As organizations grow and evolve, leaders face complex and multifaceted challenges. For executives and members of nonprofit and corporate boards, ensuring financial security for the organization and its employees proves paramount.
Nonprofit board insurance, as well as other types of fiduciary liability insurance, protect directors and officers of nonprofit organizations from personal financial liability for decisions made on behalf of the organization.
In order for the organization’s CEOs and executives to focus on critical strategic decisions rather than logistical details, many boards leverage meeting software to optimize productivity and streamline communication.
What is Fiduciary Liability Insurance?
Fiduciary liability insurance is a type of insurance coverage that protects businesses and organizations from financial losses resulting from claims of breach of fiduciary duty, errors in plan administration, or other acts of negligence related to the management of employee benefit plans.
These claims can arise when the fiduciaries, such as directors and officers, are alleged to have breached their duty of care to act in the best interest of the plan participants, resulting in financial losses or other harm.
For nonprofit organizations, fiduciary liability insurance is vital, as the directors and officers of these organizations may face personal financial liability for decisions made on behalf of the organization. To help determine the appropriate coverage for your organization, insurers often use a D&O questionnaire.
This questionnaire helps identify potential risks and exposures related to the management of employee benefit plans. It also assists in determining the appropriate level of coverage needed to protect the organization and its directors and officers.
Why is fiduciary liability insurance important?
Fiduciary liability insurance protects businesses, organizations, and their directors and officers from financial losses resulting from claims of mismanagement of employee benefit plans. These plans, including retirement and health insurance plans, are subject to complex laws and regulations, and managing them can be difficult and risky.
Fiduciary liability insurance covers claims against the fiduciaries responsible for managing the employee benefit plans, including claims of breach of fiduciary duty.
Without fiduciary liability insurance, the fiduciaries responsible for managing employee benefit plans may be liable for any financial losses resulting from claims of mismanagement. It can include legal fees and damages due to lawsuits or government investigations related to acts of negligence.
For nonprofit organizations, the risks can be significant. Without nonprofit board insurance, directors and officers may be personally responsible for monetary losses, even if they acted in good faith and in the organization’s best interests.
Ensure effective, efficient meetings with our comprehensive Board Meeting Agenda Template.
What Does Fiduciary Liability Insurance Cover?
Fiduciary liability insurance provides coverage for claims and legal expenses arising from the management of employee benefit plans. It includes coverage for claims of breach of fiduciary duty, errors in plan administration, and acts of negligence.
Specifically, fiduciary liability insurance may cover:
- Legal defense costs: This includes the cost of legal representation and related expenses incurred in defending against claims of mismanagement.
- Settlements or judgments: This includes the cost of settling claims or paying judgments resulting from claims of mismanagement.
- Other related expenses: These may include costs associated with government investigations, regulatory fines, and additional fees related to managing employee benefit plans.
Fiduciary liability insurance is essential insurance coverage for businesses and organizations that manage employee benefit plans, helping to protect them from financial losses and providing peace of mind.
How Much Does Fiduciary Liability Insurance Cost?
The cost of fiduciary liability insurance for a nonprofit or limited liability company (LLC) can vary depending on several factors. Generally, the cost can range from a few thousand dollars to tens of thousands of dollars per year.
Some of the factors that influence the cost of fiduciary liability insurance include:
- The size and type of organization: Larger organizations and those with a higher level of risk may require more coverage and pay higher premiums.
- The scope of coverage: The extent needed can also affect the insurance cost. For example, an organization that manages several employee benefits plans may require more coverage than one that manages only one.
- The insurance provider: The insurance cost can vary depending on the insurance provider and the specific policy.
In addition to these factors, there may be other considerations that affect the cost of fiduciary liability insurance, such as the organization’s claims history, the level of risk in the industry, and the deductible and limits of liability chosen.
It’s recommended that organizations work with an experienced insurance broker to assess their specific needs and obtain quotes from multiple insurance providers to find the best coverage at a competitive price.
OnBoard Powers Effective Boards
OnBoard is a board management software platform that’s designed to help organizations and board directors work more effectively and efficiently. The software offers key features and benefits specifically designed to streamline board operations and enhance collaboration, including:
- Agenda management to easily create and manage meeting agendas, attach supporting documents and track progress on action items.
- Advanced meeting capabilities, including video conferencing, screen sharing, and chat.
- Collaboration tools, including real-time annotations, comments, and voting.
- Robust security features to protect confidential information, including two-factor authentication, encryption, and granular permissions.
Download our free board meeting agenda template for an example of how OnBoard streamlines board business.
Frequently Asked Questions (FAQ)
Ensure effective, efficient meetings with our comprehensive Board Meeting Agenda Template.
About The Author
- Gina Guy is an implementation consultant who specializes in working with nonprofit organizations get the most from their board meetings. She loves helping customers ease their workloads through their use of OnBoard. A Purdue University graduate, Gina enjoys refinishing furniture, running, kayaking, and traveling in her spare time. She lives in Monticello, Indiana, with her husband.
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