Why Serving on a Board Puts Your Personal Assets at Risk
Philanthropy and civic involvement are part of life for many high-net-worth families, and seats on the boards of nonprofits, foundations, cultural institutions, and homeowners associations come with them. What many directors do not realize is that board decisions can create personal liability. If the organization is sued over a governance decision, a financial matter, or an employment dispute, individual directors can be named, and the comfortable assumption that “the organization will protect me” holds only if specific protections are actually in place.
Protection here works in two layers. The first is the organization’s own directors and officers (D&O) insurance and its commitment to indemnify you. The second is your personal umbrella, which can often be endorsed to extend over your volunteer board service. A gap in either layer can leave your personal assets exposed to a claim that has nothing to do with your home, which is why board service is one of the exposures we review when sizing your overall liability coverage.
Before you accept your next board seat, call (234) 231-9941 for a complimentary review. We will confirm whether you are actually protected, and close any gap.
How to Protect Yourself Before You Join a Board
- Ask whether the organization carries D&O insurance, and request the policy. Do this before you accept the seat. A reputable organization will share its coverage details without hesitation.
- Confirm the bylaws indemnify directors. Indemnification commits the organization to defend and cover you for actions taken in your board role. Verify it is in writing, not merely assumed.
- Check your personal umbrella for a not-for-profit board endorsement. Many personal umbrellas can extend over volunteer board service for an additional layer of protection, but not all do so by default.
- Understand the gaps D&O may leave. D&O policies have exclusions, and their limits are often shared across all directors and officers, which can leave you under-protected in a large claim naming multiple people.
- Keep records of your diligence. Meeting minutes, your attendance, and documented recusals where you had a conflict all support your defense if a claim arises.
What to Verify With Your Advisor
- The organization carries current D&O insurance and you have reviewed the policy.
- The bylaws indemnify directors and officers in writing.
- Your personal umbrella includes a nonprofit or board-service endorsement.
- You understand the D&O policy’s exclusions and whether limits are shared among directors.
- Your coverage matches the role, finance, audit, and employment committees carry more exposure.
Common Questions About Board-Service Liability
Am I personally liable for decisions I make as a nonprofit board member?
You can be named individually in a lawsuit over board decisions. Whether your personal assets are actually at risk depends on the organization’s D&O insurance, the indemnification in its bylaws, and whether your personal umbrella extends to board service.
Does the nonprofit’s insurance protect me personally?
Only if it carries directors and officers (D&O) coverage and its bylaws indemnify you. Both should be verified in writing before you accept a seat. An organization without D&O coverage leaves its directors personally exposed.
Does my personal umbrella cover volunteer board service?
Many personal umbrellas can extend to volunteer board service with the right endorsement, but coverage is not automatic. We confirm whether your umbrella includes it and add the endorsement where needed.
What is D&O insurance?
Directors and officers liability insurance protects individuals from claims arising from their service on a board, covering defense costs and judgments related to governance, financial, and employment decisions made in that role.
Does this apply to homeowners association (HOA) or condo boards?
Yes. HOA and condo association board members face the same personal exposure as nonprofit directors. The same checks apply: confirm the association’s D&O coverage, its indemnification, and your personal umbrella endorsement.
Giving back should never put your family’s assets at risk. Call (234) 231-9941 and we will make sure your generosity is fully protected.
