Understanding Risk Financing
Understanding Risk Financing
How churches must calculate potential losses—and ways to pay for them.

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.

Many churches now carry $2 million or more of liability coverage, but that amount can be misleading.

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.

Log In For Full Access

Interested in becoming a member? Learn more.

Posted: February 19, 2015
View All
from our store
Church Finance

Church Finance

Learn about budgeting, financial reporting, tax compliance, insurance coverage, and more.
Youth Ministry in a #MeToo Culture

Youth Ministry in a #MeToo Culture

Develop boundaries and a reporting structure that keeps your youth program safe for everyone.
Best Practices for Technology Usage

Best Practices for Technology Usage

Establish policies and best practices to govern the use of technology for church staff.
Church Board Guide to Developing a Risk Management Strategy

Church Board Guide to Developing a Risk Management Strategy

Learn how to develop and implement a risk management strategy in your church.

ChurchSalary

ChurchSalary

Experience a whole new way to set compensation. Eliminate the guesswork – get access to detailed compensation reports in just minutes.