Protecting Your Ministry: 12 Key Insurance Policies for Churches

Robert Tyler, Partner & Greg Norris, Law Clerk

May 31, 2024

Is your ministry adequately protected with insurance?

Common Legal Threats to Churches

Churches have many potential legal threats that should be considered when making decisions as to the insurance policies they should obtain. Consider just a few of the common legal threats:

1.  Lawsuits for discrimination against alternative lifestyles.

2.  Litigation related to church provided counseling.

3.  Sexual harassment in the workplace.

4.  Liability for wage and hour claims by employees or even volunteers.

5.  Child abuse, mandatory reporting, and related litigation.

6.  Auto liability for autos owned by the church or volunteers.

7.  Liability for injuries on church property.

8.  Directors’ and officers’ liability for actions of the corporation.

Churches need to review their insurance policies annually with their lawyer and insurance professional to ensure that the policies provide adequate coverage for all those areas of risk.  There are essential insurances that every church should have, and other insurances that are not absolutely necessary, but desirable.  

12 Essential Insurance Coverages for Churches

1. Property Insurance Coverage

Property insurance may cover many major risks to church property, including fire, smoke, lightning, hurricane, and tornado.  There are many nuances to property insurance that should be considered to determine if the coverage purchased covers all desired issues for your particular geographic region.  

2. Liability Insurance Coverage

Liability insurance covers many forms of personal injury associated with church activities and can also include damage to the property of others.  Examples can include slip and fall, negligence acts, and sexual misconduct if requested (coverage is likely limited to the church, and will exclude the offender).  

3. Church-owned Vehicles Insurance Coverage

Church-owned vehicle insurance covers injuries and damages resulting from the use of church-owned vehicles.  

4. Non-owned Vehicles Insurance Coverage

Non-owned vehicles insurance covers injuries and damages caused by church members who use their own vehicle for their church. The church member’s personal car insurance is also available, but if inadequate, the church is at risk of being sued. This coverage is a separate endorsement. Non-owned vehicle insurance coverage is essential for churches that allow members or employees to drive personal vehicles on church related business.

6. Counseling Insurance Coverage

Counseling insurance covers injuries caused during counseling activities. This insurance coverage often must be obtained as a separate endorsement. This insurance coverage is essential for churches that provide counseling services.  It is important to understand what is excluded from the policy, and for church leaders to understand that general liability policy in most cases will not cover this type of claim.

7. Employment Practices Insurance Coverage

Employment Practices Insurance covers certain employment-related claims such as wrongful dismissal as well as some forms of discrimination. These types of lawsuits are among the most common types of litigation churches will encounter. General liability in most cases will not cover these types of lawsuits.

8. Directors and Officers (D&O) Insurance Coverage

Directors and Officers Insurance covers several potential legal claims that can be brought against officers and directors directly.  D&O policies will likely cover claims not covered by general liability policies. Uncompensated or volunteer directors of nonprofit organizations have limited immunity from personal liability under both state and federal law.  This limited liability, however, does not protect compensated directors and  will not cover acts of gross negligence.   D&O insurance must be obtained as a separate endorsement or policy.

9. Theft Insurance Coverage

Theft insurance covers embezzlement of church funds and securities by employees and others having access to church monies or property. Theft insurance must be obtained as a separate endorsement in most cases. Theft insurance is also referred to as bonding.

10. Foreign Travel Insurance Coverage

Foreign travel insurance (FTI) provides medical benefits for injuries occurring during foreign travel. Costs of a medical evacuation may also be covered.  FTI coverage often must be obtained as a separate endorsement or policy and is highly desirable for churches that send groups on mission trips to foreign countries.

11. Umbrella Insurance Coverage

Umbrella insurance covers legal judgments in excess of the limits on other insurance policies.  If your church has substantial assets to protect, this additional layer of insurance protection should be considered.

12. Workers’ Compensation Insurance Coverage

Workers’ compensation provides insurance benefits to employees who are injured on the job or become ill in the course of employment.  Many church leaders erroneously assume that churches and their employees are not covered by state workers’ compensation laws.  This assumption is often wrong and exposes a church to a substantial risk of loss.

Determining Insurance Coverage Amounts and Limitations

Churches should consider two issues.  First, the nature and frequency of the activities that are putting the church at risk.  Second, the net worth of the church.  The general rule is that the church should have general liability insurance in excess of the net worth of the church’s assets.  It is advisable to review all insurance coverage annually to consider changes in church activities that might expose the church to greater liability.  It is also advisable to obtain appraisals of church property to be sure that the coverage limits exceed the net worth of the church.

Co-insurance issues

Church leaders need to understand the limitations of the insurance policies that the insurance policy may include a co-insurance clause which requires that a church be insured for a certain percentage of the churches’ net worth.  Failure to comply with this co-insurance clause can leave a church in the position of a co-insurer and partially responsible financially for litigation losses.  Insurers use this clause to encourage churches to obtain what they see as the correct amount of insurance.

Exclusions

As important as the coverages you choose to purchase are the exclusions included by the insurer. Churches should take the time to review exclusions with their lawyer and insurance professional and consider how the exclusions affect coverage.

Conclusion

Making insurance decisions should not be taken lightly.  Determining which coverages to purchase related to the changing issues within a church and how it functions, as well as exterior threats due to cultural controversies, all should be contemplated and coordinated with both your insurance professional as well as legal counsel.

Tyler Law, LLP assists churches in assessing their legal risks. Tyler law can develop or review Articles of Incorporation, Bylaws, Constitutions and amendments, corporate filings, policy statements, manuals, handbooks, job descriptions, and assess the degree to which the church is protected and in compliance with both federal and state law.  In addition, Tyler Law, LLP can advise on insurance related issues and how to best protect the church’s assets and limit liability.  

If your church is in need of a risk assessment review please contact us at https://www.tylerlawllp.com/contact-us or call our office at 951-600-2733 to schedule an appointment with an attorney.

Give Us a Call

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