06.4 - Local Church Insurance

by Scott Selman

For we know that if the earthly tent we live in is destroyed, we have a building from God, a house not made with hands, eternal in the heavens.
2 Corinthians 5:1 (NRSV)

Local church insurance is needed to protect the church against loss of property and liability claims. Insurance may also provide a legal defense for the church, including staff and volunteers. It is important to remember that the cost of local church insurance will always be considerably less than the cost of a major loss that is uninsured or significantly underinsured. But, who is responsible for seeing that the local church is adequately insured?  The local church trustees have this responsibility.

According to ¶2532.2 in the Book of Discipline of The United Methodist Church, “The board of trustees shall review annually the adequacy of the property, liability and crime insurance coverage on church-owned property, buildings and equipment. The board shall also review annually the adequacy of personnel insurance. The purpose of these reviews is to ensure that the local church, its properties and its personnel are properly protected against risks. The board shall include in its report to the charge conference the results of its review and any recommendations it deems necessary.”

Ideally, to provide adequate insurance coverage, local church trustees should review current policies and limits on an annual basis, conduct an annual safety inspection of all church-owned buildings and property, maintain a current inventory of furniture and equipment, and obtain a periodic appraisal of all property at least once a quadrennium. These procedures are necessary due to possible new directions in ministry, changing laws, the effect of inflation on replacement costs, and societal attitudes toward claims litigation.

Types of Coverage

The types of coverage that should be considered are numerous, but generally include property, liability, fidelity (crime), and workers compensation. Property coverage may include:  buildings and church-owned personal property, boilers, electrical breakdown, earthquake, flood, and builder’s risk (while buildings are under construction).

Liability coverage may include: commercial general liability (including sexual misconduct), pastoral professional liability, directors and officers liability, employment practices liability, owned automobile liability (including vans and buses), hired and non-owned automobile liability, umbrella liability, and pastor’s personal liability. Some of these coverages may be provided on a “package” basis, and some of these coverages may require separate policies.

Other considerations include the following:

• Make sure the building insurance includes “all risk” replacement cost coverage with a blanket limit per location. Also, don’t forget to include parsonage(s) in the blanket limit.
• Coverage for computers, peripherals, and software needs to be specifically considered, even in an all risk policy.
• Coverage for backups of sewers and drains may be important.
• Most church equipment is expensive. Make sure the church has breakdown coverage for electrical surges and spikes.
• Ask your agent whether earthquake or flood insurance is recommended for your area.
• Commercial general liability insurance provides a defense against lawsuits or claims. Make sure church members, staff, and volunteers are additional insureds. Liability coverage should also be provided for local church day care facilities, schools, and summer camps.
• Directors and officers liability insurance will protect church officers and board members against claims of negligence, errors, omissions, or breach of duty when acting within their official church capacity.
• The Conference provides up to $50,000 of fidelity insurance for local churches. Local churches should obtain additional coverage as needed based on their assessment of risk.
• Local churches that employ five or more persons (including clergy) are required by state law in Alabama to carry workers compensation insurance on all employees. The number of employees includes full-time and part-time employees. Workers compensation insurance is highly recommended even when there are less than five employees.

Sources of Local Church Insurance

Local church insurance is available through the United Methodist Insurance Program (UMIP) and many local agencies.  For information about local church insurance, contact the UMIP Service Center at 1-800-221-8552 (toll free) or your local agent.