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Nonprofit Board Member Insurance: Don't lift a finger without it.

2/15/2023

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If you're asked to serve as a member of the Board of Directors for a nonprofit organization, make sure you will be covered by Board Member D&O Insurance (Directors and Officer's Insurance). Most companies and nonprofits will cover the cost of this insurance for all board members, but if they refuse you have the option of purchasing a policy yourself. You also may want to think twice about joining a board that will not cover your exposure to financial risk. 

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What is Nonprofit Board Member Insurance?

Nonprofit board member insurance (D&O insurance) is an important protection for those who volunteer their time and expertise to serve on the board of a nonprofit organization. Think of it as a safety net that protects you as a board member. It covers board members from the risks they may face while serving on the board, such as personal liability for decisions made in the course of their duties, legal fees, and damages they may be held responsible for. D&O Insurance is a type of liability insurance that covers the legal defense costs and any settlements or judgments that may result from legal action taken against you for alleged wrongful acts or decisions made in your capacity as a board member.


Why Do Nonprofit Board Members Need D&O Insurance?

If you are a nonprofit executive leader, you should spend the money to offer a policy to your Board of Directors. Having this insurance can demonstrates a commitment to responsible governance and can attract high-quality board members who value the protection that insurance offers.

Nonprofit board member insurance is especially important in today’s world, where nonprofit organizations often take on complex and challenging projects, and face a variety of legal and financial risks. Board members are ultimately responsible for the decisions made by the nonprofit organization, and can be held personally liable for any mistakes or oversights. Even if the board member is not directly at fault, they may still be held liable for any losses or damages suffered by the organization.

It's not a matter of if a lawsuit will happen, but rather when. As a nonprofit board member, you can be held personally responsible for any decisions or actions that result in financial loss or harm to the organization or its stakeholders. Even if the allegations against you are false or baseless, the legal defense process can be lengthy and expensive. D&O Insurance can give you peace of mind so you can and focus on your role as a board member without worrying about personal financial repercussions. Nonprofit board member insurance provides financial protection for board members in the event of any legal action taken against them. It can cover legal fees associated with defending the board member against any allegations, as well as any damages that may be awarded. In some cases, this insurance may even cover the cost of settling out of court.


When is D&O Insurance Used?

D&O Insurance can be used in a variety of scenarios. Here are some examples:
  • Allegations of mismanagement or financial irregularities: If someone claims that the nonprofit was mismanaged or that there were financial irregularities, D&O Insurance will provide the necessary legal defense and financial protection for the board members.
  • Claims of breach of fiduciary duty: As a board member, you have a responsibility to act in the best interests of the organization and its stakeholders. If someone claims that you breached your fiduciary duty, D&O Insurance will provide the necessary legal defense and financial protection.
  • Employment as an officer, director, employee, or volunteer in the corporation: Even if you're simply volunteering your time and expertise, you may still be personally liable for actions taken in the course of your volunteer service.
  • Employment practices or discrimination claims: If someone claims that the organization engaged in discriminatory employment practices, D&O Insurance will provide the necessary legal defense and financial protection for the board members.
  • Allegations of defamation or libel: If someone claims that you or the organization made false or damaging statements about them, D&O Insurance will provide the necessary legal defense and financial protection.
 
D&O Insurance is an essential component of any nonprofit organization's risk management strategy. As a board member, having this insurance in place can provide peace of mind and protect you from personal financial loss in the event of a lawsuit. It's important to ensure that the nonprofit you are involved with has this coverage in place to protect both the organization and its board members.

Having the right insurance in place can help protect board members from any financial losses they may face due to their involvement in a nonprofit organization. It can also help to reduce the risk of financial ruin for the organization itself, as well as for its board members.
If you need help finding a reputable, trustworthy risk management advisor for your nonprofit organization, contact us and we can help point you in the right direction.
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  • For Businesses
    • Philanthropy Management
    • Corporate Social Investment
    • C-Suite Philanthropy
    • Social Impact Measurement
    • Cause Marketing
    • Public Relations
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    • Fundraising Help
    • Marketing Communications
    • 501c3 Formation
    • How to Start a Nonprofit
  • Insights
    • Blog
    • Case Studies
    • Resources
    • Researching Nonprofits
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