Does Your Church Need Insurance? (Part 1)

A checklist for church treasurers.

Should our church be insured? If so, what kinds of coverage should we have, and for what amounts? What are exclusions? What is the best way for us to obtain insurance? What insurance company should we use? What are our responsibilities regarding the reporting of a claim, and assisting with an investigation? Church treasurers should be familiar with the answers to these questions. This article, along with an article in next month’s newsletter, will provide you with information that will assist in responding to these questions. This article addresses the following questions:

(1) Do we need insurance?

(2) What kinds of insurance should we have?

(3) What amounts of coverage should we have?

Next month we will be addressing these additional questions:

(4) Claims made or occurrence coverage?

(5) What are exclusions?

(6) How should we obtain insurance?

(7) What is a church’s duty to notify and cooperate?

(8) What is subrogation?

(9) Is insurance a substitute for risk management?

Do we need insurance?

There is no legal requirement that churches purchase insurance (with the possible exception of workers compensation insurance, as noted below). It is completely optional. Why, then, do most churches purchase property and liability insurance, and some purchase additional kinds of coverage? Consider the following reasons:

(1) Risk. Every church, regardless of size, faces significant risks. These include damage or destruction to church property due to fire, wind, tornado, hurricane, flood, or other natural disaster. They also include several liability risks, such as injuries or deaths occurring on church property or in the course of church activities. Any of these risks can be catastrophic since they may result in a total loss of the church’s facilities, or in significant harm to children and adults with the potential for astronomical judgments. No church is immune from these risks.

(2) Protection of ministry and assets. Most church leaders are simply not willing to assume the potentially devastating consequences of property loss or personal injury, and they purchase insurance to ensure that the church and its ministries will survive these occurrences.

(3) Defense costs. Most insurance policies provide your church with a legal defense of covered claims. And, since “the duty to defend is greater than the duty to indemnify,” your insurer may provide a legal defense for a claim even though coverage is disputed. As a result, insurance policies relieve churches of the time and expense of finding, and compensating, an attorney. While a church may successfully defend against an uninsured claim, the legal fees can be substantial.

What kinds of insurance should we have?

Some insurance is essential, and should be obtained by every church. Other kinds of insurance coverage are desirable, meaning that they are not absolutely necessary but may be highly desirable depending upon a church’s circumstances. Most church leaders would consider property and liability insurance to be essential. As the table in this newsletter indicates, other forms of insurance should be regarded as essential depending on the circumstances.

Insurance Coverages for Churches


propertyCovers many major risks to church property, including fire, smoke, lightning, hurricane, tornado.


  • Check to see if unique items such as stained glass windows, pipe organs, handbells, artwork, and sound equipment require special “endorsements.”
  • Obtain appraisals of unique items to be sure they are adequately insured.
  • Conduct periodic inventories of property to prove claims in the event of loss or destruction.
  • Check to see if coverage is limited to the market value of damaged or destroyed property. If so, consider obtaining replacement cost coverage.
  • Check on coverage for items of personal property owned by members or employees. Examples include expensive coats left in a coat room, or an employee’s own laptop computer.
  • Check to see if boilers require a special endorsement.
  • Check the exclusions under the policy. Some risks, such as earthquakes, mold, and sewer or drain backup, may be excluded and require special endorsements.
  • If your church is located in one of 19,000 communities that participate in the National Flood Insurance Program, you can obtain flood insurance from insurers that participate in the National Flood Insurance Program (NFIP). Coverage amounts are often inadequate.
  • Check to see if your policy contains a “coinsurance clause.” If so, you are required to insure your property for a specified percentage of its market value. If you don’t, you become a “coinsurer,” meaning that your policy will pay less than the stated limits in the event of a partial loss. These clauses make it essential for churches to be sure they have adequate coverage. This review should be done annually.
liabilityCovers many forms of personal injury and damage to the property of others. Common examples includes slips and falls, sexual misconduct (coverage may be limited to the church, and exclude the offender).


  • Check to see if sexual misconduct coverage is limited, and if higher amounts can be obtained by complying with specified procedures.
  • Check to see if liability insurance is provided on an “occurrence” or “claims made” basis.
  • Some policies provide minimal medical benefits to persons injured on church property. Additional coverage should be considered.
church-owned vehiclesCovers injuries and damages resulting from the use of church-owned vehicles.

  • Check to see if your property or general liability policy contains coverage for church-owned vehicles. If not, be sure to obtain a separate endorsement for this coverage.
non-owned vehiclesCovers injuries and damages caused by members who use their own vehicle while performing services for their church. The driver’s personal car insurance is also available, but if inadequate, the church will likely be sued. Often must be obtained as a separate endorsement. Essential for churches that allow members or employees to drive personal vehicles on church business.


  • Check to see if non-owned vehicle coverage applies to rented vehicles.
counselingCovers injuries caused during counseling activities. Often must be obtained as a separate endorsement. Essential for churches that provide counseling services.


  • Check exclusions carefully. For example, some policies exclude sexual misconduct.
employment practicesCovers certain employment-related claims such as wrongful dismissal and some forms of discrimination.These are among the most common types of church litigation today. Many church leaders erroneously assume that their general liability policy covers these claims. In most cases it does not.


  • If your church has employees, you should consider this coverage. The more employees you have, the more essential this becomes.
directors and officersCovers several potential legal claims that can be brought against officers and directors directly. “D&O” policies also may cover claims not covered by general liability policies. While uncompensated directors of nonprofit organizations have “limited immunity” from personal liability under both state and federal law, this protection does not cover compensated directors and does not cover acts of “gross negligence.” Must be obtained as a separate endorsement or policy.


  • If your church does not screen youth workers, lets children ride in fully-loaded 15-passenger vans, or engages in other high-risk activities that may be deemed “grossly negligent,” then this coverage is essential.
theftCovers embezzlement and other misappropriations of church funds and securities by employees and others having access to money or property. Often must be obtained as a separate endorsement. This form of insurance is also referred to as bonding.


  • Remember, the opportunity to steal, rather than a need for money, is often the primary reason for employee theft. Institute procedures to minimize unsupervised access to funds.
foreign travelProvides medical benefits for injuries occurring during foreign travel. Costs of a medical evacuation may also be covered. Often must be obtained as a separate endorsement or policy.


  • Most general liability policies exclude any injuries or damages occurring outside of the US.
  • Essential coverage for churches that send groups on missions trips to foreign countries.
umbrellaCovers legal judgments in excess of the limits on other insurance policies.


  • • Does your church have substantial assets to be protected, or inadequate liability insurance? If so, this coverage is essential to protect against catastrophic damages.
workers compensationWorkers compensation insurance provides benefits to employees who are injured or become ill in the course of (or because of) their employment. Many church leaders erroneously assume that churches are not covered by state workers compensation laws. In most cases this assumption is incorrect, and exposes a church to a substantial uninsured risk.


  • Check to see if churches are subject to workers compensation law in your state. If so, obtain insurance to cover potential claims.
What amounts of coverage should we have?

Church leaders often ask, “How much insurance should be purchase?” Unfortunately, there is no simple answer to this question. Here are a few points that may help:

  • In general, the amount of coverage should be based on two primary considerations: (1) the nature and frequency of your activities, and (2) the net value of the church’s assets. To illustrate, if your church has a youth program that has frequent meetings involving several minors, or your church provides counseling, or hosts community activities, then your liability risks are increased and you should be looking for higher insurance limits. Further, as a general rule, liability insurance should have limits in excess of the net value of the church’s assets, so that the assets are protected in the event of litigation.
  • Annually review all church insurance coverages to be sure they are adequate.
  • Periodically obtain appraisals of church property (real property, personal property, and fixtures) to be sure that you have adequate coverage.
  • Be sure that your church is insured for an amount in excess of what is required by a “coinsurance clause” in your insurance policy. A coinsurance clause is often difficult to understand, but the idea is that unless a church is insured for a specified amount (e.g., 80% of market value) then the church becomes a “coinsurer” in the event of a partial loss, and is responsible for paying part of that loss. This is done by a reduction in the amount that the insurer has to pay. The purpose of such clauses is to persuade property owners to insure their property for an amount equal to or approaching its market value. Over time, a church’s failure to increase the amount of its property insurance to reflect the current value of the church property will reduce the insured amount to less than the coinsurance amount, and this can result in an unpleasant and unbudgeted expense when the insurer only pays a portion of a substantial partial loss.

This article first appeared in Church Treasurer Alert, July 2002.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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