All about D&O insurance for non-profits

Do Nonprofits Need D&O Insurance

Director and Officers Insurance or D&O insurance is essential for big corporations as well as nonprofits.

This insurance covers the cost of legal issues faced by the director and officers of a company. Every policy covers different claims. Apart from criminal and fraudulent charges, most claims are covered by D&O insurance.

Every corporation has a director, officers, employees, and a management staff that ensure the smooth functioning of a company. It exposes the company to several legal risks.

The D&O insurance assures protection from legal claims. Whether you are a big company or nonprofit, D&O insurance is an absolute must.

What is D&O insurance?

what is D&O insurance

Directors and Officers or D&O insurance covers the cost of legal fees, settlements, wrongful allegations, and the judgment arising from a lawsuit.

If a director or officer of the company is sued, the D&O reimburses the company. The D&O also protects the person holding the post from personal losses. The insurance covers the director or officers of the company if they are sued. It also reimburses the company in case of a lawsuit.

Most D&O policies do not cover criminal offenses or fraud charges. Often the director and the officers get sued together. An individual or another corporation can sue them. Running a company requires a person to be well versed with the law. But no matter how hard they work, sometimes things might go wrong.

It is hard to please everyone. At times the claims are valid, while at other times, they aren’t. Either way, the D&O insurance covers it all. The D&O insurance covers any losses incurred by the company in legal fees. Whether you are a big corporation or a nonprofit, D&O is essential. The director and officers of a company need to keep track of the ever-evolving legal system. If you miss something out, the repercussions can be massive.

When a company has D&O insurance, it can be reimbursed for any legal issues the director and officers face. The policy may not protect you, but it will be able to provide monetary and legal support. This way, the company does not have to take a financial loss. Directors and officers are often in the limelight. It is easy to target them for the slightest mishap.

No matter who makes a mistake, the price has to be paid by the top management. They are responsible for the functioning of a company. When a company is sued, its director and officers are automatically blamed.

D&O insurance is essential for all companies, whether big or small. It is better to be protected from unforeseen legal troubles. Legal liabilities can cause a big hole in a company’s pocket. With excellent D&O insurance, you can avoid this.

Why is D&O insurance important for nonprofits

non-profit banner

Most of the time, the directors appointed by nonprofits lack the experience. They are mostly hired due to their passion for the vision. It does not mean they aren’t experienced.

These directors are well versed in the vision of the company. The director’s job is to create all the policies and regulations of a nonprofit. At times the directors or officers might get sued due to these policies. There are other reasons why a director might get sued. The D&O insurance helps pay for the settlement or any additional legal costs.

20% of all the companies in the USA are nonprofit. That is why D&O is essential for them. Nonprofits stand up for causes. Some causes might not sit well with other people or companies. In this case, the nonprofit can be sued.

When a nonprofit is issued, it has to pay legal fees from its funds. Since nonprofits work on donations, their funds need to be protected at all costs. Whether the nonprofit is big or small, it needs D&O insurance.

Most nonprofits believe that they are protected under the federal Volunteer Protection Act. Unfortunately, not everyone is covered under this act. Several legal technicalities can cause trouble. Since most of the directors are not highly qualified, they might overlook something. Nonprofits believe that just because they are not a for-profit company, they won’t get sued. It is not true. Nonprofits have made 58% of the D&O policy claims.

Nonprofits have to cut costs wherever they can. But this should not be done when it comes to D&O insurance. They will realize that the insurance cost is far lesser than what they might end up paying in legal fees. Directors of nonprofits may not be very well versed in corporate law.

It makes the directors and officers of a nonprofit more vulnerable to legal issues. A creditor can sue a director for a wrongful investment of assets. In such a situation, the D&O insurance nonprofit is extremely important. It protects the director and officers from such legal issues.

The D&O also covers personal issues such as wrongful termination, discrimination, mismanaging assets, or failure to provide services. By purchasing a D&O, the nonprofit reduces the risk of legal trouble.

Over the years, nonprofits have become more organized. They have a concrete hierarchy and structure. When an organization has a director and officers, they need to be protected.

Who is covered by D&O

Business Team Meeting

The D&O insurance covers past, present, future directors, trustees, officers, volunteers, committee members, and employees for nonprofits.

In case of death, insolvency, or bankruptcy, the executors, heirs, and legal representatives are also insured. The policy assures security to everyone in the company. It helps mitigate risk and guarantees compensation in case of a legal mishap. It is crucial to go through the policy thoroughly. Make sure you purchase one that covers all kinds of claims.

Some nonprofits might lean towards a cheaper policy. But it is advisable to go for a policy that covers everything. You don’t want to end up paying money even after purchasing a policy.

Most policies do not cover fraud and claims brought by one director to another. The most common claims are employee-related. So, when you purchase a policy, make sure employee-related claims are appropriately covered. The majority of directors and officers get tangled in employee-related lawsuits.

Nonprofits often use marketing materials and newsletters to publicize their cause, which is why it is essential to purchasing a D&O policy that includes ‘publishers’ liability and personal injury. It assures coverage in case of defamation, copyright, trademark infringement, or libel.

D&O insurance cost

costs and coverage

The basic D&O insurance starts from $70 per month. This D&O insurance for nonprofits might not cover a lot of claims.

You can also buy policies for $800-$1000 per month. Ideally, nonprofits should go for policies that cost $10,000 and above.

Of course, this is not necessary. If your nonprofit organization is small, you can go for low-priced D&O insurance. Larger nonprofit organizations need to go for a higher range. Depending on the number of employees, board of directors, and other officers, you can decide which policy to pick.

It should cover all the potential claims that the nonprofit might face. Both small and large nonprofits must have D&O insurance. It is essential to compare the policies before you purchase one.

You can get in touch with an insurance expert. They will provide you with all the details you need. Make sure to scrutinize the D&O insurance policy before purchasing it.


Over the years, nonprofits have become organized and legally sound.

When nonprofits function at total capacity, they become liable for their actions. That is why it is vital to protect the directors, officers, employees, and other people linked to the nonprofit.

So if you are contemplating whether to buy a D&O for your nonprofit, then think no more. You must purchase D&O insurance for your nonprofit.

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