Nonprofits often focus their resources on serving others, leaving little room to absorb the financial impact of an unexpected closure. When operations are interrupted, having a plan to manage ongoing expenses becomes essential. Business interruption insurance covers costs related to temporary closures, which can include lost income, relocation expenses, and more. While business interruptions are a main concern in for-profit businesses due to their retail component, nonprofits also benefit from insurance protection against the costs of unexpected closures.
In 2026, non-profit organizations can prepare for potential shutdowns and be better able to resume normal operations without unnecessary costs.
What is Business Interruption Insurance?
When a for-profit business closes unexpectedly due to a natural disaster or accident, business interruption insurance covers the costs of lost income, employee wages, relocation, and more.
Though some of these costs may not apply to all nonprofits, business interruption insurance can still provide significant protection in many ways.
Nonprofits rely on community support, donor confidence, and volunteer/employee commitment. An unexpected closure can make certain locations inaccessible, leading to a loss of donations, members, or staffers. Additionally, as with for-profit businesses, nonprofits typically have to pay fixed expenses during a closure, such as rent, taxes, utilities, and insurance, without being able to use those locations to support the business.
As non-profits expand their mission, the costs of interruptions increase as well. These can include opening an alternative site, rescheduling an event, moving personnel and equipment, and more. Business interruption insurance covers these costs and to help recover operations, confidence, and reputations.
Historical Examples of Non-Profit Business Interruptions in Hawaiʻi
Many businesses in Hawaiʻi have experienced unexpected closures in the past, which can help put modern closures into a more useful context:
COVID-19 Pandemic
During the COVID pandemic, many nonprofits discovered they lacked business interruption coverage. According to studies conducted by Science Direct, the demand for business interruption insurance among nonprofits in the US increased by as much as 6 times during the pandemic.
While the pandemic is over, many nonprofits still shoulder the burden of being underinsured for business interruptions. Another pandemic-scale event could cause a similar disruption, once again leading nonprofits to close locations, cancel events, or house personnel and guests in quarantine for extended periods. These costs, without the right insurance policies, can be detrimental to the survival of the organization.
Lāhainā Fires
Forecasters expect that Hawaiʻi is heading into a mild recession following an underperforming tourist season. However, for business owners in Lāhainā, recovering from the 2023 wildfires remains even more pressing than economic changes. Not until 2025, were many businesses able to reopen along Lāhainā’s Front Street, while many others, such as the Maui Toy Works store, have found new locations, many in West Maui.
The costs of losing a location and assets due to a fire can be recovered using property, general liability, and disaster insurance. However, the costs of relocating the business, hiring new staff, and recouping lost income and donations can only be covered by business interruption insurance, regardless of whether the business is for-profit or non-profit.
Other significant wildfire events in the last few years have included those in Upper Kula and Olinda. In total, wind-driven wildfires on Maui alone destroyed over 2,200 buildings in 2023, resulting in over $5.5 billion in damages. In Hawaiʻi, losing parts of these areas, as well as an entire historic district like Lāhainā, strongly suggests that interruption insurance is now a necessity, not a luxury.
How Interruption Insurance Protects NPOs in Times of Crisis
From horrific disasters like the wildfires in Lāhainā and other crises, business interruption insurance helps businesses recover and eventually reopen. Though on-site income is more of a concern for retailers, many aspects of unexpected closures apply to non-profits as well, including:
- Compensating personnel, such as marketing directors and event leaders
- Paying employee benefits, if applicable, including health insurance costs and payroll taxes
- Keeping up with fixed expenses such as utilities, property taxes, rent, and insurance
- Recovering income from lost donations, contracts, or events
- Repaying extra expenses due to interruptions, such as relocation costs
With both the natural and financial climate in Hawaiʻi, non-profit organizations may not be prepared for the costs of a significant business interruption. The recent wildfires in Maui serve as a warning that a disaster in Hawaiʻi can not affect only one or two businesses but may disrupt entire districts, workforces, and industries.
Tailored interruption insurance protects not only property but also personnel, donors, and reputations. If a nonprofit needs to close, reopen, or relocate, these policies can be invaluable to the financial security and future of its mission.
Experienced Local Insurance Teams Prepare Non-Profits for Disasters
At Atlas Insurance, our team has spent the last almost 100 years providing local insurance coverage for non-profit organizations and for-profit businesses in Hawaiʻi. Unlike national chains with offices in every state, our team intimately recognizes the challenges of operating nonprofits in Hawaiʻi. Many of our clients have been impacted by recent disasters and have relied on our custom insurance plans to relocate, reopen, and recover from unexpected events.
Contact our team today to learn how to add business interruption insurance to your policy coverage or as a runner on new policies to make sure your assets, personnel, and cultural reputation are protected.