Nonprofit Insurance Program

5 Reasons to Carry D&O Insurance

By Alexa Connelly
October 31, 2012

A great nonprofit organization is run much the same way as a great business, only with different goals in mind and a slightly different rule book guiding its actions. Like a well run business, for a nonprofit to maximize its capital holdings and its potential to do good works and fulfill its mission, it must be run by the best available talent using the best, most relevant and most creative strategies and tactics for achieving the organizations mission. To get the best talent, often the first step is offering the best directors & officers insurance policy.

Does it seem too coldly calculating for a nonprofit organization to weight obtaining directors & officers insurance as a major part of its operational plan? Here are five reasons why it’s not:

1 – Without solid D&O insurance in place, you will not attract the top innovators.

Great business people are great risk takers. If you want to lure a risk taker to a management role in your organization, you will be asking them to take a role where there may be some risks they themselves have to take. Providing them safeguards against legal or civil action should an initiative they originate fail or should some extenuating circumstance effect the whole nonprofit is crucial to getting them there in the first place.

2 – You need to hold onto your top talent once you have them.

Too often nonprofits will see talented, dynamic individuals come through their offices far too quickly, getting involved with a given group for a given initiative or to oversee the handling of a specific program, but not to sign up for the long run. Once you have great folks helping out at a managerial or executive level, you need to keep them there, so make sure they know they are perfectly safe and sound from any punitive action.

3 – D&O insurance protects the organization itself.

Most types of directors & officers insurance have clauses that protect the organization itself as an entity when it comes to various types of losses and against certain suits that may be filed by shareholders or outside groups. Don’t risk losing a whole organization because your protections weren’t in place!

4 – Protect against your own internal errors with D&O insurance.

There are times when any outfit makes mistakes, and if yours leads to the mismanagement of funds, ether through negligence or bad luck in investments, etc. you should be protected against further loss through punitive action, and this is your best way to do just that.

5 – And the last reason to get D&O insurance… you might need it to grow!

Very often, boards of directors will not consent to be convened without proper directors & officers insurance already in place, so if you want the all-important aegis of a trusted board to help manage your growing nonprofit you need to create the type of environment where they will be willing to put down roots.

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