We frequently get asked by new and existing nonprofit organizations about directors and officers liability insurance (“D&O Insurance”). Should you obtain coverage? Is it worth the cost?

Yes, you should explore obtaining D&O Insurance. If you want to recruit high-quality directors, you may find that they will not serve on your board without seeing a copy of your policy. They want to know that they will be protected. In addition, their employers may not allow them to serve on your board unless you have D&O Insurance.

On a related note, you might also want to review your organizational documents for provisions that indemnify your directors and officers against certain acts. The same potential directors who want to see a copy of your D&O Insurance policy may also want to see your indemnification provisions.

There are a number of organizations, some of them nonprofit themselves, that provide affordable D&O Insurance to nonprofit organizations of all sizes. When discussing your policy, make sure that you understand its terms and the acts it actually covers.