Business Insurance for a Church

Protecting the Church with Business Insurance

USA ,Massachusetts, Berckshire District, Lee City,Church
Image courtesy of [Jose Fuste Raga] / Getty Images.

A church has some unique characteristics that set it apart from a typical business. For instance, a church may be liable under canon law as well as common and statutory law. A church often relies on volunteers more than paid employees. Yet, a church also resembles a for-profit business in a number of ways. It owns property that may be lost, damaged or stolen. It owns vehicles that may be involved in auto accidents.

Like a business, a church needs insurance to protect its assets so it can continue to serve its mission.

Most churches require the services of a skilled insurance agent or broker to ensure they obtain appropriate coverage. This person should be knowledgeable in commercial insurance. He or she should also understand the insurance needs of a religious organization.

Churches seeking insurance have several options. A very large church may choose to self-insure. Smaller churches may purchase coverage from a large property-casualty insurer, like State Farm or Farmers Insurance. Alternatively, they may buy insurance from a specialty insurer, such as Church Mutual or Brotherhood Mutual. Both standard and specialty insurers have developed products designed for churches. Many sell package policies that include property, liability, auto and various other coverages churches need.

Property Insurance

All churches need property insurance.

A commercial property policy will protect your organization against loss or damage to church-owned buildings and personal property.

Church property may be insured for its actual cash value or its replacement cost. Which option should you choose? This question can be difficult to answer. Many church-owned buildings are old.

The cost of replacement cost coverage on such buildings may be very high. Some churches may resort to actual cash value to save money. However, if your church can afford it, replacement cost coverage is a better choice. It will ensure you have the funds you need to rebuild your church if it is completedly destroyed by a fire or other insured peril. Be sure your policy limit is adequate.

Another coverage you should consider is building ordinance coverage. It covers the extra costs incurred to repair or reconstruct a building to meet current building codes. Without this coverage, a church may incur large out-of-pocket costs to improve old buildings so that they meet modern standards.

Be sure that all church-owned property is covered under the property policy. This may include halls, meeting rooms, parsonages and education centers. It may also include living quarters inhabited by a pastor or other members of the clergy. Religious artifacts, statuary, paintings and other artwork should be inventoried and listed on a separate schedule. These items can be insured under fine arts coverage. If your church owns stained glass, scriptures, prayer books and valuable items, be sure they are covered by your policy.

Churches are not exempt from crime, including illegal acts committed by employees. Employee theft coverage will protect your church against theft of money, securities and other property by church employees. Some insurers will extend the definition of employee to include volunteers.

Many church's use computers to purchase supplies, maintain accounts, and communicate with parishioners. Your property policy may not provide adequate coverage for your computers and data. If it doesn't, consider buying electronic data processing coverage.

General Liability Insurance

At one time, religious organizations were immune from tort liability. A person who was injured due to the negligence of a church was barred from suing the church for damages. Much of this immunity has been eliminated by the courts. Nowadays, churches are subject to many of the same types of lawsuits that affect for-profit businesses.

General liability insurance protects the church against claims by third parties for bodily injury, property damage, and personal and advertising injury. Church leaders may think that liability insurance is unnecessary since nobody sues a church. This is a fallacy. Religious organizations are often sued, particularly in cases involving injuries to children. A church's liability policy should cover employees, volunteers, church officials, staff, and church members as insureds.

Here are some additional liability coverages a church should consider purchasing.

  • Sexual Abuse and Molestation Covers claims alleging illicit physical contact or exploitation of a minor child by an insured individual
  • Employee Benefits Liability Covers claims against your company that result from errors in administering employee benefits
  • Umbrella Liability Available as a separate policy. Provides extra limits over those afforded by your primary liability policy

Errors & Omissions Coverage

Church pastors, employees or members may be held liable for negligent acts they commit while providing counseling services. Likewise, cemetery staff may be sued for acts or omissions they commit while performing burials or cremations. To protect these individuals against claims, churches need errors and omissions liability.

Churches should also consider purchasing 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.

Business Auto

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 commercial auto policy that includes coverage for non-owned autos

Some churches own buses or vans that they use to transport parishioners. Such vehicles create serious liability risks. To ensure they are operated safely, buses and vans must be maintained properly. Careful driver selection and training are also essential. Note that a bus or van is subject to federal regulation if it travels across state lines and is designed to transport more than 15 passengers (including the driver). If you aren't sure what requirements may apply to a particular vehicle, ask your agent or broker for assistance.

Workers Compensation

Churches that employ workers are generally obligated by law to purchase workers compensation insurance. This coverage ensures that workers injured on the job will receive the benefits to which they are entitled under state law.

In a few states, churches are exempt from the requirement to buy workers compensation coverage. Even if this coverage is not required, a church should consider purchasing it voluntarily. Voluntary compensation coverage serves as a hedge against lawsuits. It provides injured workers the benefits 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.

Other Insurance to Consider

  • Workers Compensation Insurance - depending upon your state laws your church may need to provide its employees workers compensation coverage.
  • Health Insurance - your church may need to offer health insurance as a benefit to attract clergy or for permanent employees.
  • Surety Bonds - you may wish to have any volunteers that work with church funds bonded.
  • Travel and International Operations - your denomination may minister or send missionaries overseas and you will want to consider this coverage for those operations.

    Larger Operations
    The focus of this article is on smaller churches. Larger churches may need different coverages and may benefit from some aspects of their operations being self-insured. Larger churches may operate schools, daycare, or retirement facilities. Such large operations may benefit more from the service of a broker instead of an agent as some of these operations require specialized coverage on their own.