As the cost of living increases, so does the cost of goods and services, including insurance. As many nonprofit business owners in Hawaiʻi have learned over the last few years, business insurance remains the foundation for a strong risk management policy. Yet, in addition to the escalating prices, many nonprofit organizations are also struggling to find agencies to insure them. These issues raise their risk of paying out-of-pocket for damages related to injuries, property damage, mismanagement, and more.
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The article reviews how the rising cost of living has impacted insurance needs in Hawaiʻi and includes strategies for nonprofit organizations to respond to these changes.
What is the Cost of Living Index in Hawaiʻi?
Traditionally, Hawaiʻi has had the highest cost-of-living index in the United States. According to the 2025 figures, the index is 185, over 40 points higher than the second-highest state (California). For every measured category, including groceries & health, transportation & misc, and especially for housing & utilities, Hawaiʻi is the most expensive state in the nation.
These costs have contributed to a “nonrenewal crisis” for nonprofits in Hawaiʻi, meaning providers are no longer offering services to these businesses. According to a survey of brokers conducted by the Nonprofit Insurance Alliance, 70% say that commercial insurance carriers are “likely” or “very likely” to deny renewal to nonprofits. Only 1% responded that it was “not very likely.”
These statistics suggest that insurance agencies do not know the nonprofit industry well enough to adapt to rising costs. They may consider abandoning the industry as a whole to be their most profitable option. For the organizations that are renewed, this shift in support indicates rate increases, with 79% of brokers reporting that their nonprofit clients have experienced recent premium increases of at least 25%.
Key Takeaway
Changing economic conditions have impacted both the cost and availability of nonprofit insurance. Finding and maintaining policies that address specific coverage gaps has never been more difficult, or more important, for nonprofits in Hawaiʻi.
How Expenses Impact Nonprofit Insurance Costs
The cost of living index usually refers to how expensive it is for people to live in a state. However, the index also impacts a business’s insurance needs. For example, staffing costs, utility expenses, rent prices, and delivery costs often increase with higher cost-of-living, prompting organizations to reevaluate their liability limits based on new financial conditions.
For a clear-cut example, consider the relationship between property maintenance costs and commercial property insurance. As materials and labor become more expensive, the costs associated with repairing property damage increase as well. This makes it necessary for businesses to raise their liability limits and expand coverage to include other types of events to make sure they don’t pay out-of-pocket after a disaster.
This is not an isolated example, as each type of insurance policy carries a similar risk. For workers’ compensation policies, rising medical costs suggest a need for more expansive coverage in the event of a workplace accident. For commercial auto coverage, the rising costs of repairs and the material costs of property damage lead many nonprofits to expand their auto coverage. This can mean raising the liability limits or adding provisions for their volunteers’ vehicles.
Note: Nonprofits do not always retain paid employees, but volunteer workers introduce other risks that can be impacted by high cost-of-living, including the costs of legal defenses, medical treatments, third-party property damage, and more.
How to Update Insurance Policies to Reflect Rising Costs
Even minor accidents involving nonprofit organizations, which often use volunteer labor and serve vulnerable demographics, can result in significant liability claims. Top-performing nonprofits strategically update their insurance to reflect new risks and higher costs.
Reassess Replacement Values
Replacement value is the cost it would take to replace an asset, including a building, piece of equipment, sign, or any other asset, in the event of a disaster. The insurance company can only reimburse a business up to its maximum coverage amount. For most businesses, rising cost-of-living has quietly raised the real-world replacement cost of their assets, including labor and materials. Without a response in their policy’s liability limits, these cost increases translate to out-of-pocket expenses after an event.
Next Step: Don’t rely on outdated valuations. Hire an appraiser and speak with a local insurance broker to keep your property and asset value appraisals up-to-date with current cost-of-living expenses.
Revisit Liability Limits
As the cost-of-living grows, a nonprofit’s liability limit can become insufficient to cover the increasing actual costs of recovering from an incident. Higher cost-of-living means higher medical expenses, legal fees, and settlement costs. For organizations with paid employees, this means a higher liability limit may be needed to safely pay for workers’ compensation claims.
Note: Liability limits depend on local economic conditions, including material and labor costs. The cost-of-living, not only in Hawaiʻi as a whole but in each business’s region, is an important factor in determining the liability limit each business needs to stay protected.
Consider Policy Extensions
As a part of the changing economy, businesses rarely remain static. A nonprofit organization may scale its employee base up or down, take on new volunteers, expand its fleet of vehicles, introduce new remote or hybrid work arrangements, or amend its services in other ways. Any change can create a new insurance gap, where old policies no longer protect the organization’s current setup.
Key Takeaway
Many nonprofits have changed their service models in recent years. The right insurance protection adapts to these changes to prevent coverage gaps and high out-of-pocket recovery costs.
Local Insurance Brokers Help Nonprofits Plan Affordable Insurance Coverage
New economic pressures reshape a nonprofit’s risk profile, whether they respond to it with updated insurance protection or not. At Atlas Insurance, our team builds on nearly 100 years of experience in helping nonprofit and for-profit businesses in Hawaiʻi plan affordable insurance coverage. This includes setting up the right policies for your organization as well as adjusting them over the long term to remain protected with sustainable coverage options that adapt to rising costs and new risks.
Contact our team today to learn how cost-of-living increases may be impacting your nonprofit’s risk profile and how an insurance change may help.