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D&O Insurance

How much non-profit directors and officers insurance Do I Need?

The D&O Insurance Policy cover also applies to NGOs, along with private and public companies. If you are the director or a senior executive of a registered NGO, then you are eligible to avail the facilities of the insurance policy

What is the objective of the D&O liability Insurance?

The main objective of the D&O Insurance Policy is to cover the legal costs in cases the directors and officers of an organization (an NGO in the present context) face a lawsuit for alleged negligence of duties. The insurer pays the legal costs and takes care of the claims.

The insured entities

Directors or Board Members of the NGO are covered by the insurance policy. Also, if it has officers overseeing the core aspects of the management, the insurance can cover them, according to the clauses mentioned in the policy document of the offering.

The amount of insurance you need

It is a subjective matter. There is no single answer to the query. The amount depends on the size of the NGO, the hierarchy of the NGO and other crucial factors. The insurer sets various slabs for the amounts, considering such factors.

How is the payment to the insurer done?

In most cases, when an NGO buys a D&O insurance policy, it pays the insurer annually. There are some cases when the payment is made quarterly, or even monthly. The terms and conditions of the insurance policy are important in this regard.

Who is covered? 

If your NGO has permanent employees, then the risk factor is more. The insurance premium is usually more in such cases. The amount you need for insurance will be obviously more compared to cases when the NGO does not have any permanent employees.

There are many NGOs that don’t have any employees or operate on the basis of recruiting contractual employees. In such cases, the amount you require is less. It is because the risk factor is less in such situations. 

It is an insightful decision to thoroughly discuss with experienced legal professionals about the insurance amount you will require from a D&O Insurance Policy. Take note of the suggestions they provide. Consider all practical perspectives before you decide to buy the insurance. 

Some major areas of exposure for nonprofit directors and officers include: 

  1. Employment practices – For nonprofits employment practices liability is a significant risk. The same employment laws that apply to for-profit corporations are also applicable to non-profits. With limited resources, most nonprofits don’t have a human resources department or the knowledge of employment practices that a for-profit corporation may have. Either directors and officers don’t realize they’re liable, or they have poorly defined employment policies and procedures in place.
  2. Fiduciary duty breaches – Similar to for-profit corporations, nonprofit directors and officers are also responsible for fiduciary duties owed to the nonprofit, to the other directors and officers, and to third parties such as donors and members. Directors and officers can be liable for grossly neglectful decisions and wasting resources. Fiduciary duties for nonprofit directors and officers are similar to the fiduciary duties for-profit corporation directors and officers owe their shareholders. 
  3. Misuse of funds – A nonprofit relies on grant funding and donations to operate, but it is important that funds are used for the stated mission and goals. Directors and officers are liable for how funds are used. Even if you were not present at a meeting where a financial decision was made, you can still be liable for the misuse of funding.

As far as the Indian scenario is concerned, the popularity of availing D&O Insurance policies among the NGOs has been gradually increasing. NGOs are realizing the importance of such insurance policies to reduce the risk factors, especially in the long run.

The premium you pay also varies according to the insurer

There are many insurers operating in the competitive insurance market of India. The premium amount you pay for the policy varies according to the insurer you choose. So, for a specific amount of insurance that you need, the premium you pay can alter, depending on the service provider you select.

Remain clear about your NGO needs

You should have clear ideas about the particular needs of your NGO when you plan to purchase a D&O Insurance Policy from a broker. The amount of insurance you require depends on the needs and long-term goals of the NGO. 

Understanding the cases when you can request for insurance

You must also be aware of the cases when you will need insurance support from the service provider. If you are knowledgeable about the situations, then it becomes easier to counter the legal issues. 

Accusation of mismanagement of funds

A Board Member or Director of the NGO can face the charges of mismanaging the funds of the organization. In such cases, he has to fight a lawsuit. The insurance amount covers the legal expenses, as mentioned through the clauses of the policy document. 

Failing to meet regulatory standards

A stakeholder or similar subject can file a lawsuit against the directors/officers of the NGO alleging serious failures in meeting the regulatory standards while running the non-profit organization. In such cases, too, the insurance amount covers the legal costs on behalf of the insured. 

Failing to perform the official duties

The directors/officers of the NGO can also face a lawsuit, with accusations of failures in performing the official duties. Again, the insurance amount of the D&O policy comes into play. The amount supports the legal expenses of the accused, within a regulatory framework.

Check out premiums for various insurance amounts

It should be a priority to check out the premium the NGO needs to pay against particular insurance amounts. The crucial thing is to go through the details of the offerings of the insurer available in the competitive market. When you are sure about a particular plan, go ahead with it, after discussing relevant issues with the insurer. 

Get in touch with a top insurance broker

You can call or write to PlanCover, a renowned insurance broker with a wide range of D&O Policies for NGOs in the Indian market. The broker will promptly clear your response to your queries.

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