Charity Insurance Explained: What You Need and What You Do Not

Charity insurance is a quietly expensive line on the budget that most trustees approve on the recommendation of last year's broker without much challenge. The schedule arrives, the premium is paid, and the policies stay in a drawer until something happens or somebody asks. The pattern is understandable; insurance is technical and dull. It is also the line where a small charity can quietly carry tens of thousands of pounds of overinsurance, or worse, a critical gap.

A trustee does not need to be an insurance expert to challenge the schedule properly. They need to understand which policies are essential for their charity's activity profile, which are optional, and which questions to ask at renewal. The article below sets out the working knowledge that lets a trustee ask those questions confidently.

The policies most UK charities genuinely need

Public liability

Covers injury or property damage caused to a third party by your activity. Essential for almost every charity that has any contact with the public, runs events, or operates premises. Limits typically start at £5 million; charities running larger events or higher-risk activities should consider £10 million or more.

Employer’s liability

Legally required if you employ anyone, including most volunteer arrangements that involve direction and supervision similar to employment. Covers claims from employees who suffer injury or illness related to their work. Minimum statutory limit is £5 million; most policies provide £10 million.

Trustee indemnity

Covers trustees for personal liability arising from honest mistakes in their governance role. Not a substitute for good governance, but essential for attracting and retaining trustees, who otherwise face personal financial exposure. Permission to purchase from charity funds is generally available; check the governing document.

Professional indemnity

Required if your charity provides advice or services where someone could suffer loss from acting on them (welfare advice, advocacy, training, professional services). Often misjudged as optional when it is in fact central.

Buildings and contents

Required if you own or are responsible for premises and the contents within. The valuation should be revisited annually; underinsurance against rebuild cost is a frequent finding in claims investigations.

Money and fidelity

Covers cash handling losses and employee dishonesty. Important for any charity handling cash, including community fundraising. The fidelity element matters more than trustees usually realise; the risk is small but consequential.

Cyber

Increasingly essential. Covers incident response costs, ransom payments where lawful, business interruption and third-party claims. Insurers increasingly require demonstrable controls before quoting; the underwriting questions are themselves a useful security audit.

Policies that may not be needed (depending on activity)

Group personal accident

Useful for charities with volunteers in higher-risk activities (outdoor work, expeditions, sports). Often unnecessary for office-based charities, where the statutory employer's liability and personal arrangements of volunteers suffice.

Engineering inspection

Required by law for certain equipment (boilers, lifts, pressure systems). Not relevant if you do not have the equipment. Worth confirming explicitly to avoid paying for inspection cover that does not apply.

Trade credit

Rarely relevant for charities. Worth checking your schedule for legacy entries that no longer reflect your activity.

The questions trustees should ask at every renewal

1. Has our activity profile changed in ways that change our risk?
1. Have any policies been added or removed, and why?
1. Are the sums insured appropriate, especially for buildings rebuild cost and business interruption?
1. What are the largest exclusions on each policy, and are we comfortable with them?
1. What is the deductible or excess on each policy, and how does it interact with our reserves?
1. Have any claims been made in the period, and what did we learn from them?
1. When did we last formally retender, and is now the right time?

A trustee who asks those seven questions every year understands the schedule properly. A trustee who signs the renewal without asking them does not.

Working with the broker

Disclose fully

Material non-disclosure (failing to mention an activity, a known risk, a past claim) is the single most common reason claims are reduced or rejected. Err on the side of telling the broker too much rather than too little.

Review the activity description annually

The activity description in the policy is the basis on which underwriting was done. If your activities have evolved (new programmes, new locations, new partnerships) and the description has not, the cover may not respond as expected.

Treat the broker as a partner, not a vendor

A good broker is a continuing risk advisor, not a yearly transaction. The trustees who get the most value from their broker invite them to a governance meeting once a year to discuss the risk profile, not just the schedule.

Common pitfalls in charity insurance

• Underinsurance of buildings against rebuild cost (often a 20% to 40% gap by the time it surfaces in a claim).
• No business interruption cover, leaving the charity exposed if premises become unusable.
• Cyber policies with conditions the charity does not actually meet, voiding cover in practice.
• Outdated activity descriptions that no longer reflect current programmes.
• Reliance on a single quote at renewal rather than a periodic competitive process.
• Trustee indemnity policies with hidden exclusions that surprise trustees on a claim.

Insurance pays back at the worst moments. The trustees who treat the schedule as worth understanding rarely discover at the worst moment that the cover was not what they thought.

The annual review process

1. Two months before renewal: trustees receive a paper from the chief executive summarising the activity changes, any claims, and any risk-profile changes for the year.
1. One month before: broker attends a meeting with the finance subcommittee to review the schedule against the paper.
1. Two weeks before: revised schedule and recommendations to full board. Trustees approve renewal with explicit acknowledgement of the cover, the limits and the exclusions.

Three meetings, properly prepared, replace the unmemorable annual approval that most boards default to. The trustees end the process understanding what they have bought and why, which is the single best protection against an unpleasant surprise at the moment of a claim.

Further reading

Restricted vs Unrestricted Funds, Explained Properly | A Hybrid Working Policy for Charities That Actually Works | Cyber Security Basics Every Charity Should Have in Place