Number 10
Insurance for
Voluntary Organisations
You can insure against almost anything these days — it’s just that every extra thing you want to cover will cost you more in premiums. With voluntary organisations almost always operating on limited funds, it’s important to know which kinds of insurance are appropriate, or in some cases, compulsory, for your needs.
There are quite a few insurance brokers who specialise in voluntary sector insurance and over the last few years have developed specialised packages which cover most requirements of the average group, at a premium which is reasonable for the size of the organisation. As with any product, however, it pays to shop around and see what’s out there in the market place.
Why do we need insurance?
Hardly a day goes by without us reading in the paper about another big compensation case where damages running into millions are awarded by a court. Organisations need to protect themselves against the possibility, however remote, that they may be sued for damages. A simple fall down the stairs could leave a volunteer or employee permanently disabled and that person needs to be able to claim against someone’s insurance to provide the funds they will need to see them through the rest of their life. Fortunately, the fact that these cases are rare does at least mean that the premiums for public or employees’ liability insurance are fairly reasonable for a small organisation.
Different types of insurance
Employers Liability Insurance — any employer must have this by law — but it doesn’t cover volunteers or trustees, only direct employees. The certificate must be displayed at the employer’s premises. It only provides cover where the employer is at fault by being negligent or by not fulfilling their statutory duty, e.g. under Health Safety law.
Obviously, this is only appropriate for a group which actually employs people. Certain types of activity may be excluded from this and public liability insurance — always check the exclusions and make sure you are not unwittingly breaching your policy, which renders any cover invalid. Examples include fork-lift trucks and powered cutting tools, such as chainsaws, where insurers usually specify that no one without a formal training certificate may operate one of these machines.
Public Liability Insurance — this is the most appropriate form of insurance for most voluntary groups. For employers, the definition of who is an employee must match under both this and the Employers Liability policy or you may end up excluding volunteers or trustees, who are not covered by employers liability insurance.
There are policies directly aimed at voluntary groups, which include cover for volunteers and trustees, otherwise you may have to add a lengthy extra clause to a standard PLI policy to make sure that they are specifically covered.
You can only claim if it can be shown that the organisation has been negligent or not taken reasonable care. It covers you for food and drink provided to visitors but if you are selling goods, as in a charity shop, you should get Product Liability Insurance as well, which covers you for dangerous defects in any item you sell.
(Volunteers’ own household contents insurance usually contains a public liability element, which may protect them against claims in case of an accident, such as when a volunteer causes damage to someone else’s property while carrying out voluntary work.)
Buildings and Contents insurance - this is fairly self-explanatory. If you own a building you will need to insure it both for the full cost of rebuilding and also its contents. If you lease the building, or are allowed to use it by another organisation, it is normally the responsibility of the landlord to insure the structure of the building but you will need to insure the contents, which belong to your group. Always check, however, as some leases specify that buildings insurance is the tenant’s responsibility and sometimes several voluntary groups can occupy a building, each one assuming someone else has insured it!
Business interruption
Buildings and contents insurance often includes an option to have cover for business interruption. This pays the costs of emergency measures which might have to be put in place following a disastrous fire, for example, where your offices and computer records were destroyed. It would allow you to rent premises and hire computer equipment and consultants as necessary to reinstate your systems and keep the organisation functioning while your offices were under repair.
Motor Vehicles
Charity’s own vehicle - all vehicle owners must by law have a minimum of Third Party insurance, which covers passengers, other road users and damage to property owned by a third party (e.g. when your group’s van knocks someone’s fence over!). This can be extended to Fire Theft or Fully Comprehensive at extra cost.
The insurer will need to know exactly what the vehicle is being used for and who will be driving it. Usually a minimum age for drivers will be specified - 24 years of age is fairly common. As with private car insurance, specifying only named drivers keeps the cost lower than if all members of the group are allowed to drive it.
Minibuses are a special case and some insurers now offer a blanket policy, which covers everything you are likely to need if your group owns or operates a minibus. In any case, it is always important to tell the insurer all the details about how the vehicle will be used, the likely drivers and so on. Different insurers may impose restrictions, for example a minimum age for drivers or a fully clean licence.
If the vehicle is hired out for a fee to another organisation or passengers are charged for using it, an operator’s licence from the Department of Transport, Environment and the Regions is required. If you occasionally hire a minibus, check that the insurance provided in the hire fee is adequate for your needs.
Volunteers using their own vehicles for the group’s activities must inform their own insurers if the car is regularly used for anything more than simply attending meetings or events. In many cases, social domestic and pleasure insurance will cover voluntary activities but when the car itself becomes the main part of that activity, for example volunteer drivers taking patients to hospital appointments, then an extra premium may be payable.
Commercial Legal Protection
This type of insurance is becoming more important, as it covers the cost of employment tribunals and compensation awards. The maximum compensation payment, which can be awarded by an employment tribunal, has risen from £12,000 to £50,000 in the last couple of years, plus all the attendant legal costs of fighting a difficult case.
It is worth considering for larger organisations with a number of staff. It also covers your legal costs in the event of a dispute over property, tax or other cases where your organisation faces legal action by a third party.
Trustee Liability Insurance (TLI)
There has been a lot of debate about this complex subject over the last few years. For a long time, the Charity Commission was against allowing trustees of charities, as they saw it, to “insure themselves against their own incompetence.” They will now allow this, however, as otherwise it would be very difficult to get trustees to serve on boards of large charities if they were not covered by some form of insurance.
Your constitution must also state that the trustees have the power to take out this type of insurance. In any case, TLI does not cover trustees against breaches of their statutory responsibilities. Whether this is right for your organisation or whether you would be better off with Commercial Legal Protection is for you to decide and we would recommend you seek detailed advice before pursuing this further. By and large, TLI is more appropriate to larger charities, as the premiums can be expensive. (see end of leaflet for further information)
Insurance for events — there are packages available which cover events of all types
— if your group is planning a big fundraising fete or fair, you can buy a package which includes all the insurance you are likely to need for a one-off occasion. Not usually included but available at extra cost is so—called “pluvius” insurance (from the Latin word pluvius, meaning rain), where you can insure against an outdoor event being cancelled or cut short because of the weather — this is only usually worth the premium if you have laid out a large amount of money in advance, for example to hire marquees or book a band.
Outdoor events may involve certain activities like bouncy castles, go-karts or bungee jumping, where there are specific risks to members of the public taking part in them. It is probably better if you do not take on these kind of things yourself but get a professional company to do it because insurance is usually covered in their hire fee (but always check!)
Charity shops — again, there are specialised packages available, which are effectively cut-down versions of commercial retail policies, to reflect the smaller amounts of money usually involved and keep the premiums reasonable.
Professional Indemnity Insurance
If your group provides advice to clients, such as a welfare advice bureau, or advocacy service, you may need to consider professional indemnity insurance, to protect your workers from compensation claims if wrong advice is given, leading to the client or others losing money.
Depending on the level of advice being given and the potential financial consequences of bad advice, premiums are usually quite modest and may be well worth considering, especially if providing advice is your principal service. This can also be part of an “all-in” package offered by brokers to voluntary groups.
Fidelity insurance
This covers you against employees’ dishonesty and may be appropriate if the organisation deals in significant amounts of cash, such as a charity shop or a group which holds regular street fundraising events. Insurers may require a police check to be carried out on employees to disclose any previous convictions before agreeing terms.
As we said at the beginning of this leaflet, you can insure anything these days. The above attempts to give a brief definition of the main types of insurance currently available.
The best way to deal with the insurance needs of your organisation is to develop a good relationship with a broker who has experience of dealing with the voluntary sector.
Your local CVS or other voluntary groups in your area may be able to suggest someone. A package policy, which includes only those elements you need, is generally the most economical solution and you can ring up the broker to add things to it or ask questions as necessary.
Further information
The National Council for Voluntary Organisations (NCVO) publishes various factsheets on its website www.ncvo-vol.org.uk/askncvo
The Charity Commission publishes a factsheet on “Charities and Insurance,” downloadable free from them on www.charity-commission.gov.uk
Community Action, 4 Charnwood Street, Derby DE1 2GT
Tel: (01332) 342722 Fax (01332) 205069
Website www.communityactionderby.org.uk
Updated April 2010