Starting a Charity? The importance of insurance
When setting up a new charity it’s crucial to get appropriate protection.
No matter a charities size, it has a duty of care to protect its assets and resources.
When setting up a charity there are many things to consider, from naming it, to creating governing documentation. There are also different structures for charities to take and this will affect the insurance requirements.
Charity Structure Options
Your chosen structure will impact things like who and how the charity is run, and what the charity can do, so it is important that you select the most appropriate structure for your specific charity aims. These are the common 4 charity structures:
- Charitable Company - Registered with companies house, Trustees have limited liability
- Charitable Incorporated Organisation (CIO) - Incorporated structure, Trustees have limited liability
- Charitable Trust - Trustees can manage assets, unlimited liability
- Unincorporated Charitable Association - Volunteers run a charity for a common purpose, unlimited liability
Depending on the structure Trustees can have varying levels of liability should anything go wrong.
Trustee Indemnity Insurance – Protect Charity Trustees
Within some charity structures, particularly unincorporated ones, Trustees can be held personally liable if anything goes wrong. Taking out Trustee indemnity insurance can therefore provide a level of protection against the risks faced by board members.
Trustee indemnity insurance covers the trustee rather than the charity itself, and one of the benefits of this is it will cover legal fees which can often run into thousands of pounds.
Policies of this kind will protect trustees from the debts incurred if the charity closes and will also cover damages in civil courts. It will not, however, protect against fines in criminal courts.
As a specialist charity broker CARE can incorporate trustee indemnity insurance within a wider charity policy.
Incorporate if you can
Incorporated charities are registered with Companies House as well as the Charity Commission. In these cases it’s the organisation and not the individual trustees that are liable for the debts and other costs should the charity close.
The risks a charity and its Trustees face vary considerably, so rather than take an off-the-shelf policy you should explain to a specialist broker such as CARE the actual risks of the charity so you can ensure that Trustees are protected against everything they need to be.