How to Protect Yourself as a Non-Profit Organization Board Member

Managing or serving on the board of a nonprofit organization(NPO) remains both a noble and necessary activity. NPOs are often involved in protecting the vulnerable; providing services to those in need; and filling educational gaps for those subject to being mislead by charlatans and thieves to name just a few activities.

Director's and Officer's Liability Risks
However, despite these noble and necessary efforts, NPOs' Directors and Officers(D&O) have liability risks and need to be clear as to what these risks are and what adequate protection consists of. In this litigious society NPOs who are sued are experiencing an average of $235,000 in legal fees even if the suit is unfounded.

Specifically, Directors and Officers (D&O) are exposed to such employment claims as wrongful termination, breach of employment contract, discriminatory hiring practices, failure to employ or promote, retaliation, negligent evaluation, sexual harassment, wrongful discipline, invasion of privacy, deprivation of career opportunity, employment related defamation, wrongful infliction of emotional distress, and mismanagement of employee benefit plans. Employment claims represent the area where more than 80% of the claims arise.

The Need for an Employee Handbook
Therefore, before even the first employee is hired an Employee Handbook should be developed based on the models currently being used in similar type of service organizations and modified later if necessary. The employee should be given one and required to sign a statement that they have received it. A workers compensation policy which covers injury, illness, and death that result from workers performing their job or being on the job is also essential.

Other Types of Claims
The other types of claims that arise are non-employment claims include misallocation of funds, breach of fiduciary responsibilities, self-dealing/conflict of interest, anti-trust or restraint of trade violations, defamation, invasion of privacy, negligent financial advice to third parties, failure to maintain insurance, interference with contract, breach of contract, failure to accredit or certify, and infringement of trademark, patent, or copyright.

Lawsuits can originate from such diverse sectors as beneficiaries who feel that they are entitled to more than they received; board members who disagree with a majority decision on the use of funds; donors who feel that their contributions have not been used to further the expressed aims of the organization; state attorney generals who institute legal proceedings against the board for issues such as mismanagement of funds and antitrust violations, and other government officials such as the IRS and the Dept. of Labor alleging violation of federal or state laws.

The Difference Between a D&O and a GL policy
It is important for NPOs to make the distinction between what a D&O liability policy covers and what a General Liability (GL)policy covers. A GL policy does not cover what a D&O liability policy is designed to cover. A GL policy is broad coverage and is designed to cover bodily injury, property damage, theft, criminal acts, deliberate fraudulent acts, pollution, nuclear reactor or radiation, and litigation pending prior to the original inception date of the policy.

To narrow this down, a GL policy then essentially covers bodily injury and property damage, whereas the D&O policy covers wrongful acts which includes "wrongful management decisions" and never includes bodily injury and property damage. Therefore, it is essential that an NPO have both policies.

To summarize, the D&O liability policy must not only cover the claims made against the organization, but also full prior acts, and defense costs. Moreover, not only should the D&Os be covered, but also the employees, volunteers, and committee members. The best D&O liability policy does all of this.



Are you a board member of a nonprofit organizations? Have you had any of these concerns? Call (773) 614-3201.

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Whole Life Insurance or 529 Plans - The Choice for Funding a College Education

Whole life insurance is the workhorse of the insurance industry. It is designed to be in force throughout the life of the policyholder with the premium never changing.

It has often been compared to buying a home with a 30 year fixed rate mortgage where your monthly note containing your principal and interest never change throughout the life of the mortgage all the while your home equity is building up. 

Similarly, all the while your whole life policy is in force, your cash value is building up tax-free.

529 plans are best described as a way for parents to save money for tuition in a tax-deferred account. The state income tax break together with not having to pay federal income tax on your earnings have made these financial instruments attractive to some parents and grandparents.

Know the 529 Tax Deductions
However, given this current economic climate, some states may begin to restrict qualifications for the tax breaks by limiting the amount that you can claim as a tax deduction. 

You need to closely monitor the tax laws relative to this issue in your state. In addition, with returns on managed funds and FDIC insured plans being historically low, you simply may not get the value that you were promised.

The Difference Between a Whole Life Plan and a 529 Plan
Now contrast a whole life insurance plan with a 529 plan. As earlier mentioned, the growth in the cash value feature of the whole life insurance plan is guaranteed and builds up tax-free. 

And, because it is in the private sector, it is not subject to the whims of the politicians who not only decide who manages your funds but also how much you can declare as a tax deduction.

But, even more importantly, it must be emphasized that permanent whole life insurance is an asset that is guaranteed to grow each year as long as you continue to pay your premiums. It is not a commodity purchase with fluctuating returns.

529 Plans Can Lose Value
While many assets lost as much as 50% during the recessionary period, permanent whole life insurance has continued to grow. Therefore, in choosing a whole life plan, choose the largest face amount that you can afford. For unlike a 529 plan, a whole life insurance plan is self completing if you should die before your children are old enough to begin college. 

And, if you become seriously ill or disabled, with waiver of premium as a part of your policy, your premium will be paid for you.

So in choosing a permanent whole life insurance plan, you have a guaranteed, tax-free cash buildup, a face amount that would be paid to your beneficiaries if you should experience a premature death, and, if you become seriously ill or disabled the company would pay your premiums for you.


Which choice gives you the greatest piece of mind? Leave your comments below. Also, if you are in Illinois, call (773) 614-3201 for help in choosing the best Whole Life plan for you needs.

Stop Renting. Here's 7 Ways Get an Affordable Home

According to the Department of Housing and Urban Development, the general accepted definition of affordable housing is for a household to pay no more than 30% of its annual income on housing.  A family that pays more than 30% of its income on housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation, and medical care. This post, however, focuses on home ownership as opposed to renting and will offer an overview on owning affordable housing while not having to pay no more than 30 per cent of your annual income for it.  In acquiring affordable housing and building equity, it depends on you and not on the mortgage lender. Here are 7 ways in which you can acquire affordable housing with a minimum down payment if you qualify for mortgage or how to do it if you don't qualify for a mortgage.  The ways to acquire affordable housing are as follows:   county down payment assistance,   city down payment assistance,   lease with an option to buy,   contract for deed,   owner will carry,   not-for-profit grant money,   and, a wraparound mortgage. Each of the seven ways represent a viable strategy for acquiring affordable housing whether you are going for a mortgage or not and should be looked into and discussed with a trusted adviser in detail. Remember. as a homeowner, you own equity and an appreciating asset; you have have peace and privacy; and, you have an estate that can be inherited by your survivors.  For a free consultation on homeownership, call (773) 614-3201