Has Your Nonprofit’s Insurance Kept Up with AI? Navigating the Risks and Rewards

Artificial intelligence is showing up in all kinds of ways across the nonprofit world. Maybe your organization is using it to handle donor outreach, automate admin tasks, or analyze impact data. It’s helping you move faster, make better decisions, and focus more on the mission.

But with all these new tools and efficiencies come new questions—especially when it comes to risk. Do you have a business insurance agency to help you? Has your insurance coverage kept up with how you’re actually using technology today? 

The Good: How AI Is Helping Nonprofits

Nonprofits are stretched thin. AI lightens the load by:

• Automating everyday tasks – Whether it’s scheduling volunteers or processing donor receipts, less time on admin means more time for what matters.
  
  
• Spotting patterns in your data – Want to know who’s likely to give again this year? Or which programs are working best? Smart tools help surface those insights.
  
  
• Improving accessibility – Things like auto-translated content or 24/7 chat makes your work more reachable to the people you serve.
  
  

These are all good things. But like anything new, you’ve got to look at the full picture.

The Not-So-Good: New Tech Brings New Risks

When you start relying on software to make decisions or to handle sensitive data, you’re taking on new kinds of exposure:

• Data privacy issues – Many AI tools collect and process information about donors, clients, and community members. If that data leaks or is mishandled, you’re responsible.
  
  
• Unintended discrimination – If you use a tool to screen applications or prioritize services, how confident are you that it treats everyone fairly?
  
  
• Security threats – AI can detect and be used in cyberattacks. A clever phishing attempt or spoofed message might be enough to trigger a data breach.
  
  

When You Change How You Work, Your Insurance Should Change Too

Let’s say your nonprofit recently added an AI-driven chatbot to help answer questions from the public. Or maybe you’re using a tool that ranks which grant applicants are most likely to succeed. These decisions feel operational, not legal, but they can absolutely create legal risk.

Every time you shift how you deliver services, you change the landscape of your liability. A tool that automates outreach might store more personal data than you realized. A donor-targeting algorithm could overlook certain communities and unintentionally introduce bias.

The point is: your insurance policy should reflect how your organization actually functions today. If you haven’t reviewed your coverage in a year—or longer—it might still be based on an older version of your operations, before AI tools entered the mix.

Third-Party Liability: The Risk You Didn’t See Coming

Here’s where it gets tricky. Let’s say your AI system screens client applications, and someone feels they were unfairly denied. Or your automated chatbot gives out information that ends up being incorrect and someone gets hurt because of it.

Even if you didn’t mean for harm to happen, your organization could still be held liable by someone outside your nonprofit. That’s called third-party liability, and it’s something traditional nonprofit policies don’t always account for when tech is involved.

That’s why an annual audit of your insurance coverage is a must. You need to know where your blind spots are, and make sure your policy accounts for both what you do and how you do it.

How to Stay Covered (and Sane)

• Talk to your broker – Tell them how you’re using tech, what tools you’ve added, and what kind of data you're working with.
  
  
• Ask direct questions – Does your general liability or cyber coverage include errors made by software you use? What if it’s third-party software?
  
  
• Get ahead of the issue – Don’t wait for a breach or complaint to find out what’s covered and what’s not.
  
  

Bottom Line: Don’t Let Tech Outpace Your Protection

AI is able to make your nonprofit more effective, but only if you’re also managing the risks that come with it. Taking time to review your insurance coverage each year helps make sure you’re chasing innovation and doing it responsibly.

If your organization has changed the way it works, your insurance should reflect that. Technology is moving fast. Your coverage should too. Trust in a local business insurance company today and keep your nonprofit doing the work that needs to be done.