With money as tight as it is these days, one of the last things you want for your church is for it to suffer a financial loss—whether in the form of property damage or damages awarded from a lawsuit—that are not covered by insurance.
Like every other major purchase, buying the right church insurance takes some homework on your part, along with some good advice from professionals active in the worship community.
Price-wise, now is probably a pretty good time to be looking for insurance, according to Patrick M. Moreland, vice president of marketing at Merrill, Wis.-based Church Mutual Insurance Co.
“The insurance industry is cyclical, and has for some time been in what is called a ‘soft market,’ meaning prices are depressed,” Moreland says, “and no one can accurately predict when the market will change and prices begin to firm up again.”
Insurance industry capacity is indeed currently outpacing demand, according to Matthew Greene, national sales manager of Ft. Wayne, Ind.-based Brotherhood Mutual Insurance Co., a company that sells insurance to Protestant religion-related entities.
This is the classic definition of a “soft” market—and there are some important implications for churches buying insurance.
“Thanks to the constriction in the economy in general, and cutbacks in construction and manufacturing in particular, standard insurers are now looking for new places to sell insurance,” Greene explains. And in the search for new sources of revenue, “Many of these insurers are attempting to enter the church market for the first time.”
Choosing among the plethora of insurance companies competing for your business begins with determining the needs of the church and ends with the selection of an appropriate insurance carrier, according to Brian Murray, commercial underwriting manager with West Des Moines, Iowa-based GuideOne Insurance.
“The church needs to determine what types of activities they are involved in that conceivably expose them to great financial loss,” Murray says. “And once they have determined what those are, they need to find a stable, financially solvent insurance carrier that can meet their needs.”
And, more often than not, that carrier is going to be one that specializes in churches, according to GuideOne Senior Church Risk Manager Eric Spacek.
With their camps for children, counseling services, and other missions, “Churches are unique in their programs, their activities, and their people,” Spacek says. “This makes it very important to have an insurance company that specializes in church insurance, so they are not leaving themselves unprotected in major areas, such as sexual misconduct, that requires insurance that some standard insurance companies don’t offer.”
What to cover …
Determining what a church needs to cover in its insurance program requires a great deal of planning. For example, a significant percentage of church buildings today are underinsured, according to Moreland. Numerous sources of potential loss/legal exposure also need to be considered.
Also, “Most churches today need employment-practices liability insurance to protect against claims of harassment, discrimination, and wrongful termination,” says Moreland, adding that these claims comprise a growing area of litigation across the nation, “and churches are in no way immune.”
Make sure you are insured against loss for items unique to your church, adds Moreland. For example, “Extra expenses of operation” and “loss of income” coverages are appropriate for any church that operates schools, daycare centers, and other entities dependent upon tuition and/or fees. And of course, “Church leaders should consider—and some mortgage holders will require—flood insurance if they have a building located in a flood zone,” he says, “and earthquake damage is another concern in many areas, not just on the west coast.”
Some ways to save money
Instead of simply dropping coverage when funds get tight, churches can lower their insurance costs by bumping up their deductibles, according to Greene.
Historically, most churches carry lower deductibles in the $500-$1,000 range, according to Greene. But given the loyalty of congregations to fundraising efforts following losses, he advises carrying a $2,500 or even $5,000 deductible, and using the premium savings to buy coverage to cover catastrophic risks.
“And lots of times, churches can often easily handle small things—a broken window, a damaged roof—on their own,” Greene adds. “If a church has people that can swing a hammer or donate time or materials to help in times of need, it doesn’t have to spend as much insuring for the little things as they do big-ticket items like D&O (directors and officers) and employment practices claims—where losses can mount up into other tens of thousands of dollars.”
Raising deductibles can be a good way to reduce insurance premiums, says Murray, “And at the same time, this also can create a little bit of ownership interest in being better stewards of property.”
Just how much to increase deductibles depends on the size of the church, Murray reports. “For a smaller church, a $5,000 or $10,000 deductible just may not be doable. But a larger church may find a $10,000 deductible to be a drop in the bucket.”
Deductible levels are very much a personal decision, according to Moreland. “Only the congregation and its leaders can determine how much of a claim they can afford to absorb on their own,” he says. In many respects, “It’s a balancing act on the part of a church—it can take a small savings up front with a high deductible and risk absorbing a greater share of a loss, or maintain a more reasonable deductible, and not have to worry about the amount absorbed.”
Another way to save insurance premium dollars to insure a building at its actual cash value (i.e., taking into account a depreciated amount) rather than replacement value, according to Moreland. No congregation should do this if they contemplate ever replacing an existing building with one of like size and quality, he explains. “However, for congregations with buildings that are too large, ornate, less than functional, or otherwise not well-suited to the congregation’s current size or activities, an actual cash value policy might suit them fine and save them some money.”
The price is right, right now …
Church insurance experts report that price-wise, now is a good time to be looking for insurance. Why? According to Patrick M. Moreland, vice president of marketing for Church Mutual Insurance Co. in Merrill, Wis., “The insurance industry is cyclical, and has for some time been in what is called a ‘soft market,’ meaning prices are depressed. No one can accurately predict when the market will change and prices begin to firm up again.”