Trustee Indemnity Insurance: The Trustee’s Safety Net

Ever volunteered to be a trustee and then had that panic of what exactly you are liable for? You are not alone. Whilst being rewarding work, it comes with legal responsibilities and financial risks.

What Actually Is a Trustee?

A trustee is someone legally responsible for managing an organisation or fund on behalf of others. You are essentially the guardian of someone else’s money or assets. This makes trustees responsible for the decisions they make.

What Are the Key Duties of a Trustee – and Which Acts Apply?

Being a trustee isn’t just a title – it comes with real legal obligations. Two key pieces of legislation set the framework in England and Wales:

The Trustee Act 2000 requires trustees to act in the best interests of beneficiaries, exercise reasonable care and skill when managing trust assets, and follow a duty of care when making investment decisions. It also sets out when trustees can delegate responsibilities and to whom.

The Charities Act 2011 is the main statute governing charities in England and Wales. It outlines trustees’ duties to act within the charity’s objects, manage funds prudently, and comply with Charity Commission requirements. Trustees must ensure the charity operates for public benefit and keeps proper accounts.

The Charities and Trustee Investment (Scotland) Act 2005 explains what Scottish charity trustees must do. They must always act in the charity’s best interests and manage it properly. If they fail to do this, the regulator (OSCR) can step in and take action.

In practice, your key duties include:

• Act with reasonable care and skill
• Acting in the best interests of your beneficiaries at all times
• Managing finances responsibly and avoiding conflicts of interest
• Ensuring the organisation operates within the law
• Keeping proper records and filing required reports with the Charity Commission

So, What Is Trustee Indemnity Insurance?

It protects you personally if someone claims you made a mistake in your trustee duties, even if you acted in good faith. As a trustee, you can be held personally liable for decisions that go wrong. That means your own assets could be at risk if someone sues and wins.

Trustee Indemnity Insurance steps in to cover:

• Legal defence costs
• Compensation payments
• Investigation costs
• Crisis management expenses

What Kind of Mistakes Are We Talking About?

• Investment decisions that lead to mismanagement of funds.
• Breach of trust allegations – Someone claims you didn’t follow the trust deed properly or acted outside your powers.
• Employment disputes – The trust is sued for wrongful dismissal, and you’re named personally.
• Regulatory investigations – The Charity Commission launches an inquiry into your organisation.
• Conflicts of interest – For example, a trustee approves a contract with a company they have a financial stake in, without properly declaring or managing the conflict. Even if the decision was fair, the process failure can expose the trustee to a claim.

Here’s the thing: you don’t have to be wrong to face expensive legal action. Defending yourself costs money whether you are guilty or innocent.

Who Needs This Insurance?

Short answer: pretty much anyone serving as a trustee.

Even if you’re serving a small local charity with the best intentions, one disgruntled beneficiary or regulatory inquiry could put you at financial risk.

What Is NOT Covered?

Insurance doesn’t cover everything. Typical exclusions include:

• Deliberate wrongdoing or fraud – If you intentionally break the law, you’re on your own.
• Personal profit – Claims related to making unauthorised personal gains.
• Fines and penalties – Most policies won’t cover regulatory fines (though they’ll cover defence costs).
• Known issues – Problems that existed before you took out the policy.

The Bottom Line

Trustee Indemnity Insurance is not about expecting the worst – it is about protecting yourself so you can focus on doing your best.

Think of it this way: you would insure your car even though you are a good driver. You would insure your home even though you are careful in your home. Why wouldn’t you insure your personal liability when acting as a trustee?

At Unity Insurance Services, we work exclusively with charities and not-for-profit organisations because we understand the unique pressures you face. Protecting your trustees is just one more thing on an already overwhelming to-do list, but it doesn’t have to be complicated. Our goal is to help you meet your obligations and secure the right protection for your trustees, simply and confidently.

For more advice or support, contact us:

📞 0333 0917019

📧 [email protected]