Insurance Made Simple Blog

We get a ton of questions about how Nonprofit Directors and Officers Insurance works and who is at risk, when they are at risk and when they are at risk.  I’ve culled out the top three most common questions and provided brief answers to help you better understand the issues at hand.

With so much insurance industry jargon thrown around by brokers sometimes it's hard to understand the distinctions between insurance coverages for nonprofits.  Two key coverages in the nonprofit insurance arsenal are General Liability Insurance and Directors and Officers Insurance.  They both provide very different yet critical coverage.

The truth is that we don't see very many Directors and Officers Liability insurance claims and when we do they are usually related to an employment situation.  However, when we do see a claim they are usually quite large and take a long time to litigate. 

We get a lot of questions from Nonprofits about whether or not they need nonprofit insurance and specifically Directors & Officers Insurance.  Many believe they don't need it because they are protected by the Volunteer Protection Act either at the Federal or State level.

A good Board of Directors is almost as good as the funding in terms of running a nonprofit organization.  A key part of your nonprofit insurance is the Directors and Officers Liability Insurance Coverage.  This is generally very easy to get and usually fairly inexpensive.  However, this can change in an instant if there is a claim and/or the insurance company sees that your Directors & Officers do not employ good board practices.

Nonprofit organizations cannot survive without a strong board of directors.  However, having a board of directors comes with certain inherent risks associated with electing officers, adopting organization policies and making financial decisions.  Even when acting in good faith volunteer board members can make mistakes and sometimes these mistakes can affect their personal financial status.