Nonprofit Directors and Officers Insurance: Why are Nonprofit Executives At Risk?

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Which Nonprofit Activities Put Executives at Risk?

58% of companies which had to defend a D&O claim in the previous five years were non-profits.

A Director or Officer for a nonprofit is usually the primary person implementing and setting policies and procedures, which is why they're held accountable to a high standard.

Which activities put nonprofit executives most at risk from a claim?

Nonprofit Directors and Officers Insurance: What You Need To Know

Nonprofit organizations typically receive funding through donations and maintain a tax-exempt status. This puts them under extra scrutiny regarding how they spend money and how they manage their employees.

Directors and Officers Insurance, or D&O, protects managers where claims are made against them for decisions made in their role as Director or Officer.

D&O Insurance protects directors and officers of nonprofits from having to pay the expensive legal fees that come with defending claims.

How can nonprofit Directors and Officers mitigate their risks?

When nonprofits' executives, managers, and other officers must defend against a claim; the largest cost burden is often the legal defense.

Nonprofit Directors and Officers Insurance may pay to reimburse either the directors and officers involved or the company itself. This policy may also reimburse the directors and officers should a claim result in a loss.

How Much Does Nonprofit Directors and Officers Insurance Cost?

Specific risk factors may influence the final cost of Nonprofit Directors and Officers Insurance, such as:

  • The size of the nonprofit organization.

  • How your organization handles risk mitigation.

Premiums tend to be less expensive than many other types of insurance.The total cost for D&O is often determined by your company’s size:

Small, private nonprofit organizations are typically considered low-risk. Many pay as little as $500 a year for each million dollars in premium coverage, according to the Insurance Information Institute (III).

Good to know: Average D&O claims can cost around $35,000 to settle, while one out of every ten will exceed $100,000 before a resolution is reached. If you look at all privately held companies, not just non-profits, the average cost of a Directors and Officers lawsuit is nearly $700,000. This number that includes judgements, settlements, fines and legal fees, according to Chubb.

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