Nonprofit Insurance Program

5 Reasons You Should Purchase D&O Insurance

By Alexa Connelly
April 04, 2013

Often ignored is the fact that organizations officers and directors are at a risk of many things and should thus be insured just like any other asset. They can be a cause for a nonprofit organization going bankrupt as they try to cover bills for compensation and law suits.  This is specially so if their officers were caught in the line of duty.

There are reasons why a nonprofit organization should obtain a directors’ and officers’ liability insurance. They include:

1.       The possibilities of a nonprofit board being sued by donors are not strange. The public and government can also join this group in condemning them. This could be as a result of the decisions they pass that have a negative effect to the environment and cause harm to the dwellers. When the institution is being taken to the law courts, the people with full responsibility are the officers and directors, it is thus essential to obtain a cover for them during such emerging cases.

2.       It is stated in the bylaws of the nonprofit organization that the board of officers and directors has an indemnity but does not guarantee availability of resources always. It is thus advantageous to insure them so that the institute’s financial solvency remains by backing up directors finances.

3.       It is not as expensive as it looks. The expense of getting directors and officer’s liability insurance is most of the time what discourages organizations from even considering it. Averagely you pay about ten thousand dollars for the policy but receive retention of a hundred. Factoring this in, I would say that any nonprofit organization should not miss on the offer.

4.       The other reason why you should get director and officers’ liability insurance is because none of the concerns of these people is covered in the general liability policies. Surely you will concur that your workers, mainly volunteers in this case, are more important than the building and machinery.

5.       The fact that the board is nonprofit does not exempt it from charges that corporate boards face. It even becomes more difficult for the officers on this other side because they are not compensated for anything. Directors are human beings and though prohibited from furthering their own interests while serving the nonprofit organization, it may happen. It is only fair that they are insured incase of lawsuits.

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