Business Insurance for Your Church
Churches Are No Longer Immune From Lawsuits
While churches face many of the same hazards as for-profit businesses, they also have some unique risks. For one thing, a church may be held liable for violating canon law. Secondly, a church performs its work primarily through volunteers rather than paid employees. To protect their assets so they can continue to serve their mission, churches need to buy insurance.
Sources of Coverage
Churches have several potential sources of insurance coverage. Very large churches may save money on insurance premiums through self-insurance. Small or mid-sized churches may purchase coverage from a standard property-casualty insurer or a specialty insurer like Church Mutual and Brotherhood Mutual. Both standard and specialty insurers have developed insurance programs for churches.
Church property may be insured for its actual cash value or its replacement cost. While coverage based on actual cash value may be appropriate for an older building that's not in good condition, most churches should be insured for their replacement cost. The building limit should be high enough to cover the cost of reconstructing the church if it has been completely destroyed by a fire or other insured peril.
Churches should also consider purchasing building ordinance coverage, which covers the extra costs of repairing or reconstructing the building so that it meets current building codes. Without this coverage, a church could large out-of-pocket costs for required upgrades.
All property the church owns should be insured under the property policy. Church-owned buildings may include meeting halls, parsonages, education centers, and living quarters inhabited by members of the clergy. Examples of personal property are furniture, office supplies, and computers. Personal property might also include religious artifacts, stained glass, statuary, paintings, scriptures, and prayer books. These items can be covered by fine arts insurance.
Churches are not immune to crime. Some of the most common crimes committed against churches are burglary, vandalism, arson, and theft of cash by employees. Burglary, vandalism, and arson are covered perils under most commercial property policies. Employee theft coverage will protect a church against theft of money, securities, and other property by church employees. Some insurers will extend the definition of employee to include volunteers.
Many churches use computers to purchase supplies, maintain accounts, and communicate with parishioners. Most standard property policies afford inadequate coverage for computers and data so churches should consider buying electronic data processing coverage.
At one time, religious organizations were immune from tort liability. This is no longer the case as courts have eliminated most church immunity. Nowadays, churches are subject to the same types of lawsuits that affect for-profit businesses.
General Liability Coverage
General liability insurance protects a church against claims by third parties for bodily injury, property damage, and personal and advertising injury. The policy should cover church employees, volunteers, officials, staff, and members as insureds.
Churches are vulnerable to claims alleging sexual abuse of adults and children. To protect themselves, churches can purchase sexual misconduct insurance. This coverage may be written separately or added to a general liability policy.
Like for-profit businesses, churches may offer fringe benefits to their workers. If a church fails to administer these benefits properly and employees are harmed as a result, the church may be sued by employees. Churches can safeguard themselves against costly claims by purchasing employee benefits liability insurance. This coverage is added via an endorsement to a general liability policy.
Many churches allow outside organizations to use church-owned facilities for meetings, classes, and other purposes. Churches should require all such organizations to provide a certificate of liability insurance to demonstrate that they are properly insured.
Many general liability and auto liability policies provide a $1 million limit. A large claim could exhaust that limit, leaving a church with a large out-of-pocket expense. A church can avoid this scenario by purchasing a commercial umbrella policy. It provides extra limits over those afforded by your primary general and auto liability coverages.
Errors & Omissions Coverage
Church pastors who provide spiritual counseling may be held liable for physical or emotional injury to church members. To protect their pastor, churches need pastoral counseling liability insurance, a type of errors and omissions insurance. Likewise, a church that performs burials or cremations should protect its cemetery staff by purchasing cemetery professional liability coverage.
Churches should also consider buying directors and officers (D&O) liability and employment practices liability (EPL) coverages. D&O insurance protects directors and officers against claims alleging they committed wrongful acts while serving on the church board. EPL insurance covers claims by employees alleging discrimination and other employment practices.
Churches often own vehicles that are used to conduct church business. Some furnish a vehicle to the pastor. At many churches, parishioners drive their personal autos on behalf of the organization. Thus, most churches need a business auto policy that includes coverage for non-owned autos.
Some churches own buses or vans they use to transport parishioners. Such vehicles can create serious liability risks, particularly if they aren't maintained properly or are driven by an inexperienced operator. As a general rule, buses and vans are subject to federal regulation if they travel across state lines and are designed to transport more than 15 passengers (including the driver). Some exceptions apply to vehicles operated by religious organizations.
A few states don't require churches to buy workers compensation coverage. Yet, churches should consider buying this insurance voluntarily. Voluntary compensation coverage serves as a hedge against lawsuits. It provides injured workers the benefit they would have received had they been covered by state law. A worker who accepts those benefits is barred from suing his or her employer.