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Right Sizing Your Insurance Budget

Updated: May 8

Welcome to the inaugural resource of our series on revitalizing ministries in the wake of recent challenges. Stay tuned for more!


Property

1. Inventory: The value of your business personal property should be reviewed to ensure that your coverage is adequate but not overstated. Are there any high-value items that are no longer in place or would not be replaced that are still included in your values? This should be reviewed annually.


2. Property used offsite: Do you have any property that you use offsite? If you have audio equipment that is used for events outside of the church you may need an inland marine policy to cover it while in use.


3. Building:

  • You should have your building’s replacement cost valued every three years.

  • Insure your property to the true replacement cost.

               i.     Undervaluing your building can lead to coinsurance penalties.

               ii.     It can also leave you with a shortfall in the event of a total loss.

  • Are you in the right space? If your building is too large for your congregation or not in use for a significant part of the week you have some options:

               i.     Share space with third parties.

                ii.     Consider downsizing.

                iii.     Merge with another congregation.

  • Review your deductibles.

                i.     Increasing the deductible can lead to a reduction in premium.

                ii.     Don’t take on more risk than your budget permits.


4. Financial Risk

  • Make sure your treasurer and others involved in the church’s financial management are bonded. It provides extra coverage that standard crime coverage may not provide.

  • Review your cyber exposure. Many policies now include some limited coverage.

  • Review this with your agent to determine if additional coverage is needed to protect your church’s assets.


5. Be aware of any coverage exclusions or sublimits in the policy. The best coverage is an all-risk policy with coverage for everything but losses that are expressly excluded.


 

Liability

1. Churches frequently rely on agents with no experience covering houses of worship or

cut corners on liability to save money.


2. Cheap coverage can be very expensive. Policies designed for for-profit organizations aren’t going to include coverage for sexual misconduct and pastoral counseling.


3. There are other key coverages included in the General Council on Finance and

Administration’s recommended coverage standards:

  • Directors and Officers

  • Employment practices liability

  • Umbrella or excess liability


4. Hired and non-owed automobile liability is a coverage that is hard to imagine does not apply to your church. Any employee or volunteer using their personal vehicle for church-related activities creates an exposure for your church. Make sure it’s included in your policy.


5. Workers compensation coverage. If your church has even one employee, this is a coverage you must have. You should also seek coverage for volunteers. This coverage greatly reduces exposure to civil suits for work-related injuries and illness. It provides medical coverage for injuries and illnesses with no deductible. It also provides partial income replacement.


6. Automobile liability insurance should be provided for any vehicles that the church owns. Limits for liability should be at least $1,000,000. Make sure that all drivers are qualified, that motor vehicle records are reviewed, that vehicles are properly maintained, and that all drivers know what to do in the event of an accident.


7. Employee benefits liability coverage should be purchased if your church administers any heath, life, or accident benefits. It’s not required if you don’t provide these benefits or if a third party administers them for you.


 

Record keeping

 

1.     It is very useful to have a picture or video record of your assets.


2.     Insurance policies should be kept in a secure location or backed up, if in digital

format. Never discard your policies.


3.     Updates to the building and all major building systems should be recorded and

provided with every insurance renewal or request for coverage.


4.     All background checks, training, and retraining records should be kept in a secure

location accessible only to those who need them to do their job.


5.     Maintain all records in a secure location known to everyone involved in the church’s

administration.


6.     Have a transition plan in place so that new trustees, treasurers, etc. know the

procedures and have the information they will need to do their job.


 

Buying Insurance

 

1.     Hire an agent with experience in placing coverage for churches.


2.     UMIP’s agent has 60 years of experience placing coverage for churches.


3.     Always purchase a form that takes your church’s exposure into consideration.


4.     Comply as closely as possible to the General Council on Finance and Administration’s recommended coverage standards.


5.     Pay close attention to your need for the following coverages:

  • Sexual misconduct

  • Pastoral counseling

  • Employment practices liability

  • Directors and officers

  • Workers compensation

  • Hired and non-owned auto liability


6.     Refer to UMIP’s insurance buying guide for more information.


 

Special thanks to United Methodist Insurance (UMIP) for their contribution to the first installment of our RightSize Your Ministry series. Stay tuned for more resources and insights, coming soon to GCFA.org!


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