Managing Church Risk with Insurance

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Churches often operate within tight financial constraints that can limit the affordability of things like comprehensive insurance packages. But for most churches, remaining underinsured can be a recipe for disaster. Church leaders should take some time to think about the kinds of risks their churches face, and to explore whether insurance may offer a cost-effective way to mitigate that risk.

Not every church faces the same kind of risk. Very small communities with no real estate or other significant property face different challenges than large, well-established churches. These are a few examples of the kinds of risks an insurance policy can protect against:

  • Liability for personal injury. If someone suffers a significant injury while on church property or acting as an agent of the church, the church may be sued for a significant sum of money. Even very small churches should consider carrying insurance against this risk.
  • Property coverage. Any church that owns significant property, whether in the form of land and a building or in the form of equipment, should insure it against fire and other potential loss. In California we face the constant risk of earthquakes, and recent years have brought into focus the risk of catastrophic fire. Churches that are in flood zones may also need to take out flood insurance.
  • Employee and volunteer insurance. California churches are required to provide their employees with workers’ compensation insurance. Independent contractors and volunteers may not have legal rights to be covered by insurance, but understanding when someone is a “volunteer” or “independent contractor” can be more difficult than it might first seem. Insurers offer a variety of strategies for churches to provide coverage to different categories of people so injuries are covered.
  • Litigation coverage. Insurance policies often cover the cost of litigation for the policy’s subject matter (personal injury, for example). But policies can also cover circumstances where the church gets sued for other things, such as sexual abuse or harassment. Such coverage can be especially important for churches that offer special services for children.
  • Special event coverage. Many general liability policies will not cover a church’s off-site activities. Such events will need their own policies.
  • Director and officer insurance. Church leaders can get sued along with the church for things they have done in their official capacity on behalf of the church. Separate “D&O” coverage must be purchased to provide leaders with coverage for legal costs in such cases.

Some forms of risk are natural in origin and physical in nature: a fire or flood, for example. But when evaluating a church’s legal risks it’s important to keep in mind that just being accused is itself a risk, even if the church is blameless. If someone sues a church for sexual misconduct, the fact that the accusation turns out to be baseless will not pay the defense attorneys’ fees. The right insurance policy will.

The Church Law Center of California provides organization and governance advice to churches and secular nonprofits. If you have questions about the kind of insurance your church should have, please reach out to us today. We can be reached at (949) 892-1221 or reach out to us through our contact page.

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