Directors and Officers Insurance
for Nonprofit Organizations
If you’re the owner of a startup nonprofit or social services organization, Directors and Officers Insurance (D&O) can save your company from financial ruin if it is ever sued for misusing company funds. The company itself usually purchases this type of insurance, even when it is for the protection of directors and officers. That’s because without this safety precaution in place, directors, officers, and board members could be held personally responsible in such a lawsuit, and having this insurance gives them incentive to perform their duties without fear of personal liability.
Read on to learn why D&O Insurance is becoming a staple for nonprofits and social services organizations and how the coverage can protect your talent in the event of a costly liability lawsuit.
Directors and Officers Insurance: Protecting Nonprofit and Social Services Organizations
Running a business is inherently risky, but when it comes to nonprofit organizations, the public has a way of being especially scrutinizing and unforgiving. That’s why many nonprofits turn to Directors & Officers coverage in order to allow their competent professionals to lead the organization without fear of personal financial loss. Directors and officers only have so much control over the success of the company. Their involvement in its day-to-day activities may be overshadowed by the myriad other responsibilities they have on their plate. However, if something goes awry, the blame falls squarely on the director, officer, or board member. This coverage steps in to shield those acting on behalf of your company from claims made against their actions (or inactions).
Typically, a D&O policy protects against claims that one of your directors or an officer…
- Misused the organization’s funds. Unfortunately, it only takes a single allegation that your director or officer made an improper investment for a lawsuit to commence. Even if your officer or director is not found liable, the cost of hiring a lawyer can be enough to constrain your finances.
- Mistreated an employee. If one of your organization’s employees claims a director is responsible for harassment, discrimination, or wrongful termination, the company’s D&O Insurance can cover the court costs that ensue.
- Failed to perform official duties. If a lawsuit is leveled against your business for your director or officer’s failure or perceived failure to fulfill the duties of their position, D&O Insurance would cover such a claim.
Ask your insureon agent if you have questions about D&O Insurance and whether it can be bundled with your Employment Practices Liability policy.
D&O Insurance Details
Nonprofit and Social Services Professionals: D & O Insurance Details
Regardless of whether your nonprofit or social services business is a startup or has years under its belt, if you plan to continue growing your company, you’ll eventually need a board of directors for new ideas, direction, and insight. However, without D&O Insurance, potential talent may fear their personal finances would be too vulnerable if they accepted the position. In the event that your nonprofit is sued and found liable, but lacks the adequate funds for its defense or settlements, your directors and officers will be responsible for the costs.
Having D&O coverage in place gives your directors and officers peace of mind that if they accept the position, their personal assets won’t be at risk. This helps your business attract top talent, which in turn helps your nonprofit raise money and continue to expand.
Here are some other details to keep in mind as you shop for Directors & Officers Insurance.
Criminal Acts Are NOT Covered by D&O Insurance.
While Directors & Officers Insurance can protect your directors from financial devastation in some cases, it will not protect them if they are guilty of intentional criminal activity, fraud, or illegal profits. Instead, this coverage only extends to “wrongful acts” as defined by the policy (e.g., certain acts, omissions, or misstatements while acting on behalf of the organization).
D&O Insurance is Purchased by the Company, Not Individuals.
In the United States, the company usually purchases D&O insurance, even though it is primarily for the benefit of directors and officers. However, the company benefits from carrying this insurance indirectly. With such a policy in place, a nonprofit organization can attract and retain top talent for its board of directors.
Custom Policies for NPOs
Custom Policies for Nonprofit and Social Services Organizations
The Nonprofit Specialist agents at insureon can help you find a policy that adequately protects your directors and officers. If you’re ready to begin coverage, simply complete insureon’s easy online application. Depending on your needs, you may receive a quote in minutes!