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What Are The Benefits of D&O Insurance For Non-Profits?

By June 28, 2018February 23rd, 2021Non-Profits

Non-Profit Organization provide essential social services that benefit the community and their members. These organization cannot survive without a board of directors to make major decisions on behalf of the organization.

However, even when acting in good faith, directors and officers of nonprofits expose themselves to risks with each decision they make on behalf of their organization. In the event of a claim, nonprofit leaders could suffer damage to their reputation and personal finances simply based on their decisions.  In order to protect themselves, directors and officers (D&O) insurance for nonprofit leaders is crucial and can provide the following benefits:

Legal Cost Reimbursement

In the event of a claim, D&O policies can provide defense cost coverage for a variety of claims. Specifically, D&O insurance can provide legal cost reimbursement to nonprofit leaders following allegations of wrongful acts, financial mismanagement, errors in judgment and negligence.  Because D&O lawsuits can occur without warning and easily reach six figures, it’s critical that nonprofit leaders arm themselves with the right policy.

Peace of Mind

D&O claims can come from a variety of sources, including employees, recipients of services, government bodies and donors. D&O insurance ensures that nonprofit leaders are protected regardless of where claims originate, providing timely and effective coverage.

Entity Coverage

A number of D&O policies go beyond protecting directors and officers and extend to the organization itself. This is particularly advantageous, as this type of coverage kicks in even if a director or officer isn’t directly involved in a claim.

Flexible Limits

Most insurance companies offer a variety of coverage limits for D&O policies. In some cases, these limits can go as high as $10,000,000 depending on the size of the nonprofit.

Protection beyond indemnification

While the bylaws of many nonprofits require the company to indemnify and defend directors and officers who are sued, leaders shouldn’t expect this protection to be sufficient. That’s because a nonprofit’s duty to indemnify is only as good as its ability to pay.  This means that, if the nonprofit is insolvent or not financially stable enough to cover the legal fees, directors and officers would have to cover these fees themselves.

Want to learn more about D&O Insurance for Non-Profits?

Though you may not realize it, board members can be held liable for the actions of the nonprofit organizations they serve. In order for a nonprofit to protect its company missions and its board member’s personal assets, D&O insurance is crucial.  Contact us below to find out more.

Scott Harrigan

About Scott Harrigan

Scott started his career in insurance in 1988 and joined Rue Insurance in 2004 as a Marketing Specialist focusing on creating effective risk financing and risk transfer programs for companies and non-profit organizations. In addition to this he is a member of the Rue Insurance educational team that provides ongoing professional development in critical insurance concepts and programs to Rue employees. About Scott | More Posts by Scott