directors and officers insurance for nonprofits: Top 10 Essential Benefits in 2025

The Real Cost of Protecting Your Nonprofit’s Mission

Directors and officers insurance for nonprofits is specialized coverage that protects board members, executives, and the organization itself from lawsuits alleging mismanagement, employment issues, or breach of fiduciary duties. Here’s what you need to know:

• Purpose: Covers legal defense costs, settlements, and judgments from claims against nonprofit leaders
• Average Cost: $35,000-$100,000 for defense costs alone, with average settlements reaching $457,000
• Key Coverage: Wrongful acts, employment practices (94% of claims), misuse of funds, regulatory actions
• Who’s Protected: Current and past directors, officers, employees, volunteers, and committee members
• Not Covered by: General liability insurance or the Volunteer Protection Act (which has significant limitations)

Running a nonprofit means focusing on your mission, not worrying about personal liability. Yet every year, thousands of well-intentioned board members face lawsuits that threaten their personal assets. Many nonprofit leaders mistakenly believe they’re protected by their organization’s general liability policy or by volunteer immunity laws—neither of which typically cover governance decisions.

The reality is sobering: nonprofit organizations file twice as many D&O claims as for-profit companies. When these claims arise, defense costs alone average $35,000 to $100,000—expenses that can quickly deplete an organization’s limited resources and potentially expose board members’ personal finances.

I’m Geoff Stanton, President of Stanton Insurance Agency, and I’ve helped dozens of nonprofit organizations throughout Massachusetts secure robust directors and officers insurance for nonprofits that protects both their missions and the dedicated people who lead them.

Directors and officers insurance for nonprofits terms to know:
– management liability insurance
– insurance for nonprofit organizations
– is director and officer’s insurance included in general liability

What Is Directors & Officers (D&O) Insurance?

Directors and officers insurance for nonprofits is like a specialized safety net designed specifically for the people who lead your organization. Unlike other insurance policies that focus on physical accidents or property damage, D&O insurance protects against something just as dangerous: claims about how your nonprofit is managed.

Think of it as leadership protection. When board members and executives make decisions for your organization, they’re taking on personal risk. D&O insurance steps in when someone alleges that these leaders made a wrong call in managing the nonprofit.

“Many of our nonprofit clients are genuinely surprised when they learn their board members could be personally liable for decisions made while volunteering,” explains our claims specialist at Stanton Insurance Agency. “There’s a common belief that nonprofit status automatically shields individuals from liability, but this misconception can lead to serious financial hardship.”

What exactly does D&O insurance protect against? It covers “wrongful acts” that might include poor judgment calls, mishandling of funds, failing to meet fiduciary responsibilities, regulatory non-compliance, misrepresenting information to donors, or mishandling employment issues. When claims like these arise, your D&O policy covers legal defense costs, settlements, and judgments that might otherwise drain your organization’s budget—or worse, come directly from your board members’ personal savings.

The Basic Structure of a D&O Policy

Most directors and officers insurance for nonprofits policies are built with three key coverage components, commonly called “sides”:

Side A Coverage directly protects individual directors and officers when the organization can’t indemnify them. This might happen if your nonprofit lacks the funds to pay, if laws prohibit such payment, or if your organization becomes insolvent.

Side B Coverage reimburses your nonprofit when it pays to defend its directors and officers. This is the most frequently used aspect of D&O insurance.

Side C Coverage protects the nonprofit organization itself when it’s named alongside its leaders in a claim.

D&O policies work differently than other insurance you might be familiar with—they’re “claims-made” policies. This means the policy must be active both when the alleged wrongful act happens and when someone files the claim. This differs significantly from “occurrence” policies like general liability insurance.

The retroactive date is another critical element—it determines how far back in time your coverage extends. Any actions that happened before this date won’t be covered, even if the claim comes in during your policy period.

“When reviewing D&O policies for our nonprofit clients throughout Massachusetts and New Hampshire, we pay close attention to the retroactive date,” notes our senior advisor at Stanton Insurance. “For organizations that have seen leadership changes over the years, making sure you have adequate prior acts coverage can be just as important as the policy limits themselves.”

D&O vs. General Liability – Why Both Matter

One misunderstanding we frequently encounter is the belief that a nonprofit’s general liability policy covers claims against board members. This simply isn’t the case, and understanding the difference is essential for proper risk management.

Coverage Aspect	General Liability Insurance	Directors & Officers Insurance
Primary Focus	Bodily injury, property damage	Management decisions, fiduciary duties
Claim Triggers	Accidents, third-party injuries	Alleged mismanagement, breach of duty
Employment Claims	Generally excluded	Typically covered (with EPLI)
Covers Volunteers	For physical accidents only	For governance decisions
Defense Costs	Usually within limits	Can be outside limits (preferred)
Policy Type	Occurrence-based	Claims-made

General liability insurance protects against physical accidents and property damage. If someone slips on your nonprofit’s steps or your volunteer accidentally damages someone’s property during an event, general liability has you covered.

Directors and officers insurance for nonprofits, on the other hand, addresses the invisible risks of leadership—the decisions, policies, and management practices that guide your organization. When a major donor claims their funds were misused, or a former employee alleges wrongful termination, D&O insurance becomes essential.

“We often see nonprofits that have diligently maintained general liability coverage but have overlooked D&O insurance,” our risk management specialist points out. “This creates a dangerous gap in their protection, especially considering that governance-related claims often hit organizations much harder financially than typical accident claims.”

The bottom line? Both policies play vital but completely different roles in protecting your nonprofit’s mission and the people who make it possible.

Why Nonprofits Need D&O Coverage

Nonprofit organizations face a surprising reality that many board members don’t expect: they actually file twice as many D&O claims as for-profit companies. This higher vulnerability isn’t because nonprofits are managed poorly—it’s built into their very structure and mission.

“What we’ve seen over twenty years of serving Massachusetts nonprofits is that good intentions don’t shield you from lawsuits,” explains our nonprofit specialist at Stanton Insurance Agency. “The passion that drives your mission needs to be matched with practical protection.”

Several unique factors contribute to nonprofits’ liftd risk profile:

First, nonprofits answer to a complex web of stakeholders—donors want to know their money is properly used, beneficiaries expect quality services, volunteers need proper management, and regulatory bodies demand compliance. Each relationship represents a potential source of claims.

Second, most nonprofits operate with limited resources and often rely on volunteer board members who may lack formal governance training. This combination can lead to unintentional oversights in policies and procedures.

Third, the mission-focused nature of nonprofit work sometimes means administrative details and legal technicalities take a back seat to service delivery—creating vulnerability gaps.

Perhaps most concerning is that a staggering 94% of D&O claim dollars for nonprofits stem from employment practices allegations. These include wrongful termination, discrimination, and harassment claims that can devastate an organization’s finances and reputation.

Many board members believe they’re protected by the Federal Volunteer Protection Act, passed in 1997. While this law does provide limited immunity, it has critical gaps that leave volunteers exposed:

“The Volunteer Protection Act creates a dangerous false sense of security,” cautions our nonprofit insurance specialist. “Even when it technically applies, you still face the stress and financial burden of defending yourself in court—costs that can easily reach $35,000 before you’ve proven your innocence.”

The Act doesn’t cover willful misconduct or gross negligence, doesn’t prevent lawsuits from being filed in the first place, provides no protection for the organization itself, and can be overridden by stricter state laws.

Beyond legal protection, directors and officers insurance for nonprofits serves another crucial purpose: attracting quality leadership. Experienced professionals increasingly view D&O coverage as a prerequisite before joining nonprofit boards. By providing this protection, you demonstrate your organization values those who volunteer their expertise.

Counting the Cost of Going Uninsured

The financial consequences of operating without directors and officers insurance for nonprofits extend far beyond the immediate legal expenses. Consider what’s really at stake:

Defense costs alone typically range between $35,000 and $100,000—funds that would otherwise support your mission. If a judgment goes against your organization, the average payout reaches $457,000. One in every ten claims exceeds $100,000 before settlement.

But the true cost goes deeper than these numbers. When a nonprofit faces an uninsured D&O claim, the entire mission faces jeopardy. Board members and executives must divert precious time and emotional energy away from program work to handle litigation. Fundraising efforts suffer as donors hesitate to support an organization embroiled in legal troubles. Community trust—built over years of service—can erode within weeks of negative publicity.

“We’ve seen organizations forced to cut vital programs just to cover legal fees,” shares our claims specialist. “Others experience a leadership exodus exactly when steady guidance is most needed. The mission interruption can be devastating to the communities you serve.”

Real-World Nonprofit Claim Scenarios

The threat to nonprofits isn’t theoretical. These real-life scenarios from our claims files illustrate how directors and officers insurance for nonprofits has protected organizations just like yours:

A government agency sued a community development nonprofit, alleging its executives paid themselves excessive salaries from grant funds. The lawsuit sought $2.3 million in damages. Without D&O coverage, the organization would have collapsed under $300,000 in defense costs alone—instead, their policy covered both these expenses and the eventual settlement.

In another case, a community organization’s former president filed a racial discrimination lawsuit, claiming unequal treatment compared to white executives. The nonprofit’s D&O policy with employment practices coverage stepped in to defend both the organization and individual board members.

A nonprofit think tank faced copyright infringement claims after embedding social media posts in their educational materials without permission. The plaintiff demanded $150,000 per violation. Their D&O policy covered both defense costs and settlement, protecting the organization’s limited budget.

When association members sued their board for allegedly violating election procedures outlined in the bylaws, D&O coverage paid the $115,000 in legal expenses needed to defend the directors’ decision-making.

“These scenarios show how quickly governance decisions can turn into legal challenges,” notes our nonprofit specialist at Stanton Insurance Agency. “D&O insurance isn’t about protecting against theoretical risks—it’s about ensuring your mission continues despite very real threats that nonprofits face every day.”

For a deeper understanding of how this coverage protects your mission, explore our guide to background on D&O insurance or learn more about comprehensive insurance for nonprofit organizations.

directors and officers insurance for nonprofits: What Does It Cover?

When a donor calls demanding to know why their restricted gift was used differently than specified, or when a former employee files a discrimination lawsuit, your nonprofit’s leadership needs protection. That’s exactly what directors and officers insurance for nonprofits provides—a financial shield against claims that target how your organization is run.

Think of D&O insurance as governance protection. It covers allegations that your board or executives made poor decisions, failed in their duties, or mismanaged the organization. Unlike general liability insurance (which handles physical accidents), D&O responds when someone challenges your leadership’s judgment.

“I’ve seen too many passionate nonprofit leaders face personal financial ruin over well-intentioned decisions,” shares our claims specialist at Stanton Insurance. “What makes these situations particularly heartbreaking is that many could have been fully protected with the right coverage.”

Your policy typically protects against errors and omissions in management decisions and breaches of duty where board members allegedly failed to act in the organization’s best interests. It also covers misstatements to stakeholders and donor disputes over how contributions were used.

When vendors claim unfair treatment in the contracting process or regulatory bodies like the IRS or state attorney general launch investigations, your D&O policy steps in with defense funding. Even the aftermath of cyber incidents falls under protection when the claim involves governance decisions about data security practices.

The policy typically covers legal defense costs (which can quickly reach $50,000 even in baseless claims), settlements, judgments, and in some cases, public relations expenses to repair reputational damage.

Employment Practices & Fiduciary Claims in directors and officers insurance for nonprofits

Did you know that 94% of nonprofit D&O claim dollars relate to employment issues? That’s why most nonprofit policies include Employment Practices Liability protection.

“Employment claims are the monsters hiding under the bed for nonprofits,” explains our senior advisor. “They’re common, expensive, and can arise even in the most well-intentioned organizations.”

Wrongful termination allegations often follow difficult staffing decisions, especially during funding cuts. Claims of discrimination based on protected characteristics like age, race, or disability can emerge from hiring processes or promotion decisions. Harassment allegations, particularly sexual harassment, can target both the alleged perpetrator and board members who supposedly allowed a hostile environment to develop.

We’ve seen retaliation claims from employees who faced consequences after reporting concerns, and defamation suits where terminated staff believe their reputation was damaged. Even third-party discrimination claims from clients, vendors or volunteers alleging unfair treatment fall under this coverage.

Fiduciary liability protection is another crucial element, covering ERISA violations and benefit mismanagement allegations. If your nonprofit offers retirement plans or health insurance, poor investment decisions affecting these benefits could trigger claims that proper oversight was lacking.

While most directors and officers insurance for nonprofits includes these protections, coverage limits vary significantly. Some policies offer ERISA sublimits starting at $250,000, with options to increase protection based on your organization’s specific needs.

Who Is Protected by directors and officers insurance for nonprofits?

The beauty of a well-crafted D&O policy lies in its inclusive protection. It doesn’t just cover your current board president—it extends a protective umbrella over your entire leadership ecosystem.

Current directors and board members receive the most obvious protection, but past directors remain covered for actions taken during their service—protection that continues even years after they’ve left your board. This retroactive coverage often makes the difference between attracting qualified board members or struggling to fill seats.

Your officers—executive director, CEO, treasurer, and others—receive the same protection for their management decisions. Employees acting in their official capacity also fall under the policy’s shield, as do volunteers representing your organization.

Those serving on board committees receive protection even if they aren’t full board members. Surprisingly, spouses and domestic partners of directors and officers are covered when named in lawsuits simply because of their relationship to your leadership. Even subsidiaries under your nonprofit’s control typically receive protection.

“The comprehensive protection of directors and officers insurance for nonprofits provides peace of mind not just to your current leadership team but to everyone who helps advance your mission,” notes our nonprofit specialist at Stanton Insurance Agency. “When prospective board members ask about personal liability—and the good ones always do—having robust D&O coverage makes that conversation much easier.”

Protection applies only to actions taken in official capacity. Personal activities outside organizational duties wouldn’t be covered—a distinction worth explaining during board orientation.

Selecting the Right Policy & Provider

Finding the perfect directors and officers insurance for nonprofits isn’t just about checking a box on your risk management list—it’s about securing your mission’s future. At Stanton Insurance Agency, we’ve guided countless nonprofits across Massachusetts, New Hampshire, and Maine through this important decision.

Coverage limits typically range from $1 million to $10 million, depending on your organization’s unique profile. Most smaller nonprofits should start with at least $1 million in coverage, while organizations with larger budgets or higher public visibility often need more substantial protection. Think of your coverage limit as your safety net—you want it strong enough to catch you if you fall.

When it comes to deductibles (sometimes called retentions), smaller nonprofits generally see options from $0 to $2,500, while larger organizations might carry $10,000 to $25,000. One feature worth looking for: policies that offer $0 deductibles for individual directors and officers, giving your volunteer leaders extra peace of mind.

“The most overlooked aspect of D&O policies is how defense costs are handled,” explains our nonprofit specialist. “Always look for policies where defense costs are paid outside the policy limits. This seemingly small detail can be crucial if you face a lengthy legal battle.”

Prior acts coverage is another essential element—ideally, your policy should have no retroactive date exclusions. This ensures you’re protected for claims arising from actions that happened before you purchased the policy (as long as you weren’t aware of potential issues when you bought coverage).

The strength of your insurance provider matters just as much as the policy itself. We partner with financially stable, A-rated carriers who specialize in nonprofit coverage and have proven track records for fair claims handling.

Several factors affect what you’ll pay for directors and officers insurance for nonprofits. Your organization’s size (budget, assets, employee count) plays a major role, as does your mission—some activities simply carry more risk than others. Your claims history can significantly impact rates, and naturally, higher coverage limits with lower deductibles will increase premiums. Even your board’s professional diversity and your geographic location influence pricing.

“Many of our nonprofit clients are surprised by how affordable quality D&O coverage can be,” shares our senior advisor. “Smaller organizations often start with premiums of just a few hundred dollars annually, while mid-sized nonprofits might pay a few thousand—a small investment compared to the substantial protection provided.”

Key Questions to Ask Before You Buy

Before signing on the dotted line for your directors and officers insurance for nonprofits, arm yourself with these essential questions:

Is the policy claims-made? Most D&O policies require both the wrongful act and the claim to occur while the policy is active. Understanding this timing element is crucial for continuous protection.

What about the retroactive date? This determines how far back your coverage reaches. Ideally, you want either no retroactive date limitation or one that matches when your organization was founded.

Does employment practices liability come included? With 94% of nonprofit D&O claims involving employment issues, EPLI coverage isn’t optional—it’s essential. Check what sublimits apply to these claims.

Is fiduciary liability part of the package? This protects against claims related to employee benefit plans. Many policies include a basic sublimit (often $250,000) with options to increase.

How does the policy handle breach of contract claims? Many policies cap coverage for contract disputes at lower amounts, typically around $250,000—potentially problematic if contracts are central to your operations.

“The defense costs question is one of the most important,” notes our claims specialist. “Are they within or outside the policy limits? Outside is always preferable, as it preserves your full coverage limit for settlements or judgments.”

Don’t forget to ask about coverage for regulatory investigations. Some policies exclude or limit protection for government agency inquiries—a significant gap for nonprofits subject to oversight.

Lastly, inquire about support services. Forward-thinking carriers often include risk management resources, employment hotlines, or board training materials that can help prevent claims before they happen.

Red Flags Hidden in Policy Language

Even seemingly comprehensive directors and officers insurance for nonprofits policies can contain limitations that compromise your protection. Here’s what to watch for:

Insured vs. Insured Exclusion is standard in most policies, preventing coverage when one insured sues another. But nonprofit-friendly policies should include exceptions for claims brought by former directors or derivative actions.

Be wary of punitive damages carve-outs. Some policies exclude coverage for punitive damages, which can be substantial in employment cases. Look for language covering punitive damages “where insurable by law.”

The hammer clause is another concern—this provision allows insurers to limit coverage if your nonprofit refuses a settlement the insurer wants to accept. Better policies either omit this clause entirely or modify it to be less restrictive.

Insolvency exclusions can be particularly problematic, as they cut off coverage if your organization becomes insolvent or bankrupt—precisely when your leadership might need protection most.

Watch for overly broad professional services exclusions. While D&O policies typically exclude claims related to professional services, this exclusion should be narrowly defined to preserve coverage for governance decisions related to those services.

“Policy language can make or break your coverage when you need it most,” cautions our nonprofit insurance advisor. “What seems like a minor detail buried in the fine print can mean the difference between full protection and unexpected exposure. Having an experienced advisor review your policy can help identify these hidden limitations before they become problems.”

At Stanton Insurance Agency, we believe protecting your nonprofit’s mission starts with protecting those who lead it. A carefully selected directors and officers insurance for nonprofits policy does exactly that—giving your organization the freedom to focus on making a difference, not on potential liability.

Beyond Insurance: Risk-Management Best Practices

While directors and officers insurance for nonprofits provides essential financial protection, it works best as part of a comprehensive risk management strategy. At Stanton Insurance Agency, we’ve seen how combining insurance with thoughtful governance practices creates the strongest shield for your organization and its leaders.

Think of your nonprofit’s risk management like a house – insurance is the roof that protects you when storms hit, but you still need solid walls and a foundation. Those walls are your governance practices.

Board onboarding and training deserves your attention first. When new board members join your team, thorough orientation isn’t just courteous – it’s protective. Walking them through their legal duties, your bylaws, and potential liability exposures sets everyone up for success from day one.

“I was completely unprepared for the legal responsibilities of board service until our orientation,” one of our nonprofit clients recently shared. “That two-hour session probably saved me from making decisions that could have exposed me to personal liability.”

Your conflict-of-interest policy serves as another critical safeguard. A robust policy that requires disclosure of potential conflicts and recusal from related decisions prevents the appearance of impropriety that often triggers lawsuits. Make sure board members sign acknowledgments annually, not just when they join.

Clear bylaws and written policies form the backbone of good governance. When was the last time your organization updated these crucial documents? Current, comprehensive bylaws and policies for financial oversight, document retention, and whistleblower protection demonstrate your commitment to transparency and compliance.

Financial oversight matters tremendously. Regular financial reviews appropriate to your organization’s size help catch problems early. Even small nonprofits benefit from independent reviews, while larger organizations should consider formal audits. Make sure your board regularly reviews financial statements – this simple practice helps demonstrate fulfillment of fiduciary duties.

Your employment practices represent one of your biggest liability exposures. 94% of nonprofit D&O claims involve employment issues. A current employee handbook, consistent HR procedures, and regular training on harassment prevention and discrimination create a foundation for fair treatment that reduces claims.

Data security measures have become non-negotiable. Establishing protocols for protecting sensitive information – including donor data, employee records, and client information – demonstrates proper oversight. Board members increasingly face liability for data breaches when they’ve failed to ensure adequate protections.

“Insurance is your safety net, but good governance is your first line of defense,” explains Geoff Stanton. “The best way to avoid D&O claims is implementing sound risk management practices that reduce the likelihood of allegations in the first place.”

Don’t overlook the importance of meeting documentation. Detailed minutes that capture discussions of significant decisions, including dissenting opinions and the rationale for actions, provide crucial evidence if your decisions are later questioned. Many claims fall apart when organizations can produce thorough meeting minutes showing careful deliberation.

Consider establishing a dedicated governance committee to maintain focus on these practices. This committee can oversee board performance, recruitment, and adherence to best practices even when other priorities compete for attention.

How Technology Supports D&O Risk Mitigation

Technology has transformed nonprofit governance, offering valuable tools that both improve operations and reduce D&O exposure. Smart organizations are leveraging these resources to strengthen their risk management.

Board management software creates secure platforms for board communications, document sharing, and meeting management. These systems organize governance activities and maintain records in one accessible location, eliminating the scattered emails and documents that often lead to problems.

The move to paperless minutes ensures accurate, consistent documentation of board decisions. Digital minute-taking tools create standardized records that capture essential information while avoiding unnecessary details that could create liability.

E-signature workflows streamline processes for policy acknowledgments, conflict-of-interest disclosures, and other governance documents. These systems not only improve efficiency but also create verifiable records showing who signed what and when – invaluable if questions arise later.

Access controls that limit information based on role and need-to-know principles protect sensitive data and demonstrate proper information management. This technology-enabled approach shows your board is taking reasonable steps to safeguard confidential information.

Finally, electronic audit trails that track document access, policy acknowledgments, and board actions create accountability and documentation that can prove invaluable during a claim investigation.

“Technology isn’t just about efficiency—it’s about creating systems that support good governance,” notes our risk management specialist. “When combined with comprehensive directors and officers insurance for nonprofits, these tools provide a robust framework for protecting your organization’s leadership and mission.”

By implementing these practices alongside proper insurance coverage, you’re creating multiple layers of protection for your nonprofit and its dedicated leaders. At Stanton Insurance Agency, we’re committed to helping you build this complete protection strategy, combining the right insurance with practical governance support.

To learn more about comprehensive protection for your nonprofit organization, visit our page on Insurance for Nonprofit Organizations.

Frequently Asked Questions about Directors & Officers Insurance

What factors affect the cost of nonprofit D&O insurance?

When nonprofits ask me about pricing for directors and officers insurance for nonprofits, I always explain that several key factors come into play. Think of your premium as a reflection of your organization’s unique risk profile.

Your organization’s size matters tremendously – insurers look at your annual budget, total assets, and how many employees you have on payroll. A small community theater will naturally pay less than a multi-million dollar foundation with dozens of staff members.

The nature of your services also influences your rates. Organizations working with vulnerable populations like children or the elderly typically face higher premiums than, say, an arts council. This reflects the increased liability exposure these services create.

Your claims history tells insurers a story about your risk management. A clean record generally means more favorable rates, while previous D&O claims will likely increase your premium. Similarly, your financial stability matters – nonprofits with strong reserves and consistent funding sources often receive better pricing.

“We’ve seen premiums vary significantly based on governance practices alone,” shares our nonprofit specialist at Stanton Insurance. “Organizations with well-documented policies and regular board training often qualify for preferred rates.”

Of course, your coverage choices directly impact cost – higher limits and lower deductibles mean higher premiums. And don’t forget geography – litigation trends in Massachusetts differ from those in New Hampshire or Maine, affecting regional pricing.

At Stanton Insurance Agency, we leverage our relationships with multiple carriers to find competitive rates that balance protection and affordability for nonprofits throughout New England.

Does the Volunteer Protection Act eliminate the need for coverage?

I hear this question frequently, and the short answer is no – not by a long shot.

The Volunteer Protection Act of 1997 sounds comprehensive on paper, but in practice, it leaves significant gaps that can put your volunteers and organization at risk. While it does provide limited immunity to nonprofit volunteers, the protection falls short in critical ways.

First and foremost, the Act doesn’t prevent lawsuits from being filed. Even if a volunteer is ultimately protected under the Act, they’ll still face potentially devastating legal defense costs along the way – costs that directors and officers insurance for nonprofits would cover from day one.

“I’ve seen board members devastated by legal bills even in cases where they were eventually vindicated,” explains our claims specialist at Stanton Insurance. “The emotional and financial toll of defending yourself without insurance protection can be overwhelming.”

The Act also specifically excludes protection for willful misconduct, gross negligence, or reckless actions – leaving judgment about what constitutes these behaviors up to the courts. And importantly, it provides zero protection for the nonprofit organization itself.

Many board members don’t realize that state laws can override or modify the Act’s protections, creating a patchwork of protection that varies depending on where your nonprofit operates. Massachusetts, New Hampshire, and Maine each have their own nuances regarding volunteer immunity.

The bottom line? The Volunteer Protection Act provides a thin safety net with significant holes – not the comprehensive protection that directors and officers insurance for nonprofits delivers.

How does D&O insurance help attract quality board members?

Savvy professionals understand the personal risks of board service. When recruiting high-caliber board members, offering robust directors and officers insurance for nonprofits isn’t just nice – it’s often necessary.

Qualified candidates increasingly view D&O coverage as a prerequisite for board service. They’re asking pointed questions about liability protection before agreeing to lend their expertise to your mission. Without adequate coverage, you might find your most desirable prospects politely declining your invitation.

“I recently worked with a community health nonprofit that was struggling to attract financial professionals to their board,” recalls our nonprofit advisor. “After securing comprehensive D&O coverage, they successfully recruited a retired CFO who brought invaluable expertise to their finance committee. The protection gave him the confidence to say yes.”

D&O insurance provides peace of mind that allows board members to focus on advancing your mission rather than worrying about personal liability. It signals your organization’s professionalism and commitment to good governance. Most importantly, it provides concrete assurance that their personal assets won’t be at risk from decisions made in service to your nonprofit.

For board members who serve on multiple boards, D&O coverage has become an expected standard of protection. Those with the most to offer – successful professionals with significant personal assets – often have the most to lose without proper coverage.

By offering robust directors and officers insurance for nonprofits, you’re removing a significant barrier to board service, helping ensure your organization can benefit from the leadership and expertise your mission deserves.

Conclusion & Next Steps

Safeguarding your nonprofit’s mission begins with protecting those who dedicate their time and expertise to lead it. Directors and officers insurance for nonprofits isn’t just another policy to consider—it’s essential coverage that forms the backbone of your organization’s risk management strategy.

Throughout this guide, we’ve seen why this protection matters so much. The statistics tell a compelling story: nonprofit organizations file twice as many D&O claims as their for-profit counterparts. When these claims arise, defense costs alone average $35,000 to $100,000—figures that can devastate a nonprofit’s limited resources and potentially reach into board members’ personal finances.

I’ve spent years helping nonprofits across Massachusetts, New Hampshire, and Maine steer these waters. At Stanton Insurance Agency, we don’t just sell policies—we build relationships with organizations like yours, designing customized protection that addresses your unique challenges while respecting your budget constraints.

Now might be the perfect time to take a fresh look at your nonprofit’s protection strategy. If you already have D&O coverage, consider whether it includes those critical features we discussed: robust employment practices coverage, defense costs outside policy limits, and appropriate retroactive coverage. The right policy should feel like it was written specifically for your organization, not a one-size-fits-all solution.

Your nonprofit’s size, daily activities, employment approach, and board composition all influence the coverage you need. A small community theater faces different risks than a large social service agency, and your insurance should reflect those differences.

Beyond insurance, the best defense is a good offense. Strong governance practices reduce your exposure to claims in the first place. Clear bylaws, thorough documentation, conflict-of-interest policies, and regular board training aren’t just good practices—they’re essential risk management tools that work hand-in-hand with your insurance coverage.

I’d welcome the opportunity to help your nonprofit develop a protection strategy that gives your board members the confidence to focus on your mission rather than worrying about personal liability. Our team at Stanton Insurance Agency specializes in finding that sweet spot where comprehensive protection meets budget reality.

Reach out today for a no-obligation, customized quote for directors and officers insurance for nonprofits. As your trusted local partner, we’re committed to helping your organization thrive with both confidence and security.

Learn more about business insurance options for your nonprofit