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Do Nonprofit Directors Need to Worry About Liabilities

Most nonprofit organizations have a board of directors to manage and carry out their operations. Often, skilled and educated people are wary of joining boards of nonprofits due to the potential risks of personal liabilities. This is true to some extent for unincorporated organizations. Still, given that even churches are now starting to obtain church insurance and register themselves as incorporated entities, the risks are minimal for most nonprofit organizations’ directors.

Additionally, for the nonprofits in California, the state law provides limited protection to board directors of all unincorporated nonprofits as it does to incorporated organizations. However, to put your mind to rest, we have compiled a list of ways you can opt to gain protection as a board member of a nonprofit organization.

Protection for Incorporated Nonprofits

According to statistics, the U.S. has at least 1.5 million nonprofit organizations, many of which are incorporated. As a member of an incorporated nonprofit organization, you can find solace in knowing that most states’ laws exempt board members from liabilities.

So if you are a member of an incorporated nonprofit, you don’t have much to worry about in case a liability arises. However, if your organization is a nonprofit that is unincorporated, then you need to look for ways to cover yourself against personal liability.

What are Personal Liabilities in Unincorporated Nonprofits?

Personal liabilities are the consequences of actions of your organization that result in any form of threat to your assets. For example, if you are a board member of a church that is sued by an individual who fell off the staircase in the church, you may be personally liable if

  1. You pushed that individual
  2. You were responsible for the maintenance of that staircase.

Understandably, it is unlikely for a board of directors to cause harm to an individual on the church premises intentionally. If an incorporated church is sued, the compensation to the victim would be paid out of the church’s liability insurance and not yours.

On the contrary, if your church is unincorporated or you are in some way found responsible for the individual’s injury, you should have a Workers’ Compensation Insurance in place.

Workers Compensation Insurance

Church employees, like all others, are covered by workers’ insurance. However, there’s an exception for churches to protect their unpaid employees, like the board of directors, through the same insurance coverage. If you work for a church, you may want to discuss the coverage they would provide you in case of an accident or lawsuit.

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Get Professional Help

There’s nothing better in the world than to serve humanity. Individuals serving on boards of nonprofits and churches are doing an even better job as they serve humanity and God simultaneously. If you have reservations about becoming a board member for your local church or any other charitable organization, we are here to help.

Serving across seven states, Integrity Now Insurance is an insurance brokerage firm that connects churches and their employees to church insurance companies. Get in touch with us, and let us assist you in fulfilling your duty towards Christianity.

For those serving boards of charitable groups in California, we are the right people to help you find nonprofit insurance in California. As insurance agents, we believe that protection against liabilities would translate into your success and that of your organization.

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