How Much Do Nonprofit D&O Policies Cost?

>CopyrightX Kenya / CC Kenya / CC BY

>CopyrightX Kenya / CC Kenya / CC BY

Did you really think I was going to give a specific number?

I will say that if you’re a startup nonprofit with relatively innocuous operations, then your policy will qualify for minimum premiums which range from $600 to $900, depending on the nonprofit directors and officers insurance carrier.

Here are some factors that go into the cost of your directors and officers policy:

Financials

Your financial position is a key pricing factor for your directors and officers liability policy as it is a key indicator how much responsibility your Board of Directors will have.

Fund balance and revenue are the two main variables. Occasionally, underwriters will ask to see audited financial statements, but often, they simply want to know that you have a positive fund balance (assets – liabilities = positive number).

Payroll is also used in rating your D&O policy. The main reason here is that Nonprofit D&O will normally include employment practices liability insurance (EPLI), also.

Employee, Volunteer, and Independent Contractor Totals

As I just mentioned, your D&O policy will include employment practices liability (for good reason).

Therefore, carriers will use your employee count, including volunteers and independent contractors. The reason volunteers and independent contractors are counted is that they are included as insureds and as possible claimants under the policy.

Your policy would address EEOC claims, so the employee total (or payroll amount) is relevant.

Class of Business

This one should go without saying, but if you’re a foundation that doles out money to animal shelters, then your risks would be less complicated than if you were an addiction treatment facility that benefits from state or federal funds.

Some carriers will not write insurance for charter schools or churches. Further, carriers will charge a heavier premium for risks with an international operation or a duty to care for children or another disadvantaged populations.

Other Factors

Here are other factors that will either affect premium or determine your nonprofit’s eligibility.

  • Board Makeup: Are all board members from the same family? Do you maintain the number of board members called for by your bylaws? Is there a diversity of opinion?
  • Employee Handbook: Do you have one? Is it kept up-to-date? Has an employment attorney reviewed it?
  • Past Claims: Obviously, if you’ve had a sexual harassment, wrongful termination, misappropriation of funds, or other claim of a wrongful board act, then you’ll be dinged on the premium.
  • Limits and Deductibles: If you want higher limits, you’ll pay more. If you want a higher deductible, you’ll pay less. Most nonprofits select $1,000,000 limits of liability, but if you have high-earners on your board, a high risk and visibility nonprofit, or a large asset base for your nonprofit, then you should consider higher limits.

Wrapping It Up…

These items also should help you gather the right information when you have your directors and officers liability quoted (yes, I can get you started if you click that link).

Keep in mind that this insurance policy is a management liability policy. It does NOT address things like bodily injury or property damage, professional liability, abuse or molestation liability, auto liability, etc.  See my post on how to read a nonprofit directors and officers policy for clarification on how to discover what your D&O policy covers.

Leave your questions below or contact me. I’m happy to help you sift through some of the confusing language and process of finding the right insurance.

 

Nonprofit Risk Management Resource: Hasselhoff, Sizzler, and Laughter

For a break in my normal programming…

There are other lessons I could pull from these two videos, but even I, as an insurance pro, is not always in the mood to identify and break down risks.   If I had to pinpoint one risk between the two of them, it is the risk of being awesome.

Occasionally, the best thing you can do is laugh. It relieves stress, makes you a more pleasant person to be around, and helps put life into perspective.

With that in mind, I give you two YouTube gems:

  • David Hasselhoff’s True Survivor video (which I assume is intentionally full of cheese)
  • Sizzler’s 1991 groundbreaking new restaurant concept: 2 restaurants in one – the buffet plaza and the grill.

Enjoy!

The Hasselhoff…

If this doesn’t make you want to eat at a buffet, I don’t know what will…

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