Things to Look Out For If You Sit on a Nonprofit Board: Ensuring Directors & Officers Have Proper Insurance Coverage

Serving on the board of a nonprofit organization is a rewarding and impactful way to give back to your community. But while the mission may be noble, the responsibilities that come with board service are very real—especially when it comes to personal liability.

One of the most important safeguards for any nonprofit board member is Directors & Officers (D&O) Insurance. This crucial coverage protects individuals from personal losses if they are sued as a result of serving on a board. But not all D&O policies are created equal—and assuming your nonprofit is fully protected without checking the fine print can be a costly mistake.

Here are key things to look out for to make sure your nonprofit has the right D&O insurance coverage in place:

1. Verify That D&O Insurance Is Actually in Place

Don’t assume coverage is active—ask for proof. Request a copy of the policy or a certificate of insurance and confirm that it’s up to date, with no lapses or cancellations.

2. Check the Policy Limits

Make sure the coverage limits are adequate for the risks your organization faces. A $1M limit may be the baseline, but larger nonprofits or those with high public engagement might need more.

3. Understand Who Is Covered

Ensure all board members, officers, and key volunteers are explicitly included. Don’t overlook past board members or advisors—some policies exclude them unless specified.

4. Review the Policy Exclusions

Typical exclusions include:

• Fraud or criminal conduct

• Breach of contract

• Known claims prior to the policy period

• Employment-related claims (unless covered separately)

Understanding these can help shape safer governance decisions.

5. Employment Practices Liability (EPL)

If your nonprofit has employees, EPL coverage is essential. It protects against claims like harassment, wrongful termination, or discrimination—common risks that could be financially devastating without coverage.

6. Check for Duty to Defend vs. Reimbursement

Look for a “duty to defend” policy so legal costs are covered from the start. Reimbursement policies require out-of-pocket payment upfront, which can be a major burden.

7. Make Sure the Coverage Is Tailored to Nonprofits

Nonprofits face unique risks. Confirm the carrier understands nonprofit operations and offers customized protection for your type of organization.

8. Ask About Retroactive Coverage

Confirm that the policy covers past acts, even if they occurred before the current board term—as long as no one knew of the claim when coverage began.

9. Evaluate Defense Costs Inside vs. Outside the Limits

If defense costs are inside the policy limits, they reduce the payout available for settlements. Ideally, defense costs should be outside the limit, leaving full protection in place.

10. Revisit Coverage Annually

As your nonprofit evolves, so do its risks. Schedule an annual review of your D&O insurance to ensure it still aligns with the organization’s size, structure, and activities.

🛡️ Board Service Shouldn’t Mean Personal Risk

You joined a nonprofit board to make a difference—not to worry about legal exposure or personal liability. Ensuring your organization has the right D&O insurance in place is one of the smartest moves you can make as a board member. The peace of mind it provides is invaluable—and it protects not just you, but the mission you care about.

✅ Let The Luxury Group Be Your Trusted Insurance Partner

At The Luxury Group, we specialize in helping nonprofit leaders and board members secure the protection they need. Whether you’re reviewing an existing policy or starting from scratch, our team provides expert guidance tailored to your unique risks.

📞 Reach out to The Luxury Group today to schedule a policy review or get started with a custom D&O insurance quote.

Don’t leave it to chance—let’s make sure your board service is both impactful and protected.