Why Your Congregation Needs Church Insurance?
The recent devastating fire that nearly destroyed the Cathedral of Notre Dame in Paris left a nation to mourn and tasked French leaders with deciding how best to repair one of France's most iconic landmarks.
It also highlighted the vulnerability of many local churches around the United States, and brought the issue of church insurance to the forefront for many congregations.
A church is more than just a house of workship, it also can be a hub of your community hosting numerous events almost every day of the week. That's why leaders need to make sure the structure and the congregation are protected by the right mix of insurance coverage.
If you don’t? You could put your church at financial risk.
Church insurance, also known as religious organization insurance, is usually offered by insurers as a package made up of several policies. Together, these policies are designed to protect your church from financial damages that can result from a wide range of mishaps.
Say a visitor to your church falls down the front steps of your building and breaks a leg. That visitor can sue your church. The right insurance policy will cover any costs your church faces in defending itself or to cover medical costs of injured parties.
And that’s just the start. What if someone vandalizes your church or robs it? The right mix of insurance coverage can provide you with the financial protection your church needs.
What if the pastor or another member of your church commits a sexual assault against one of your members? Specialized sexual misconduct liability insurance could protect your church from the financial fallout from a real crime or the cost of defending an allegation that might not be true.
Unique risk factors when insuring churches
Tracy Saraceni from Insurance Marketing Agencies in Worcester, Massachusetts, said that churches have unusual risk factors that they must consider when investigating insurance coverage.
For instance, churches often have many volunteers of all ages and very few paid employees, Saraceni says. They might be operating historical buildings or meeting in churches dotted with ornate features that require extra property insurance. Saraceni says that crime coverage is important, too, because churches usually collect cash donations at weekly services.
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And all churches, and any institutions dealing with social services and the public, should carry sexual abuse and molestation coverage, Saraceni says, while church staffers who offer counseling services need to be protected by an errors and omissions liability policy.
"There are many unique exposures to consider when purchasing commercial insurance for a religious institution," Saraceni says.
Saraceni's advice? Church leaders should talk with an insurance professional to make sure that they have all the coverages that they need.
Charles Specht, chief executive officer of Exeter, California-based insurance agency Permission Group, says that churches should work with insurance providers that offer specialized religious organization policies. Too many insurers don't offer tailor-made packages for churches, and taking out a policy that's actually designed for a more generic business could leave a church with a hole in its coverage.
Specht knows of what he speaks. Not only is he an insurance agent, he's also the senior pastor at a Baptist church.
"You simply can't get that specialized coverage with a general policy from someone like AIG or the Hartford," Specht says.
2 main types of church insurance
Purchasing insurance for your church can seem like an overwhelming task. But it can help to break down the insurance you need into two main types: property and general liability.
Property insurance is the easier of the two to understand. Basically, it covers the things you own. So property insurance would cover your church building, the grounds and anything inside your building.
If your church is destroyed in a fire, property insurance would cover the costs of rebuilding. If your church is robbed, property insurance, again, would offer you financial protection to cover your losses.
Gary Capone, vice president of field services with Franklin Mutual Insurance in Branchville, New Jersey, said that when it comes to the property portion of their insurance coverage, churches should choose a blanket policy. This type of policy covers all the buildings that churches operate.
This is important because churches often operate several structures, everything from a main worship hall to a pastor's residence to a school or community center, Capone says. A blanket property insurance policy will cover all of these buildings.
Churches with expensive artwork, icons or mosaics, might also want to purchase additional coverage for these items if they are especially valuable, Capone said.
Liability insurance, though, is equally important to the financial health of your church. If parishioners injure themselves in your church or if parishioners damage someone else’s property during a church event – they might, for example, scratch the hood of a car during a church-sponsored car wash – your general liability insurance will pay damages to the injured party and cover the costs of your church’s legal defense.
Having both types of insurance, then, are essential to providing financial protection to your congregation.
Specialty insurance for congregation members
If you want to provide additional protection for your church, you might also consider purchasing several specialty policies that are designed specifically to protect congregations.
These policies will all cost extra, but the dollars you spend on them might protect from what would otherwise be a devastating lawsuit.
Sexual misconduct liability, for instance, might be a smart purchase for your church. As its name suggests, this policy protects churches when its members either commit or are accused of a sexual crime on church property or while on church business.
The costs of defending a claim of sexual misconduct can soar into the range of hundreds of thousands of dollars. A single claim could force a congregation into bankruptcy. Paying for this coverage, then, can stave off a financial disaster, even if an allegation is later found to be untrue.
Capone said that churches should also consider liability insurance if their pastor or other personnel offer counseling services. This can protect the church in case a member argues that he or she suffered financial losses because of bad advice given from a congregation counselor.
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Some churches offer daycare services. These churches might need additional insurance coverage to cover any possible lawsuits or damages resulting from this service, Capone said.
The key for churches, Capone said, is for them to take a close look at their own congregations when ordering insurance. There is no one-size-fits-all policy out there, he said, with different churches having different needs depending on the size of the congregation, age of the church buildings and services that churches offer.
Some small churches might need only spend $3,000 a year on insurance coverage, Capone says, while larger congregations might have to spend $25,000, $35,000 or more on coverage. It pays to shop around for several quotes to get the most savings in your area.
Specht saysthat when he was a member of a small congregation that was made up mostly of people and not buildings, his church paid about $2,000 a year for its insurance coverages. His church now, which includes several buildings, pays about $13,000 a year.
In general, Specht says, established churches with their own buildings can expect to pay about 10 percent of their yearly budget in insurance costs, while new churches just getting established can expect to pay about 5 percent. Those larger churches can usually expect to pay a percentage in the single digits.
“Some of the congregations are very savvy when it comes to insurance,” Capone says. “But it can be difficult. Churches are concentrating on social justice, serving their communities, more important things. They are not always thinking about insurance. But the key is to make sure that your ministry can survive. That’s where the right insurance package comes in.”
Specht agrees, saying that most pastors and church leaders learn little about insurance or financial matters at seminary school.
“When you go to seminary, you are taught how to preach,” Specht says. “There is no class that deals with liability issues and insurance. They don’t really teach you how to deal with budgets. You get thrown into all that once you leave seminary school. You have to figure it out as you go along.”
Editor's Note: This is an updated version of an article published in October of 2017.