Insurance — Traditional risk-financing tool used to transfer the financial hazard of risk. An insurance policy spells out what is or is not covered caused by all or specific perils (causes of damage or injury). Insurance is also a contract whereby an organization agrees to indemnify another and/or to pay a specified amount for covered losses in exchange for a premium. For many nonprofits, insurance provides the funds to pay for the nonprofit’s unexpected losses of people, property and income, while ultimately keeping the organization in operation.
