Churches don't often worry about the potential costs of risks. After all, mishaps and emergencies are covered by wide-range property and liability insurance, right?
In fact, church leaders may not fully understand the degree to which certain risks remain or the potential costs associated with these risks. They also may not know the limits of the policy, or how much of the risk is actually transferred with insurance.
A church may have $1 million of property coverage, but the church building may have a true value of $1.5 million. In essence, only two-thirds of the building is insured. Suppose a fire creates $900,000 in damage. Church leaders may think they are fully covered, but if the insurance policy contains a coinsurance clause that requires the building to be insured to its full value, the insurance company is only obligated to pay the church two-thirds of the loss ($600,000). In essence, the church is retaining one-third of any property loss because it's insured the building for two-thirds of its value.