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Insurance

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Fidelity bond insurance

Insures against employees stealing from the charity. If you have a significant bank balance or handle large amounts of cash then this policy is worth considering. There will be conditions relating to taking up references on staff and volunteers, changes may also need to be made to your financial procedures to make fraud more difficult.

There will be an emphasis on two people being involved in financial transactions so that activities like book-keeping and banking can be kept separate.

Buildings insurance

If a charity owns its buildings, it will need to arrange insurance to cover damage to its buildings from fire, storm or subsidence. If the charity leases the building then it is normal for the landlord to insure it. However, the charity will still want to insure the contents.

If insuring the building be sure that the sum insured is enough to cover rebuilding and fees like architects and surveyors.

If you are leasing the building and the landlord is responsible for the insurance check that the policy covers a reasonable period for loss of rent (for example 2 years) so you do not have to pay rent while the building cannot be occupied. Also check that the insurance is divided between the landlord and the tenant in accordance with their interests. So if the tenant carried out improvements and these are destroyed then tenant is reimbursed for the cost of the improvements out of the insurance. If the landlord’s policy does not cover this consider insuring the improvements separately.

Contents insurance

This covers loss or damage to contents including office equipment, computers, stock and employees’ belongings. The risks covered would include fire, explosion, flood and theft. Make sure that you meet any security conditions required by the insurer such as doors of a certain thickness, bars on ground floor windows or locks to a specific standard. If you fail to meet the insurer’s requirements, the insurer may refuse to pay if you make a claim.

You should consider whether to have contents insurance on a historic cost basis, in which case the insurance company would pay the original value of the lost items, or whether to insure the replacement value, in which case the insurance company will pay an amount which takes account of inflation.

Always keep receipts for insured items, and make sure that your accounts reflect what they actually cost before a possible adjustment for depreciation.

Computers

Covers loss of data and breakdown. Normally requires that a maintenance contract is in place and duplicate records are kept at a separate location or in a fire resistant cabinet. Typically this would be an optional extension to an Office Contents or All Risks policy.

All risks

If some items like portable computers are removed from the office then you may want to insure them on an all risks basis. This will mean they are insured anywhere in the UK provided basic precautions are taken, like not leaving them unattended in unlocked rooms or cars.

If employees or volunteers take equipment home, you should check whether it is covered on their home insurance policy (if they have one) or if you need to inform the insurance company and get the policy extended to All Risks, or extended to include the charity’s equipment at the employees’ home address.

Money

Does your charity hold significant amounts of cash? Is the charity’s money sometimes kept in a trustee’s house?

Increased cost of working or business interruption

If there is a fire or other disaster your charity may need to rent temporary premises while the damaged premises are being repaired. The rent could be a lot higher than what the charity is paying today. There would be other costs like installing telephones, printing temporary letterheads, moving costs and possibly loss of income due to your stopping activities for a time. This policy will cover these types of cost and is sometime included as an optional extension to buildings or contents insurance. It tends to be relatively cheap, so is worth considering.

Travel insurance

For staff and volunteers travelling on the charity’s business. Typically covers personnel accident, medical expenses, cancellation/curtailment, baggage and money, legal expenses, personal liability and personnel replacement.

Engineering insurance

Typically covers damage and breakdown to boilers, lifts and similar large pieces of equipment.

Trustee liability insurance

Where trustees act negligently, or in breach of their duties as trustees, it is possible for them to incur personal liability for wrongful action. Spending funds on objectives outside those specified in the constitution or specified by a funder could be deemed to be a wrongful action or breech of trust. If the trustees have acted with due diligence in a reasonably well managed charity then the risk of being held liable by a court is low. However it is not always possible to attend every trustee meeting and illness could keep a trustee away from the charity’s business for many months. This type of insurance can give peace of mind, particularly to trustees who own their own houses and are bringing up children, who would be affected by a significant payment of damages from the family’s funds. The cover would include liabilities arising from negligence caused through well intentioned actions that might arise from poor judgement, inexperience, honest mistake or inefficient administration. It will not cover actions that trustees knew to be wrong or were reckless.

The charity must have the power included in its constitution to take out this type of insurance so you may need to put a resolution before an AGM to change the constitution.

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Last updated: Mon, Mar 31 2008 - 03:16:51 PM

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