Revised Coverage Limits Courtesy Of United Methodist Insurance
Sunday, July 7, 2019
Recently, United Methodist Insurance moved from a captive insurance company model to a sponsored program in order to secure the financial integrity of the program. In doing so, UMI was able to reevaluate insurance coverage needs for individual churches and suggested more palatable coverage limits. As you may be aware, the Book of Discipline requires the General Council on Finance and Administration (GCFA) to set minimum insurance requirements for individual churches. On UMI’s recommendation, GCFA has revised coverage limits for individual churches.
There are two areas where changing the minimum standards help the needs of churches with smaller congregations, and UMI has responded with new policies. Sexual misconduct policies and insuring property risks on an actual cash value versus a replacement cost basis have been changed.
With regards to sexual misconduct, the marketplace began offering lower limits for this coverage for smaller churches (congregations with less than 500 members), and churches felt that they did not need higher limits. UMI believes it can meet the needs of these smaller churches and match other coverage available to them. The decision was made to reduce the minimum limits from $1,000,000 per occurrence and $2,000,000 aggregate to $250,000 per occurrence and $500,000 aggregate. The higher limits are still available to all churches and it remains UMI’s recommendation that these higher limits are selected if possible. The coverage provided at the lower limit includes defense costs outside of the limits. This is important because defense costs do not reduce the amount of money available to pay damages. In this line of coverage, defense costs represent a significant part of the cost of such claims.
When examining actual cash value versus replacement cost value, it is important to first differentiate between the two options. Actual cash value (ACV) is based on the actual or depreciated value of a damaged property instead of the cost to replace the damaged property with a new item, so an ACV policy may not cover the full cost to replace damaged property. Replacement cost value does offer the cost to replace the damaged property with a new item. Accordingly, the issue that arises is that older properties that have not been maintained may not qualify for replacement cost coverage. Replacement cost coverage for these churches may not be available in the standard market and using the excess and surplus lines market to place this coverage can result in extremely high premium prices. By offering actual cost coverage, UMI is able to present these churches with affordable access to the broad insurance available through the program. This also gives UMI and its providers the opportunity to work with those churches to identify issues that prevent them from qualifying for replacement cost coverage and help them to correct these issues and work towards securing this valuable coverage option.
As the new UMI program grows and evolves, they will continue to evaluate minimum requirements in cooperation with churches and our providers. Their goal is to offer affordable coverage without compromising the integrity of the protection offered through UMI. If you are interested in a UMI policy, please contact 1-866-203-0777 or visit www.uminsure.org.