Learn about directors and officers insurance for nonprofits 501(c). D&O liability policies cover all directors, officers, employees, including staff, volunteers and committee members from lawsuits that are brought in response to actions and decisions made.
Directors And Officers Insurance For Nonprofits
If you haven't heard of Directors and Officers liability insurance, often called D&O insurance, you're not the only one. However, you should definitely know what it is if you are part of a non-profit 501(c) organization.
Most people know D&O insurance as being a policy that protects a board of directors and officers for very large companies. While this is certainly true, they are not the only ones who need D&O liability insurance. Non-profit companies may not have as much liability as for-profit companies, but that doesn't mean they are immune from claims being filed against them.
When you're dealing with a non-profit company, it's especially important to protect what you have because most of these companies don't have a large bank account for legal expenditures and claims made against them. That is where directors and officers insurance for nonprofits comes in.
What it Covers
For acts that are negligent and not intended, general liability and/or professional liability (E&O) insurance is going to cover those claims. Directors and officers insurance for nonprofits works to cover the events that are seen as intentional. Even if the actions were done by mistake, if they are wrong, they are still considered intentional acts.
Anything wrong done by a member of the board of directors on a non-profit could be covered by D&O liability insurance. These insurance policies are very broad, but they should cover all types of employee related actions. This could include things like wrongful terminations, discrimination, harassment, failure to hire, and other issues that may be dealt with at this level. It's especially nice because most policies cover the defense costs when one of these claims turn into a legal battle.
As a non-profit 501(c) company, there isn't a lot of wiggle room with what a person can and cannot spend money on. Paying for legal coverage because of something that may have been done intentionally high up in the company would be looked down upon by many, and it could be the end of the non-profit as you know it. This insurance not only protects the board of directors and officers, but it also protects the organization's image and reputation.
Why It's Needed
There are a lot more claims that are filed with for-profit companies because they usually work on a larger scale. However, non-profits are not immune from something bad happening to them. The difference is that it could quite literally bankrupt the company by trying to defend one of the members of the board. Even if you swiftly handled the issue and terminated employment of the accused party, the person could still file a claim against the company itself. Non-profits do a lot of good in the world, and no one wants to see their business fail because of a claim against them.
Thankfully, you don't have to watch your company crash and burn when something wrong happens. With the directors and officers insurance for nonprofits policy in place, you create a safety net that is going to keep your non-profit afloat no matter what the outcome is. These policies won't cost you too much compared to your other insurance policies, but it is by definitely worth ever penny.
It should comes as no surprise that non-profits are under a huge deal of stress. The standards are much higher for these companies because they are working toward something that is good. For-profit companies are held to a lower 'moral' standard, so it might not be seen as much as a big deal as when something wrong happens in a non-profit company. Also, non-profits are usually overworked and underpaid. When this happens, mistakes might occur. Protecting your business and your employees should be the number one concern when pulling out a directors and officers insurance for nonprofits policy.
How Much Does It Cost?
Legal fees can be anywhere from $30,000-$100,000 on average, and more non-profits are being sued each day. Most of these claims stem from firing and hiring decisions, but those legal fees can be paid by your insurance policy. You can expect to pay as little as $100 to as high as $2,500 a month depending on the size of your business and board of directors. The larger the company, the higher the risk of being sued is.
Directors And Officers Insurance For Nonprofits - The Bottom Line
We hope this article on directors and officers insurance for nonprofits was informative. D&O insurance usually covers anywhere from $1,000,000-$25,000,000 in assets, so you can rest easy knowing that your non-profit 501(c) organization is well protected if something ever went wrong.
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