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What type of insurance coverage do you need?

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Adequate funding is essential for a nonprofit organization. Partnering with a corporation can be a lucrative option to guarantee revenue. However, risk in these relationships tends to fall disproportionately on the nonprofit partners either because they are putting their most substantial asset at risk (for example, their name) or because their hope for financial support can cloud their exercise of due diligence. These kinds of partnered campaigns (cause-related marketing) are subject to registration, contract and disclosure requirements in many states and often have potential federal tax implications on the beneficiary nonprofit. 

First and most importantly, thoroughly evaluate a potential partner's reputation. Look for past records of honesty in the press and promises to previous partners and the public.

Also, revisit the following considerations before signing any contracts:

Your name is your most valuable asset, and it should NOT be underpriced or undervalued in any way. 

 

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Cause-related marketing (partnerships between nonprofits and for-profits) is a business deal and differs from philanthropy.

 

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Ensure that payments and use of your name are on your terms and that you have control of all uses of your name. All promises should be in writing.

 

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Federal and state regulations may apply to cause-related marketing transactions. Ensure that you are in compliance with all applicable laws. State laws may pose a particular challenge, as solicitation campaigns must abide by the laws in every state where funds will be raised. 

 

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Check every deal you make with an accountant and an attorney. 

 

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As the nonprofit, you bear most of the risk. For this reason, you should carefully consider the financial cost of the relationship. 

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Establish an organization-wide policy for cause-related marketing ventures, and build on it as your organization gains experience. 

 

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How To Transfer Risk:

Beyond taking these preventative steps, it is important to ensure that you are properly covered should you become involved in litigation for breach of duty. A Directors' and Officers' insurance policy serves this purpose, and it is fundamental for all nonprofit organizations. 

 

Always protect your organization, its name, and its assets when considering future business endeavors

Contact Carriage Trade Insurance to learn more about our Nonprofit Insurance and Directors & Officers Insurance options.

 

 

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