Bigger Fundraisers Mean Bigger Risks
Fundraising events are often necessary for nonprofit organizations for several reasons. First, such events bring in much-needed funding to help carry out the organization's mission. Nonprofit fundraising also drives awareness of certain causes, and it provides a source to attract new supporters, donors and volunteers.
When the COVID-19 pandemic first swept the world in 2020, all large gatherings were canceled as a means to slow the spread of the virus. These cancellations included those important annual fundraising events nonprofits rely on, so many organizations found themselves searching for alternative solutions to ensure they would still have the funding needed to continue to spread their mission. While many turned to hosting virtual events or changing the way they communicate their fundraising needs, 44% of nonprofits admitted they did not have a clear plan in place to mitigate losses from those canceled events, according to a survey from The Nonprofit Alliance.
The good news is the world continues to recover from the pandemic. Vaccinations have led to the return of a feeling of normalcy — and that includes the ability to gather in large groups once again. Some nonprofits who have been anxious to get back to their annual fundraising events — whether it be a grand gala, a 5K run or a celebrity golf tournament — now have the ability to host such gatherings again. However, bigger fundraising events go hand in hand with bigger risks, so it's important nonprofits have the proper coverage to ensure they are protected in case an unforeseen incident occurs at the event.
Nonprofits already face unique risks that set them apart from other types of businesses. From having smaller budgets and utilizing donations to working with vulnerable populations, like the elderly or children, and relying on non-paid volunteers, nonprofits often need specialized insurance coverage that protects their people, their assets and ensures they can continue to fulfill their missions.
In general, nonprofits need coverages such as:
- General liability
- Professional liability
- Workers' compensation
- Management liability
In the wake of the pandemic, some organizations are ramping up their efforts to make up for lost time and all the events that were canceled or postponed during the height of COVID-19. And in some cases, organizations might put on special events even larger than those they had hosted in the past. But when it comes to hosting special events, like a fundraiser, nonprofits may even need additional coverage to keep them protected from certain risks.
Smaller fundraising events, which are defined as those with fewer than 250 participants, directly hosted by the nonprofit are covered under an existing nonprofit insurance package with special event liability coverage. Larger events can be scheduled by endorsement or have to go to a special event carrier. For example, if the nonprofit sold 300 tickets to an event, it would need to contact its carrier, which would schedule an endorsement and charge premium for that event. Special event insurance covers property damage, bodily injury and personal injury arising from a fundraising event or other revenue-generating events, such as small dinner parties, concerts or fairs. However, the organization needs to consider many other factors when planning a bigger event where third-party vendors and services are needed.
For instance, say a nonprofit organization wants to have a major celebration, something with carnival rides, fireworks and a concert with one of the country's top musical acts. Such an event is sure to draw in a large crowd. In fact, the nonprofit is planning on a guest list of at least 1,000 to bring in more donations. While this sounds like a can't-miss event, the risks involved with hosting it are bigger than most nonprofit insurance policies would cover. In this case, an event with these high-hazard activities would need to be covered by a special events carrier.
Before hosting any type of fundraiser or special event, nonprofit organizations need to make sure to contact their insurance carrier to find out what their policies cover and if any extra coverage, such as liquor liability or vendor coverage, is necessary. Organizations should discuss risk-management measures with their insurance agent to ensure they have the appropriate special event coverage for an event with more hazards, as standard carriers may not cover these exposures. The agent can explain what is covered and excluded in a standard policy. It's important to remember that even with the most careful planning, third-party claims of bodily injury or property damage can lead to a nonprofit organization's financial downfall.
Parvathy Sree is the vice president of AmTrust Nonprofit Underwriting, managing growth and profitability for nonprofits’ products. She has more than 18 years of expertise in underwriting, marketing, talent management, product development, risk management and strategic planning.