A house built on sand: 5 hidden exposures for churches

Save your parish from common, costly claims with proper preparation and protection

By Shawn Yingling

The historic events of the past 12 months have deeply impacted religious organizations everywhere.

Chances are, you’ve had to find new ways to share scripture while social distancing, learn how respond to an increasing need for community assistance, and adapt to a shifting political landscape, among other things.

If the past year has taught us anything, it’s that anything can happen. As insurance specialists, we think about this fact all the time — because we see it all the time. And we’re firm believers that a little prior preparation can go a long way toward helping you handle the unexpected.  

There are five areas where churches typically lack or miss coverage, which can cause major expenses post-claim. Our goal is to keep you better prepared before that happens — no matter what the next year brings your way.

Hidden exposure #1: mandated upgrades

Your church is really about the people — not the building. But if your building isn’t up to code, things can get costly fast. 

If you see updates and upgrades in your near future — from the outside façade, to electrical, wiring, plumbing and HVAC — ordinance and law endorsement coverage can be a life-saver.  

Why? If your church is badly burned in a fire that destroys 60% of the building, a traditional insurance policy will likely pay to repair that 60%. But, if your church is located in a district that requires all buildings that sustained damage beyond 50% be demolished completely and rebuilt, you might suddenly need to find more funds. If your church opts for an ordinance and law extension, the costs of this demolition and additional rebuild are more likely to be covered. 

Hidden exposure #2: unplanned shutdowns 

Does your church operate a day care? Does it rent its facilities to the public? What would happen to your treasury funds if these revenue sources suddenly stopped? 

If your church relies on funding from side operations, then a business and income extension is worth considering. With some exclusions, this enhancement can cover the loss of income experienced due to a qualifying event (fire, earthquake, and so on). It can also help your church retain staff during the recovery period by covering costs like payroll. 

Hidden exposure #3: restoration of fine art

Does your church have antiques, ornate artifacts, stained glass windows, or painted artwork? These should be appraised and included in a complete inventory checklist. As you negotiate your policy, consider insuring irreplaceable items through a fine arts enhancement to help cover restoration and repair. 

Pro tip: Since valuables can hide in plain sight, ask your agent to perform a walkthrough to help assess your inventory list, and log any missing items.

Hidden exposure #4: equipment upgrades and replacements

Most churches rely on technology for services, including projectors, speakers and lighting. If this equipment is damaged, stolen or lost, the cost to replace it could mean another out-of-pocket expense.

You might notice terms like replacement cost (RC) and actual cost value (ACV) throughout your policy. There’s a key difference here that is important to understand: Replacement cost is the cost to replace the item with an item of like kind and quality. Actual cost value is the amount to replace the item, minus any depreciation that has occurred. 

Policies that cover RC usually cost more upfront, but can provide greater peace of mind after a loss has occurred. This can be especially helpful for items that depreciate in value, such as A/V equipment and vehicles.

Hidden exposure #5: the worst-case scenario

No one wants to anticipate a worst-case scenario, but understanding where your policy’s limits and coverage gaps would lie in these circumstances is critical. Limits are the maximum amount an insurer will pay per incident. So, if a church’s property insurance has a $200,000 limit, but sustains $300,000 in damage, then the insurer pays up to the $200,000 limit and the parish is on the hook for the remaining $100,000. 

This can get confusing as deductibles and extensions are introduced. Deductibles are the amount the church must pay toward a claim before insurance kicks in. Unlike health insurance, property and casualty deductibles are applicable to each incident. So, if you have more than one claim in a year, each claim is subject to the same full deductible.

We get it. There’s so much to think about when it comes to insurance coverage for your church. The insurance specialists at Glatfelter are always here to help you find an insurance producer who truly cares, and who can evaluate your needs and risks and answer your most common insurance questions while you focus on fulfilling your mission. 

The difference you make in your community is remarkable — and your insurance protections should be, too.

Shawn Yingling is the president of Glatfelter Religious Practice (GRP). GRP specializes in insurance and risk management programs for churches and other religious institutions and is a division of Glatfelter Insurance Group (an AIG company), one of the largest program managers in the U.S.


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