Serving on the board of a nonprofit can be deeply rewarding — you’re giving back, helping steer mission-driven work, and offering your expertise to a cause you believe in. Before you sign on the dotted line, there’s an important piece of risk management you should never overlook: Nonprofit Directors and Officers (D&O) liability insurance.
Here’s how that risk shows up, based on the points in the article:
Why Serving on a Charity Board Can Be Risky
When you join a charitable or nonprofit board, you take on fiduciary and governance responsibilities. That means you can be held personally responsible if someone alleges a wrongful act tied to your decisions as a board member.
Claims can come from:
Donors alleging misuse or mismanagement of funds
Employees or volunteers claiming wrongful termination or discrimination
Beneficiaries unhappy with program decisions
Regulators alleging compliance failures
Vendors or partners involved in contract disputes
Even if the claim has no merit, legal defense costs alone can be financially devastating.
“But It’s a Charity — Doesn’t That Reduce Risk?”
No. As outlined in the blog, nonprofits face many of the same legal exposures as for-profit organizations. Courts do not excuse poor governance or alleged mistakes simply because the organization serves a charitable mission.
Board Service Isn’t Risk-Free — Even for Nonprofits
Many people assume that because a nonprofit isn’t a profit-seeking business, serving on its board poses little legal exposure. Unfortunately, that assumption can be costly.
When you join a board, you’re trusting the organization’s legal, financial, and operational decisions — and courts can hold you responsible if someone alleges a wrongful act in your capacity as a director or officer. Lawsuits might come from:
- Donors or beneficiaries claiming misuse of funds
- Employees alleging wrongful employment practices
- Vendors alleging contract disputes
- Government regulators over compliance issues
- Beneficiaries or members alleging breach of fiduciary duty
Even if the claim is without merit, defending yourself in court can cost tens or hundreds of thousands of dollars in legal fees. And unless the nonprofit can indemnify you, your personal assets could be exposed.
What Is D&O Liability Insurance?
According to the International Risk Management Institute (IRMI), Directors and Officers liability insurance is a form of liability insurance that covers directors and officers for claims made against them while serving on a board or in an officer capacity. https://www.irmi.com/term/insurance-definitions/directors-and-officers-liability-insurance It’s designed to protect individuals from personal losses if they are sued for alleged wrongful acts related to their managerial decisions — and it often covers legal defense costs, settlements, and judgments.
Without it, your peace of mind, reputation, retirement accounts, or even your home could be at risk if a claim arises.
Nonprofits Carry the Same Types of Risks as For-Profit Boards
You might think that nonprofit boards are immune to litigation — but they’re not. IRMI and other risk management authorities note that D&O risk exists wherever there’s organizational leadership, regardless of whether profits are generated. Decisions made by nonprofit boards — about finances, employment policies, fundraising, program changes, and governance — can and do get challenged in courts.
Before You Say Yes — Ask These Key Questions
Before you agree to serve:
- Does the nonprofit carry D&O liability insurance?
- What are the policy limits and who is covered?
- Does the policy include defense cost coverage?
- Is the coverage provided through a reputable insurer?
If the answer is “I’m not sure” — consider that a yellow flag.
How the Right D&O Coverage Protects You
A strong directors and officers policy can:
- Shield your personal assets from claims
- Cover defense costs and lawsuits that can otherwise drain your resources
- Reduce the stress and financial risk of board service
- Help the nonprofit attract qualified board members who might otherwise decline due to risk concerns
In short: D&O insurance lets you focus on governance and mission, not legal exposure.
Need Directors & Officers Coverage for Your Nonprofit Board?
At MBG Insurance, we help individuals and nonprofit organizations secure Directors and Officers liability insurance tailored to their needs. Don’t serve without protection — get the coverage you deserve.
👉 Request a quote here: https://www.millenniumbrokers.com/clapp/ (commercial lines quote form)