If your church is destroyed, could you rebuild?
Congregations want to be able to count on their insurance in the event of a catastrophe. Churches and nonprofits need to make sure their building’s value is accurately reflected in the information they’ve provided to their church insurer.
you need to know your building’s insurance value before a crisis, not afterward. make sure you’re coverage amounts are enough to replace a lost building.
It’s a memorable day in the life of your church. And not in a good way.
When the phone rings, a fire chief is on the line to let you know your building has been destroyed. It’s a day you never thought would come.
After making sure no one was hurt, your next thought is likely insurance. “Where is that policy? What does it say? Am I covered? For how much?”
At Ministry Pacific, we don’t want the answer to be a mystery: It all starts with the value your church assigns to your property. The insurance premium is then based on this number.
Church building values
Your building valuation is the key factor in determining your insurance payout if your facility is damaged or destroyed. (For clarity, the insurance industry uses the term Reconstruction Cost Estimate when discussing building valuations). We’ll keep it simple here.
“A building valuation is the amount for which your building and its contents are insured. ”
This amount is determined by multiple factors, including your building’s size, number of stories and unique architectural features. In addition, the valuation should incorporate property that’s not part of the building itself (called business equipment). You could also refer to this as “non-structural items.” These are usually mounted to the building and can’t be easily removed. Examples include stained glass, pipe organs, pews, audio visual systems and solar panels. All of these are included as part of the building value.
A building valuation is not set in cement. If your church expands, then your valuation needs to be updated (and filed with your insurer) to reflect this. In addition, market factors such as the cost of materials and labor will impact your building’s replacement value.
The problem of undervalued church buildings
Our experience, government data and private studies show the vast majority of church and commercial buildings are undervalued for insurance purposes.
Here’s a hypothetical example. A property insurance contract has been written based on a building valuation of $700,000. After the policy was written, a new wing was added and several rooms were renovated. But these changes were not communicated to the insurer and the policy was not updated to reflect them. The actual replacement cost was now more than $1 million (these numbers are for illustration purposes only). In this case, an inaccurate and incomplete building valuation did not prepare the church for all of the costs associated with rebuilding. Its construction budget fell short by $300,000. For most churches and nonprofits, that’s a lot of money. Unfortunately, this is a common problem.
The cost of rebuilding includes much more than bricks and mortar. Elements beyond the physical structure include:
Higher costs resulting from updated building codes.
Expenses related to complying with expanded environmental regulations.
Increased labor and materials costs.
Renting a facility while your building is repaired or rebuilt.
Removing debris.
And more
An insurance contract that does not account for these and other factors will leave an organization scrambling to survive the loss of its building.
There is good news
We can plan ahead to ensure we have the coverage to fully rebuild. That’s where our free eBook comes in. We invite you to download the Church and Nonprofit Facility Valuation Guide. Then contact our non-commissioned team for a free consultation about your building’s value. We’re here to serve you.
