The funding environment for community organisations in 2026 is genuinely difficult. Government contract reviews have resulted in funding reductions or non-renewals for some providers. Cost-of-living pressures have reduced discretionary charitable giving in many communities. Grant competition has intensified as more organisations compete for a pool that hasn't grown commensurately with sector need. Boards and executives across the sector are making hard decisions about where to find savings.
Insurance appears on those spreadsheets as a discretionary cost. It shouldn't be cut — and here is why.
The Financial Logic of Insurance Under Pressure
When an organisation's financial reserves are strong, an uninsured loss — a significant public liability claim, a trustee liability action, a cyber breach — is painful but survivable. The organisation can draw on reserves, renegotiate cash flow, or find short-term funding to manage the cost.
When an organisation is already financially constrained — running lean reserves, managing cash flow carefully, dependent on specific grant tranches — the same uninsured loss can be existential. There is no buffer. A $50,000 uninsured legal defence cost or a $100,000 uninsured cyber breach response lands on an organisation that cannot absorb it.
This is precisely backwards from the intuition that drives insurance cuts during financial pressure. The less financial resilience your organisation has, the more important insurance becomes — not less. Insurance exists to replace the financial buffer your reserves no longer provide.
Three Consequences of Cutting Insurance During Funding Pressure
The pattern of consequences when charities reduce or eliminate cover follows a predictable sequence.
The first consequence is claims left unfunded. A public liability claim from a community event, a personal grievance from a departing staff member, or a property loss from a fire or flood arrives without warning. An uninsured organisation must fund the response from operating budgets or reserves — resources that were already under pressure before the claim arrived. What was a manageable cost with insurance becomes a crisis without it.
The second consequence is trustees personally exposed. When an organisation cannot fund a governance-related legal claim — a Charities Services investigation, a dispute with a major funder, or an employment action directed at the board — the individuals serving as trustees face the prospect of personal financial exposure. Trustee Liability (D&O) insurance is not a luxury; it is the protection that allows people to volunteer their governance skills without risking their personal assets. Remove it, and you risk losing the trustees you most need in difficult times.
The third consequence is volunteers unprotected. Volunteer Personal Accident insurance — often one of the most affordable covers in the package — provides the supplement to ACC that makes a real financial difference when a skilled volunteer is injured and unable to work. Charities that cut this cover in the name of budget savings may find that their most committed volunteers quietly reduce their involvement when they understand the financial risk they are carrying.
Right-Sizing Is Not the Same as Removing
When budget pressure is real, the right response to insurance costs is not elimination — it is right-sizing. There is a meaningful difference between removing cover you genuinely need and right-sizing cover that has grown beyond your current risk profile.
Right-sizing might look like reviewing whether your public liability limit needs to be $10M or whether $5M is adequate for your current activity level. Or confirming that a property item you no longer own has been removed from your policy. Or reassessing whether a professional indemnity limit of $2M is appropriate given the scale of your advice-giving activities.
What right-sizing should never look like: removing Trustee Liability cover because it seems unlikely anyone will sue the board; dropping Volunteer Personal Accident insurance because ACC seems to cover everything; or reducing property cover below replacement cost because the premium is more affordable at a lower sum insured.
Have the Conversation with Your Broker
A specialist charity insurance broker, properly briefed on your organisation's financial position and risk profile, can help you identify where genuine savings exist without creating dangerous gaps. They have visibility across the sector — they know what comparable organisations carry, what underwriters are offering, and where there is room to negotiate without sacrificing protection.
If you have not had that conversation this year, now is the time. Come to the meeting with your current policy schedule, your annual accounts, and an honest assessment of your current activities and assets. Leave with a cover programme that is appropriately sized for your organisation's actual position — not the position it was in three years ago, and not the stripped-back minimum that looks affordable until something goes wrong.
To discuss right-sizing your organisation's cover, get a quote from one of our specialist charity insurance brokers.
About the Author
Sarah Connell — the CharityInsurance crew are your friendly insurance geeks on a mission to make specialist cover simple and accessible for every NZ charity, sports club, and community organisation.