Insurance plans for churches prove to be acts of good financial stewardship

Insurance plans for churches prove to be acts of good financial stewardship

Purchasing insurance to protect your church from criminal acts or natural disasters is not just a good idea — it’s a matter of good stewardship, experts say.

“In his letters to Timothy, the apostle Paul exhorts young church leaders to ‘guard the good deposit that has been entrusted to your care,’” said Eric Spacek, senior church risk manager for GuideOne Insurance. “One aspect of guarding that deposit is to ensure that the church buildings, people and ministries are protected from harm and loss.”

He added, “Without insurance, every incident of damage or injury that occurs to the church must be paid straight out of its pocket. At best, this will deprive the church of funding to support its ministries and at worst, can threaten the continued financial viability of the church.”

At least one Alabama church, and possibly more, may have learned this lesson after the recent string of church arsons. “The cost of taking out property insurance is pennies compared to the dollars of risk taken by not obtaining it,” said Jim Swedenburg, coordinator of annuity and insurance services for the Alabama Baptist State Board of Missions. “In the absence of property insurance, you could lose your building and everything inside it.”

Spacek agreed that it is much less expensive to pay for insurance now than pay for damage later.

For example, a church’s buildings and facilities are worth $500,000. The church might pay several thousand dollars per year in annual insurance premiums, but if the church is damaged or destroyed without insurance, then the church will be paying much more.

“Without insurance, if there is a fire, storm, lightning or other damage, the church will need to come up with 100 percent of the funds to repair or replace the building,” Spacek noted. “For the church mentioned above, that’s $500,000.”

To avoid such situations, Swedenburg advises church leaders to choose a good insurance company and an adequate insurance policy.

Church leaders should begin by working with companies experienced in insuring churches.

Swedenburg urges church leaders to find out how committed an insurance company is to the church market by asking if “their intentions are long-term for religious institutions” and if “they provide partnering resources to assist local church needs.”

Patrick Moreland, vice president of marketing for Wisconsin-based Church Mutual Insurance Company, said insuring churches may require extra consideration, which may affect policy limits.

“From a church architecture standpoint, churches are very radical in their designs,” he said. “They are very much different than commercial buildings, so it is nice to work with a company that is familiar with church architecture.”

“Churches have unique needs so they will want to choose an insurance company that is experienced in insuring houses of worship, offers the coverages that are unique to them, is financially strong, has a good reputation for paying its claims and provides information and resources to help churches stay safe,” Spacek said.

Dave Rickey, vice president of public relations for Montgomery-based Alfa Insurance, recommends talking to several companies before choosing one. “Look for the best coverage (you) can get at the best cost,” he said. “All insurance companies have underwriting standards, and most of them are similar.”

Moreland recommends checking an insurance company’s A.M. Best company rating to determine its financial stability and ability to pay claims.

According to a company brochure, A.M. Best has been an independent analyst of insurance companies since 1899. The brochure recommends that churches “look for insurers with high ratings, preferably ‘A’ or better, for your greatest security. And seek a nonassessable policy so that your insurance company can’t come to you for a special premium assessment when financial times get rough.”

Church leaders should also contact other churches insured by the company to ask how satisfied they are with services received and company responsiveness, according to the booklet, “Insuring Your Ministry: Points to Consider,” that can be downloaded or ordered from the Church Mutual Web site.

The company also suggested considering the following questions before selecting an insurer:

• Does the agent show genuine concern for the well-being of your ministry?

• Did the agent thoroughly analyze your needs and become familiar with your operation and activities?

• Does the agent have a good understanding of insurance and clearly express how it meets your needs?

After choosing an insurance company, church leaders must determine which policy best suits their needs.

“At a minimum, churches should have property insurance to cover the church buildings, liability insurance to cover the church for injuries to people or damage to their property and workers’ compensation insurance to cover church workers,” Spacek said. “An excess or umbrella policy is recommended to cover the church in the event of a severe loss that exceeds the limit of the insurance policy.”

Swedenburg advised churches to secure adequate insurance to replace the buildings’ contents.

“Some insurance policies only pay you what the items were worth at the time they were destroyed,” he said. “What you want is insurance that will pay you to replace them at the cost of new items.”

Spacek added, “A good church insurance policy will protect the church against basic losses such as fire, wind damage, … water damage, injuries to persons and damage to the property of others.”

He noted that churches can also buy specialized coverages depending on the needs and activities of the church.