You can skip the insurance at checkout
Why extended warranties, laptop cover, and flight insurance aren't worth your donors' money
Let’s say you work in operations at a non-profit.
You keep getting offered insurance — for laptops, flights, events, equipment. Each time, you’re aware that declining could cost the organisation thousands of dollars if something goes wrong. So it feels uncomfortable to say no.
I think you should almost always say no. I hope this post helps you feel comfortable with that decision.
How to think about insurance
Insurance sells you protection against risks at a markup. That markup is your donors’ money.
The markup covers insurers’ admin costs, profit margins, moral hazard, and adverse selection.
On top of that, insurance costs staff time — buying it, tracking it, and chasing claims.
What this means for add-on insurance
For laptops, flights, events, and equipment, the case is straightforward. The alternative to insurance is self-insuring — just paying out of pocket when things go wrong. Over time, this costs less than the premiums .
(An exception is when adverse selection works in your favour: for example, buying a flexible airfare for another 10% when you think there’s a 50% chance that you’ll change the flight.)
When other factors change the insurance calculus
I think you can decide on add-on insurance using the reasoning above. But that doesn’t apply for all decisions about insurance.
Protecting individuals from catastrophic risk. For example, we buy directors’ insurance and medical travel insurance for staff. These are worth the premium because the downside for the individual is severe. (Note: medical travel insurance and trip-disruption insurance are different products. The first protects an individual from a medical emergency abroad. The second covers missed flights and lost luggage — skip that one.)
Catastrophic financial risks to the organisation. Insure against risks that could threaten the org’s existence. Working out what counts as catastrophic for your specific organisation is genuinely complicated and context-dependent, so I’m going to skip trying to give general advice on this one.
Legal or contractual requirements. If the law says you need insurance, you get it. If your landlord requires office insurance to rent to you, you get it.
Insurance bundled with other benefits. Sometimes insurance comes packaged with useful services — for example, AppleCare bundles insurance with better repair service. These might sometimes be worthwhile — but I can’t recall any cases where it’s seemed worth it for us.