D&O insurance is the common name for
Director and Officers insurance coverage. This type of insurance coverage helps
to cover settlements, legal expenses and any wrong allegations against a
nonprofit organization. It protects directors and Officers of nonprofits
against any violation of duty. According to Randon Morris, it will be wrong to
believe that D&O insurance coverage is only for big nonprofit
organizations. The reason is that directors and officers of nonprofit
organizations have the possibility of being exposed to personal liability
irrespective of the organization's size or type.
In most cases, directors and officers
of nonprofit organizations don't have enough experience and at times they don't
have a vast knowledge of their responsibilities and duties regarding the
organization they serve. Directors and officers of nonprofit organizations need
to know that the Federal Volunteer Protection Act doesn't cover all their
actions. This means there is a need for nonprofits to protect their directors
and officers with D&O insurance no matter their size or type, says Randon
Morris.
The Benefits of D&O Insurance
Coverage for Nonprofit Organizations
They help in making decisions
Most board of directors for a
non-profit organization may have the zeal and passion for their work but most
of them lack the knowledge and experience. The responsibilities and duties of a
board director might not be known to them and this will eventually lead to them
operating a less than profit business organization. For this reason, making a
sound decision might be lacking in the organization and this leads to loopholes
and creates a greater risk for the company, says Randon Morris. Decisions like
employee salaries, how funds are spent, goals and strategies to be met are made
by the board of directors and this decision needs to be protected by insurance.
With D&O insurance coverage, there will be liability protection.
What they do is make lawsuits payment based on the board of directors'
decisions.
Attracts More Potential Investors
Lots of organizations are seeking
external funding for expansion and growth. For investors to invest in a
non-profit organization, they have to be sure of the insurance coverage of the
organization. This means they will request a seat on the board of directors.
And most investors will only feel safe with companies that have a strong
D&O insurance policy.
Protection from Bankruptcy
Though declaring bankruptcy saves the
company stress and gives litigation protection, it puts the directors and
leadership at risk. Whenever a company declares bankruptcy, people will blame
them for their incompetence and ask for compensation or pay the company's debt.
This may also lead to directors being sued by an individual or collectively. It
will place the directors in a tight corner or a rough spot because the company
may not be able to defend them. With a good D&O insurance policy, they
protect the directors and executives. And this saves them from lawsuits and
other punishments. This is why D&O insurance coverage for non-profit
organizations is important.
Cyber Scams Coverage
The rate at which cyber breaches are
increasing these days is very alarming. Once there is a cyber breach, it costs
the organization greatly.
It cost about $9million per breach in
the United States. It's even complicated to know the cause of the breach or the
main purpose of doing it.
The expectation of a customer or an
investor is that the non-profit organization should have adequate
cybersecurity.
Directors and executives will be
blamed, if they find out nothing was done to reduce cyber risk and they will be
held responsible. With good D&O insurance coverage for a nonprofit
organization, they will be covered.
Draws Better Talent
Every organization is searching for
talented leaders that can help them lead their companies or businesses. As a
result of this, the need for talented leaders is highly competitive. Top-level
officers, as well as directors, will not want to put their assets at risk which
makes certain things into consideration before joining an organization. As nonprofits
that want to work with top-level and talented board members, there is a need to
invest in D&O insurance coverage for effective leadership, says Randon Morris. With D&O insurance coverage in a nonprofit organization, the
directors and officers don't have to worry about the risk associated with their
role. Rather they can focus more on making decisions that are best for your
organization or company.
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