How Much Does Directors and Officers Insurance Cost for a Nonprofit?
A D&O policy is relatively inexpensive for most nonprofit organizations. Specific risk factors do exist which may influence the final cost. Nevertheless, 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.
For example: 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). The total cost of the premiums will be determined by how many employees you have covered in your organization and how risky it is to insure your business.
Before purchasing a policy, make sure you fully understand the liability risks for directors and officers.
For example: What are the chances that your nonprofit will be able to afford a legal defense? According to the American nonprofit magazine, Blue Avocado, 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.Additionally, 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, a number that includes judgements, settlements, fines and legal fees, according to Chubb.
The coverage limit you purchase will also impact how much your nonprofit organization pays for insurance. On a separate note, how your organization handles risk mitigation will influence the final cost.
For example: If your nonprofit organization has clearly written policies related to hiring and firing practices, you will be seen as less risky. This will result in a lower risk factor and therefore lower premiums.