Church Insurance Information

Serving Minnesota, North Dakota, South Dakota, Iowa and Wisconsin. 

The image of the shepherd, which is prominent in the Old Testament and which Jesus adopted for himself, is the image of risk management within the life of the church. It is recognizing that risks exist, just as Jesus said that the thief comes to kill, steal, and destroy. There is a thief that will do harm, and the will of the Shepherd is to provide care, provide love, and provide comfort to those who are entrusted to the Shepherd’s care.

One of the greatest misunderstandings among church leaders is equating insurance with managing risk. Insurance is a form of risk financing and only comes into play if a problem happens.

If the church cannot prevent those risks from occurring, it then must try to limit the impact of that damage. Insurance then comes into play. But for church leaders to think they have managed risks because they have insurance is simply false.

Our research indicates that employment-related disputes are the number one cause of church litigation today. That is a significant risk. A lot of church leaders simply are not aware of this and they get sued.

I spoke recently with a pastor whose church received a complaint in the mail from a former employee alleging disability discrimination, and they found that their insurance policy does not cover this.

Most church insurance policies do not cover employment practices, so that means the church has to retain and pay for its own attorney and for any settlement or judgment involved in that case. That can be very expensive. If that is an uninsured risk, that is a significant issue and underscores the need for church leaders to take risk management seriously

Almost every church is going to have property insurance. The leaders need to sit down with their insurance agent and understand what the exclusions of that property insurance coverage are and what the limitations are. No one would have thought that mold would become a serious legal issue, not simply a public health issue. Mold in churches and in workplaces and in homes has become an environmental hazard that’s resulting in massive liability.

Property Coverage
If your church were to catch fire, what would it cost to replace everything in side? What about the stuff you can't even remember? To keep account of what's in the church, make a detailed inventory of everything, videotaping if possible.

Second, they are going to have liability insurance, there are many exclusions on the liability insurance side and there are also limits to the coverage. What churches need to be concerned about with liability insurance is that they can have claims that exceed the amount of the coverage they have. For example, a claim of sexual misconduct can easily exceed the coverage today, because the coverage can be very limited or not even covered at all.

People Insurance
Besides health insurance for the full-time ministry staff, are you covered if an organist, nursery worker, or custodian gets injured on the job? How about the pastor?

After long sessions with a insurance agent, one church decided to provide disability insurance for its pastor. Eighteen months later, the pastor was severely injured in a car accident after making a church visit. Thanks to disability insurance, the church was able to provide for the pastor, his family, and a replacement until the pastor recovered.

While we're on the subject, churches might want additional protection in case anything happens to their pastor. "An organization's financial well-being may be threatened if it loses a senior pastor who attracts parishoners and their contributions to the church.

The church could take out life insurance on the pastor to protect the organization from financial loss. "Although no amount of money can replace the value of a well-loved minister, the financial security provided by life insurance can be invaluable during sudden times of leadership transition.

Most states require churches to provide workers' compensation for all employees (part-time and full-time), including pastors, despite what they've heard about not needing it because of a pastor's self-employment tax status. "For insurance purposes, the pastor is considered an employee of the church.

Directors and officers insurance will provide some protection against those claims for covered claims and for up to the limits of the policy; also D and O policies often will cover risks that the general liability policy does not. For example, in some cases, they may actually cover employment practices. I recommend that church leaders consider D and O coverage.

• Employee dishonesty insurance. This coverage is helpful because churches are becoming vulnerable targets for lawsuits stemming from dishonesty. A church should consider insurance against theft or financial misconduct.

Today, churches must also consider liability coverage for counseling situations by staff members as well as potential misconduct by people working with children.

Vehicle Insurance
The third type of coverage the typical church will have is automobile insurance. Again, leaders need to understand whether or not that coverage is provided for non-owned church vehicles or rented or leased vehicles, because churches often use vehicles belonging to church members and also leased vehicles.

Of course you'll insure church vehicles. But if the church doesn't own vehicles, it still needs liability insurance in case a church member drives his own van and transports people to a church-sponsored conference. And it might be needed if a church secretary has a wreck and gets injured while picking up supplies for the office.

Umbrella Insurance

Churches need to look at whether or not they have workmen’s compensation and whether they have an umbrella insurance policy. The purpose of umbrella insurance is to provide additional liability coverage’s that go beyond the other liability issues.

Other Exposures

A church should definitely consider coverage for extraterritorial trips. Most insurance policies have what is called an extraterritorial exclusion, meaning there is no insurance coverage for injuries that occur outside of the United States.

A youth group goes to Mexico or Guatemala or Africa, and somebody is injured on that trip. The church assumes its general liability policy is going to cover that; in most cases, that is not true. Those are some of the additional issues church leaders should consider along with the fundamental issue of what the coverage limits should be.

There is another issue churches need to consider. Many churches have their property undervalued and may take the view, "We’ve got insurance coverage and our premium will only go up if the value of the property is increased." What they fail to recognize is that there are other factors that come into play that can result in serious financial losses if the building is not adequately covered.

Also on the topic of insurance: Many churches have musicians who leave their personal instruments at the church—an electric piano, drums, guitars, amplifiers, microphones. It’s important that the church check with the insurance agent to see if that type of personal property is covered, because those things are often targeted for theft.

If a church is in a flood zone, the leaders need to understand that the only place to get insurance is through the Federal Emergency Management Association. This issue needs to be addressed with the church’s insurance agent.

What Kind of Insurance Would a Pastor Who Does Counseling Need?

That is often included within the standard general liability policy. Counseling issues need to be carefully reviewed in the policy, because that is a very significant risk both for actual incidents of misconduct involving counselees and for false accusations made against pastors. Defense costs in these cases can be very significant.

Churches need to be concerned about security in terms of the frequency and severity of specific kinds of accidents and problems. For example, there are not very many incidents where somebody comes in and shoots people. It doesn’t happen often, but it gets a lot of attention when it does.

But churches need to be concerned about security for more basic reasons. On the property side, for example, based on our 2003 survey of about 1,000 churches, one of every five churches experienced theft last year. And 16 percent experienced vandalism. The frequency of these things is high. That’s one reason, simply because theft happens frequently and churches are often targeted because they don’t take precautions and they have items that people want. That’s on the property side.

And another thing happens in dealing with fire. A church needs to be prepared for a very severe incident. What would a congregation do if its sanctuary burned down? What would the congregation need? How would they go about collecting contributions? The typical church has no plan in place to address that. So that is a security issue; a financial security issue as well as a ministry security issue.

On the other side of security are personal injuries—the slips and falls by people who use the building. They may be outside groups. People today are not shy about suing a church.

With regard to the acts of violence: There have been so few cases involving churches, that it’s difficult to comment on that. If someone were to bring a knife or a gun into a church and kill someone, the only possible basis for liability for the church would be negligent supervision or failure to provide a minimal level of safety on the property. Generally, a church is not going to be found liable.

There is very little a church can do to prevent somebody who was intent on harming other people from carrying that through. But on a more fundamental level, churches can do basic things, such as proper illumination around their building and monitor their parking lot during services. They need to lock doors and windows at the conclusion of services.

On a staff level, churches need to train church secretaries how to respond to transients and homeless people who come to the church looking for assistance. The secretary is often the only person in the building. She may be flooded with feelings of fear and concern for personal safety, and guilt on the other hand of feeling that she needs to help this person but has no idea what to do. Because no one addressed this issue in advance to help prepare her, she isn’t sure what she should do.

Many churches have not thought through the type of security measures they need for their entrances. Whether or not the doors should be locked. Whether they should have buzzers that enable people to gain access. Whether they should use video surveillance equipment around the building. We have found that larger churches are doing all of these things. They often have professional people and staff members who have the time, and the churches have the finances. But smaller churches often have no guidance in how to respond to these concerns, and they don’t think about them until after a problem has occurred.

In terms of parking lots, there have been a number of cases where church members have been assaulted, raped, kidnapped, or killed in church parking lots. A lot of churches have activities at night and parking lots are often dimly illuminated. Portions of those parking lots are isolated and are sitting ducks for mayhem.

There are also other kinds of risks that a church may not think about. For example, what happens if the pastor has a heart attack and is suddenly incapacitated? What if he or she is going to be incapacitated for an extended period, and the church wants to provide help to the pastor’s family, but they haven’t planned in advance for this situation? They may have limited finances available to help and suddenly there can be feelings of tension, guilt, uncertainty, not knowing what to do.

Recently I was aware of a case where a youth pastor was playing soccer with the youth group and tore a ligament in his knee. That resulted in a workmen’s compensation claim. Many churches don’t carry workmen’s compensation for their pastoral staff. So what happens in that situation? Those risks can have liability dimensions, but they also have a human dimension that is grounded in what it means to love and care for the staff within that church.