Directors and Officers Insurance for Churches and Nonprofits
Your board members — the elders, trustees, deacons and directors who volunteer their time to lead a church or nonprofit — put their personal assets on the line every time they make a governance decision. Directors and officers insurance (D&O insurance) protects those individuals, and usually the organization itself, when they face claims of actual or alleged wrongful acts in their leadership role. As an independent broker licensed to serve churches and nonprofit organizations across the United States, Integrity Now Insurance Brokers shops multiple carriers to find the right church or nonprofit D&O insurance for your board.
D&O insurance can also extend to board members’ spouses if they are named in a lawsuit. Claims can come from employees, vendors, donors, members, government agencies or other parties alleging wrongful acts in managing the organization.
Most D&O policies also cover the organization itself for legal fees, settlements and other costs of a covered claim.
Board members want two layers of protection: the organization’s promise in its bylaws to indemnify them, and a D&O policy that funds that promise. When the church or nonprofit indemnifies a director or officer for a covered loss, the D&O policy reimburses the organization.
A church elder board or a nonprofit board of directors can be sued for many reasons related to its governance role, including:
- Breach of fiduciary duty resulting in financial losses or bankruptcy of your church organization
- Misrepresentation of church assets
- Misuse of church funds
- Fraud
- Lack of corporate governance
As with any insurance policy, Illegal acts or illegal profits are generally not covered under a church D&O insurance policy.
Is D&O Insurance Needed for Churches and Nonprofits?
It’s a common misconception that D&O claims are rare within a church. For the most part we would agree with this assessment. This is evident in the low annual premiums, church property insurance companies charge for this coverage for the average church. For a typical small or average size church, D&O insurance only costs a few hundred dollars per year.
As your church insurance brokers, it is our job to help you identify all your liabilities your church could face in the future. This includes both small and medium size risks. We have partnered with church insurance companies that have been specializing in church insurance for over a half century. These church insurance companies provide competitive pricing for their directors and officers insurance for churches.
Churches and nonprofits of all sizes that have a board should consider a D&O insurance policy. We have found that church members will not agree to be nominated as an Elder of the church, unless there is a D&O policy in place. They risk losing a lot for their volunteer service. Making sure your church has a D&O insurance policy in place, is the least you can do for your board member.
D&O Insurance for Nonprofit Organizations
Every church is a nonprofit, and the same governance risks apply to 501(c)(3) charities, ministries, Christian schools, camps, foundations and community organizations. Nonprofit D&O insurance protects board members, officers and, on most policies, the organization when someone alleges mismanagement, breach of fiduciary duty or misuse of funds.
Common sources of nonprofit D&O claims include:
- Donors or members who allege that restricted gifts or other funds were misused
- State attorneys general reviewing how charitable assets were managed
- Vendors or partners in contract disputes
- Members challenging board elections, discipline or bylaw decisions
- Employees, when the policy includes employment practices coverage (see the D&O vs. EPLI section below)
The federal Volunteer Protection Act of 1997 limits some personal liability for unpaid volunteers acting in good faith, but it does not protect the organization, does not cover gross negligence or willful misconduct, and does not stop a lawsuit from being filed. Defense costs alone can be significant, which is why most nonprofit boards carry D&O coverage.
We place D&O insurance for churches and for other nonprofit organizations. Learn more about our nonprofit insurance, or request a nonprofit quote.
Church D&O Insurance Claim Example
While we never want to think a church member would sue one of our trusted elders or even the entire elder board, this can and does happen. Following is a claims example that occurred in 2008.
During a church business meeting, one of the items being discussed was their churches group health insurance monthly cost. During 2008 our economy was in bad shape, as a result churches were struggling.
A long standing member of the church raised their hand and voiced their opinion on why the elder board agreed to such an expense health insurance plan. They were very upset as the church member believed they had purchased a health plan that was far too expensive.
They stated the elder board was misusing the churches funds by selecting the plan they did, especially during a time of economic difficulties. The church member was not happy his offering was being wasted on what he believed was a very lavish health insurance plan.
As mentioned above directors and officers insurance for churches, covers your board member for both “actual or alleged wrongful acts”.
In this case the church member was incorrect in their assumptions, as the church had obtained the cheapest available plan in the health insurance market.
The church member was out of touch on the true cost of health insurance, as they were a union employee and paid almost no monthly insurance premium.
Something as simple as group health insurance, could have spelled disaster for the churches board members. Had this individual pressed the issue further, they could have filed a lawsuit. Thankfully this did not turn into a lawsuit, and he was satisfied with the response from the board members of the church.
Understanding Side A, B, and C of a D&O Policy
Most church and nonprofit D&O insurance policies are structured in three parts:
Side A — Individual Coverage: Covers board members personally when the church cannot or will not indemnify them — for example, if the church is insolvent or if a conflict of interest exists between the board member and the organization. This is the most critical protection for your elders and trustees personally.
Side B — Entity Reimbursement: Reimburses the church itself when it steps in to indemnify a board member out of church funds. This protects your congregation’s assets from being depleted by defense costs on behalf of an individual leader.
Side C — Entity Coverage: Covers the church organization as a named defendant in a D&O claim. This is essential for churches with significant assets or real property, as it protects the organization directly — not just its individual leaders.
Which of these parts a policy includes varies by carrier and policy form, so it is worth confirming that your policy includes all three, especially Side C entity coverage if your organization has significant assets. As an independent broker, we review your specific policy language to confirm you have the right structure for your organization’s needs.
D&O Insurance vs. Employment Practices Liability (EPLI): What's the Difference?
Churches frequently confuse directors and officers insurance with employment practices liability insurance (EPLI). They cover different exposures, and most churches with paid staff need both:
Directors & Officers (D&O) covers claims arising from governance and management decisions — financial mismanagement, breach of fiduciary duty, misuse of church funds, or failure of corporate governance. These claims typically come from church members, donors, vendors, or other stakeholders who believe the board acted improperly.
Employment Practices Liability (EPLI) covers claims from employment decisions — wrongful termination, discrimination, harassment, or retaliation. These claims typically come from current or former employees.
Example: If a church member sues the elder board for misusing the building fund, that is a D&O claim. If a former staff member sues for wrongful termination, that is an EPLI claim.
As your independent church insurance broker, we can package both D&O and EPLI together — often with the same specialty church carrier — to maximize your board’s protection and minimize your total premium.
What Does D&O Insurance Not Cover?
We understand that you don’t have time to read your church insurance policies. Below are common exclusions you can expect to find in your Directors and Officers insurance for churches:
- Fraud and criminal offenses. A church board member will not be covered if they steal money from the church or commit other criminal acts.
- Pending and prior litigation started before you obtain your D&O insurance coverage.
- Bodily injury/property damage. Customer injuries or property damage would typically fall under a churches general liability insurance policy.
- Insured-versus-insured claims. One director or officer suing another is not covered.
- Employee Retirement Income Security Act claims. Claims of mismanagement of employee benefit plans would typically be covered by fiduciary liability insurance.
How Much Does D&O Insurance Cost for Churches and Nonprofits?
The cost for Directors and Officers Insurance for Churches can range from a few hundred dollars a year to thousands of dollars.
The more assets your church has will increase the cost associated with D&O Insurance.
Another factor dealing with the cost of D&O Insurance is how you purchase the coverage. A D&O insurance policy purchased on a standalone basis will cost more than a policy obtained as a package policy.
When your church is insured with an insurance company that specializes in churches, these companies will typically offer a package policy.
Your D&O Insurance policy will also include a deductible that is separate from the church liability and property policy deductible. These deductibles range from $1,000 to $5,000.
Nonprofit D&O insurance is priced the same way: the organization’s size, assets, annual revenue, number of employees and claims history drive the premium, along with the limit you choose and whether D&O is part of a package policy or written on its own.
Frequently Asked Questions: D&O Insurance for Churches and Nonprofits
Who is covered under directors and officers insurance for a church?
D&O insurance typically covers all individuals serving in a governance capacity — elders, trustees, board members, officers, and their spouses. Many policies also extend to committee members who assist in governance functions. Review your specific policy declarations page to confirm who is listed as an insured.
Does D&O insurance cover the church’s pastor?
Yes, if the pastor serves in a formal board or officer role such as Executive Director, Elder, or Trustee. If the pastor is solely an employee without a governance role, employment-related claims would typically fall under Employment Practices Liability Insurance (EPLI) rather than D&O.
Is directors and officers insurance required for churches?
It is not legally required. However, many qualified volunteers refuse to serve on a church board without it — because they are personally exposed to lawsuits that could reach their home, savings, and other personal assets. Having D&O insurance in place is a basic governance best practice for any church with a board.
Does church D&O insurance cover volunteer committee members?
Many church D&O policies extend coverage to committee members and volunteers who assist in governance functions, but this varies by carrier and policy form. We review the “Definition of Insured” section of your policy to make sure every person doing board-level work is properly covered.
What is the typical deductible for church D&O insurance?
Church D&O deductibles typically range from $1,000 to $5,000, and this deductible is separate from your property and liability policy deductible. For small churches purchasing D&O as part of a church package policy, deductibles at the lower end of this range are most common.
Does a nonprofit need D&O insurance?
It is not legally required, but most nonprofit boards carry it. Board members can be personally named in lawsuits over governance decisions, and many qualified volunteers will not serve on a board without it. Some lenders, grantors and partners may also ask for proof of D&O coverage.
Does the Volunteer Protection Act protect nonprofit board members?
Only partly. The federal Volunteer Protection Act of 1997 limits some personal liability for unpaid volunteers acting in good faith within the scope of their role. It does not protect the organization, does not apply to gross negligence or willful misconduct, and does not stop a lawsuit from being filed or pay defense costs. D&O insurance fills those gaps.
How much does nonprofit D&O insurance cost?
Pricing depends on the organization’s size, assets, annual revenue, number of employees, claims history and the limit you choose. For many small churches and nonprofits that buy D&O as part of a package policy, it costs a few hundred dollars a year. Standalone policies and larger organizations cost more.
Is D&O insurance the same as general liability insurance?
No. General liability covers claims of bodily injury and property damage, such as a visitor injured on your property. D&O covers financial-loss claims arising from leadership and governance decisions, such as alleged mismanagement or misuse of funds. Most churches and nonprofits need both.
D&O Insurance for Churches and Nonprofits in All 50 States
Integrity Now Insurance Brokers specializes in insurance for churches and nonprofit organizations. Directors and officers insurance is one of several coverages your organization should have in place, alongside general liability, workers’ compensation, business auto and employment practices liability.
As your church or nonprofit grows, we will recommend coverage changes and limit increases as your needs change. Since 2012 we have helped more than 500 congregations nationwide. Our owner, Kevin Edwards, is a licensed insurance professional and an active Youth Pastor, and we do not charge broker fees.
We serve churches and nonprofit organizations in all 50 states. Churches can request church insurance quotes, and other nonprofits can use our nonprofit quote form.
Related Articles: Directors & Officers Insurance
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- Directors and Officers Insurance for Religious Organizations
- Examples of Nonprofit Directors & Officers Insurance Claims
- Boosting 501c3 Board Accountability Now: Stop Nonprofit Insurance Claims
- Church Governance Best Practices: Effective Leadership