Most experts think that nonprofits need "Directors and Officers" (D & O) liability insurance. It can be costly*, but many D & O claims are filed by employees of nonprofit organizations. Such claims can include wrongful termination, failure to properly promote, sexual harassment, and discrimination in regard to pay and/or duties.
Members of the board and/or officers of your nonprofit could be sued individually or as a group. Clients can even sue your organization in regard to issues such as discrimination (racial, sexual, religious, age, and sexual-orientation). Board members and officers can be included in these suits. The federal regulations on environmental, financial, and other issues can also lead to litigation.
Other benefits of insurance include:
- Some nonprofits cannot secure certain grants without proper insurance in place since the start of the nonprofit.
- Some government agencies require coverage over the federal tort claims act coverage in order to participate in funding (Health and Human Services, for counseling services, for example).
- Some professionals can't join a board unless coverage is provided.
Your board members are volunteers who often make difficult decisions. They should have D & O insurance to protect them. Not having such insurance can make it difficult to attract and retain good board members, who simply cannot afford to serve if they run such risk to their personal assets.
*Cost depends on location - some states have absolute volunteer immunity, so premiums are lower.