Nonprofit agencies also use D&O insurance to protect their assets. In the event that a nonprofit agency has a judgment rendered against it, the D&O insurance pays off some or all of the judgment and allows the agency to continue its work, rather than face a heavy financial burden that could shut its doors. D&O insurance also covers attorney’s fees accumulated while developing a legal defense strategy, but does not cover fines, lost wages, penalties, taxes or multiplied damages.
A standard D&O policy carries limits ranging from $500,000 to $1 million per claim with a $5,000 deductible. This means that the company must pay the first $5,000 in damages while the policy covers the rest. If the claims exceed the policy’s limits, the company must pay the remainder. A D&O policy also does not cover damages attributable to product failures or employee negligence unless those damages are related to the misdeeds of the directors or officers.