🛑 STOP Being Stupid: Week 10 of 40
The Insurance Gamble
Why “It Won’t Happen To Us” Isn’t A Strategy
Right. Let’s talk about insurance, because nobody wants to. It’s a grudge purchase, hundreds or thousands of pounds for a piece of paper that only proves its worth on the one day you hoped you’d never need it. When money’s tight, it’s usually the first line on the budget that gets slashed, ignored, or downgraded to whatever the comparison site throws up cheapest.
That’s the stupidity of the gambler. Shopping around for the best premium is smart. Shopping for a cheaper policy by quietly leaving critical liabilities uncovered is reckless. Running a charity without adequate insurance means betting the organisation’s existence, and potentially your own personal assets, on the hope that it won’t happen to you. But it does happen. A volunteer trips over a cable at the coffee morning. Equipment you lent out injures a child. An ex-employee takes you to a tribunal. Without the right cover, none of these are headaches. They’re extinction events.
The Two Ways You Get This Wrong
There are two ways charities end up under-insured: missing the legal minimums, and missing the sensible ones.
The Criminal Fail: Employers’ Liability. If you employ anyone, even one part-time cleaner or admin assistant, UK law requires you to hold Employers’ Liability insurance of at least £5 million. Miss it, and the Health and Safety Executive can fine you £2,500 for every single day you’re uninsured, whether or not anything’s actually gone wrong yet. And here’s the trap most charities fall into: EL insurance is technically mandatory only for employees, but volunteers carry exactly the same liability risk. Most competent charity insurance policies extend EL cover, or an equivalent personal accident cover, to volunteers as standard practice. If your insurer hasn’t explicitly confirmed that a volunteer injured while working for you is covered, you don’t actually know, and guessing here is negligence, not optimism.
The Bankruptcy Fail: Public Liability and Trustee Indemnity. This is where “we’re a small, nice charity” stops being any kind of defence. Public liability covers claims from third parties injured by your work, a coach who fails to secure a goalpost properly and a child gets hurt, someone who suffers food poisoning after a free meal from your outreach team. Without PL cover (usually £2m to £5m), the charity pays. If the charity has no money, the claim doesn’t just disappear, it looks for somewhere else to land.
That somewhere else is trustee indemnity. If a charity is sued for a wrongful act, negligence, breach of trust, an employment error, and can’t pay, trustees can be held personally liable. That means houses, cars, savings. Asking someone to serve as a trustee without indemnity insurance in place is asking them to put their family’s financial future on the line for free, and most people saying yes to a trustee role have no idea that’s the deal.
The Bouncy Castle Problem
This one’s worth knowing because it’s not a one-off horror story, it’s a genuinely common, well-documented gap that charity insurance brokers and personal injury solicitors deal with regularly. A small community group hires an inflatable for the summer fete. It’s the most normal thing in the world. What most committees don’t realise is that standard public liability policies very often exclude bouncy castles and similar inflatables unless specific conditions are met, proper anchoring, a named adult supervisor over 18, compliance with the manufacturer’s safety guidance. Charity insurance specialists flag this constantly precisely because it catches people out so often: the assumption that “we have public liability insurance” quietly doesn’t mean “we’re covered for this.”
When it goes wrong and the exclusion applies, the charity is left facing a personal injury claim with no cover behind it. If the charity has no assets to meet it, the claim can move to the trustees personally, exactly the same trustee indemnity gap described above. Bouncy castle injuries genuinely happen every year across the UK in real, reportable numbers, so this isn’t a scare story, it’s a standard exclusion that’s worth checking today rather than after the event.
The Art of NOT Being Stupid: The Annual Check
Insurance isn’t a set-and-forget task. It needs reviewing every year, properly.
1. Shop smart, not blind. Getting multiple quotes is good governance. But compare like for like. A cheaper policy that excludes your core activity, meals, counselling, inflatables, sports coaching, isn’t a saving. It’s a gap with a lower price tag.
2. Check the exclusions. Read the small print. Does the policy actually cover what you do, or was it written for “office administration” while you run a wet event, a sports day, or an outreach service? If you run a cider-making session or anything similarly hands-on, that needs to be named on the policy, not assumed into it.
3. Declare everything. New project, new equipment, a changed way of operating, tell your broker. Undisclosed changes can void a policy, and the moment you find that out is invariably the worst possible moment.
4. Don’t forget cyber. Data breaches sit alongside the traditional risks now, and standard public liability often excludes them entirely. If you hold any personal data, and almost every charity does, you need specific cyber liability cover.
5. Buy trustee indemnity insurance. If your governing document allows it, and most do, buy it. It’s relatively cheap, and it’s the one thing standing between a trustee’s good intentions and a genuinely ruinous year.
Final Thought
Insurance will never feel like money well spent, right up until the one week it’s the only thing standing between your charity and closure, or between a trustee and their own front door. Check your certificate today. Is it in date? Does it actually cover what you do, not what you did three years ago when you took the policy out?
Put the kettle on. Pull out the policy document. Read the exclusions properly, not just the headline cover.
Free Resources Worth Five Minutes
HSE – Employers’ Liability (Compulsory Insurance) Act 1969: A Brief Guide for Employers Official guidance on who legally needs Employers’ Liability insurance, the £5 million minimum, and the £2,500-a-day fine for going without it.
NCVO – Insurance A free, practical introduction to the types of charity insurance available and how insurance fits into wider risk management, written for the voluntary sector.
Charity Commission – Charities and Risk Management (CC26) The Commission’s core guidance on identifying and managing risk, including the governance, financial and reputational categories every trustee board should be thinking about.
They cost nothing. An uninsured claim costs whatever’s left when the charity’s money runs out, and then whatever’s left after that.