that you need this type of insurance?
- Has your organisation recently taken on any new activities that may require alterations to your current insurance provision?
If you do decide that you need any of the following types of insurance, make sure you research the range of policies available in terms of cost, cover, and value for money. It’s a good idea to regularly review your organisation’s insurance requirements.
Keep in mind as well that the Charity Commission takes a view on which types of insurance a charity should have, and which will need special permission, and should only be taken out if it is necessary to do so. As detailed below, the Charity Commission considers trustees to have a duty to protect their charity’s property, and so charities are strongly advised to insure their property (buildings and contents). Failure to do this may be considered a breach of trust by the Commission. On the other hand, the Commission may take a dim view of a charity that spends charitable funds on insurance where this is not necessary or prudent.
The following list is not exhaustive – but covers some of the types of insurance that may be relevant to you.
Employers’ Liability Insurance
Legally required? If you employ staff, yes – it’s a statutory obligation and you could face huge fines if you don’t have it.
Any organisation employing staff must have Employers’ Liability Insurance for claims up to £5 million. They must also display a Certificate of Employers’ Liability Insurance in the workplace. An employer can be fined £2,500 for each day that they do not have and display this insurance.
Employers’ Liability Insurance covers the organisation against any claims by staff (including anyone who has a contract or apprenticeship) for illness, injury, disease and death, including your civil liability arising from a claim for injury to an employee and the cost of defending those claims, as well as defence costs for prosecutions under the Corporate Manslaughter Act 2007 and Health & Safety at Work Act 1974.
It does not usually cover your volunteers, trainers, visitors or governing body members. You can get policies that do specifically cover volunteers, but this is not mandatory. However, you are at risk if you do not cover these groups of people, so if they are not explicitly included in your Employers’ Liability Insurance, they should be explicitly covered by your Public Liability Insurance (see below).
Motor Insurance (Personal)
Legally required? Everyone who drives a vehicle must have this; also required when volunteers are using their own vehicles in connection with voluntary activities.
It’s compulsory for everyone who drives a vehicle to have third party insurance cover. This covers civil liabilities which arise from a claim for injury to another person or damage to their property, and the cost of defending these claims. If you are using your own vehicle in connection with voluntary activities, most insurers will cover you at no extra cost.
Usually, ‘voluntary activities’ means volunteers who drive as part of their voluntary role – for instance, a charity that sells donated second hand furniture may hire volunteers to pick up the furniture and transport it to their shop. ‘Voluntary activities’ does not typically include driving to and from a charity in order to volunteer in a role not connected to driving, nor does it include using a car to attend meetings on behalf of the organisation.
Motor Insurance (Business)
Legally required? If your organisation own, leases or uses vehicles; and/or if staff/volunteers use their own vehicles to carry out the business of the organisation (beyond voluntary activities).
Every organisation that owns, leases or uses vehicles must have a minimum of third party cover. This covers your civil liability arising from a claim for injury to another person or damage to their property and the cost of defending those claims.
If your organisation either has its own vehicles, or its staff or volunteers use their own vehicles when carrying out the organisation’s business, then the vehicle owner has a legal duty to take out this type of insurance. If the vehicles are the group’s own, then you are legally required to have third party cover for all vehicles and drivers. (A more comprehensive insurance, including fire and theft insurance, is advisable). If the vehicles are the staff/volunteer’s own, then it is good practice for your organisation to make certain that they (staff and volunteers) have insured their vehicles for this purpose.
This is not typically required for staff who are using their vehicles to drive to work – personal motor insurance policies usually cover driving to and from an individual’s normal place of work.
Commercial Property Insurance (Buildings & Contents Insurance)
Legally required? It’s not a statutory obligation, but there are very good reasons for getting it – not least that the Charity Commission may consider it a breach of trust if you don’t.
Commercial Property Insurance will cover the buildings and contents owned by the charity for damage caused by burst pipes, falling trees, fire, flooding, storms, subsidence and theft. Commercial Property Insurance will not cover you for damage caused by general wear and tear or depreciation of assets.
Although not a statutory obligation, the Charity Commission’s view is that trustees of charities have a duty to safeguard the charity and its assets. As such, trustees may be in breach of trust if they do not appropriately insure the charity’s property for its full value.
Buildings Insurance covers the fabric and structure of any building that your organisation rents or owns outright. While this is not required by law, it will be required by most mortgage providers before they give you a loan. Even if you own your business premises, Buildings Insurance is still a good idea, to cover you against the cost of repairs or rebuilding your property. If you rent premises, then you need to check the terms of your lease to see whether it’s the responsibility of your organisation or that of your landlord to take out Buildings Insurance. Usually it would be the landlord’s responsibility to ensure that the building is properly insured, but this responsibility is sometimes given over to tenants in lease agreements.
Contents Insurance covers the cost of replacing your organisation’s property (such as equipment or stock) if it is damaged or stolen. There are different types of policy and you can get limited policies that will only cover certain circumstances. You may also be able to extend the policy to cover property of the organisation that is taken off the premises on business. This type of insurance is strongly recommended in any case, but especially if you own or hire property that is kept at your premises, or if you do outreach work.
Public Liability Insurance (also known as Personal Injury Insurance or Third Party Insurance)
Legally required? No, but you will need it for some registrations and licences.
This type of insurance covers injury, loss or damage, caused to any person or property as a result of your organisation’s negligence or breach of a legal duty, and covers people using your organisation’s premises or services. If you have premises that are visited or used by members of the public or by volunteers, then you are strongly encouraged to have this insurance. Although Public Liability Insurance is not a statutory obligation, it may be required for some registrations and licenses – you will almost certainly need it to obtain a premises licence, for instance.
Public Liability Insurance also covers specific activities, such as regular lunch clubs, sports activities, or single events. But don’t assume that the Public Liability Insurance you have covers you for all events – depending on your policy, you may need to take out additional insurance for events (see Charity Event Insurance below).
This policy covers your civil liability arising from a claim for injury to another person (who is not an employee) or damage to their property, and the cost of defending those claims. It also usually includes defence costs for prosecutions under the Corporate Manslaughter Act 2007 and Health & Safety at Work Act 1974, and liability you may incur for damage to leased or let property. The policy can be extended to cover libel and slander.
When taking out Public Liability Insurance, you should be clear on who is covered by the policy. If volunteers, trainers, visitors and governing body members are not explicitly covered in your Employers’ Liability Insurance, they should be explicitly covered by your Public Liability Insurance.
Charity Event Insurance
Legally required? No, but you put yourself at considerable risk if you’re not covered for any public events you run, either through this form of insurance or through Public Liability Insurance.
This type of insurance can cover costs arising from an event being cancelled or abandoned for reasons beyond your control, and for cancellation expenses including payments for publicity, hire of marquees and other equipment, purchase of perishable goods (e.g. food), venue hire, and printing costs for tickets.
Note that Public Liability Insurance can also cover you for fundraising or other events you run. You will want to check what your Public Liability Insurance does and does not cover before looking into specific Event Insurance. Some providers will also offer specific forms of cover for charity events, such as Event Cancellation Insurance.
Important to note is that any third parties providing activities at your event should have their own liability insurance, so that any claim made against their activities is covered by their own insurance policy. This is relevant where injury could occur, for instance injuries sustained on bouncy castles or allergic reactions to face painting.
Professional Liability Insurance (also known as Professional Indemnity Insurance)
Legally required? No.
If your organisation offers an advisory service or other professional services to members of the public then you should consider taking out Professional Liability Insurance. Even if the service that you offer is free, you can still be sued. This type of insurance covers you for civil liabilities arising from negligent advice or professional services provided by your organisation, and the cost of defending those claims.
This insurance applies to staff members and volunteers who give out advice, including legal and financial advice, should that advice be incorrect and lead to injury, loss or damage. When taking out this kind of insurance, you need to make sure that the insurer is made fully aware of all of your organisation’s activities.
Trustee Indemnity Insurance (also known as Trustee and Management Liability Insurance)
Legally required? No.
This type of insurance covers the potential liabilities of Trustees and Directors of voluntary and charitable organisations. For example, if your organisation’s management committee members cause financial losses to the organisation, this insurance would cover them for some of the losses. Trustee Indemnity Insurance also covers management committee members for civil liability arising from their mismanagement of the organisation, and the cost of defending those claims. It includes some cover for the organisation itself in addition to the individuals.
Trustee Indemnity Insurance cannot cover a charitable organisation’s Trustees for any eventuality. If it is thought that management committee members acted with reckless disregard – meaning that they were aware (or could reasonably be expected to be aware) that what they were doing was in breach of trust or duty – then Trustee Indemnity Insurance is not likely to cover them.
Many of the benefits of Trustee Indemnity Insurance are provided by incorporation, e.g. protecting trustees against litigation in civil cases, and protecting trustees from taking on the charity’s debts in the event that it closes down while still owing money.
Individual trustees can arrange to pay for their own Trustee Indemnity Insurance privately, rather than as a body, if they wish to do so.
The above list is not exhaustive, but covers most types of insurance relevant to the charities and community groups.
Last updated: January 2017