Frequently-asked questions about church and nonprofit insurance

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FAQ

CHURCHES, NONPROFITS AND INSURANCE

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The word “insurance” can elicit blank stares and furrowed brows. It’s often misunderstood – or not understood at all. Sometimes it can get technical. Here, we answer some of your most common questions and define terms. We want you clearly understand what your policy provides. In our view, an educated customer is the best customer. Let us know if we can be of further assistance.

FREQUENTLY-ASKED QUESTIONS ABOUT CHURCH, MINISTRY AND NONPROFIT INSURANCE

Q. Why do churches and charitable nonprofits need insurance?

A.  Generally, churches and nonprofits are not legally required to have insurance, with a few exceptions. These exceptions are:

  • Workers’ Compensation Insurance

  • Business automobile insurance

Simply, if you have employees or vehicles, your organization must have insurance for both.

In addition, when a church takes on a bank loan, the bank (not the law) will likely require property insurance as a condition of the mortgage. However, the lack of legal mandates doesn’t mean churches and nonprofits shouldn’t have other kinds of insurance. As an act of our own free will, many of us decide to manage risks in our business and personal lives through insurance. In many respects, churches face the same risks as individuals. Neither individuals nor churches are not exempt from litigation. The price of legal defense can easily reach $100,000. In the American system, you don’t have to be guilty to get sued. And even if you win, you still lose because you have to fund a costly legal defense. Insurance is part of the response to managing risk. In addition, the same natural threats that could damage or destroy your home (fire, lightning, flooding) can devastate your church building. Someone will have to pay for rebuilding. If it’s not insurance, who will it be? Although most church and nonprofit insurance is not mandated, we believe it’s in everyone’s best interest to seek appropriate coverage so their legacy can live on.

Q. Does buying insurance indicate a lack of faith in God?

A. Although we’re not theologians, we believe the idea that insurance and faith are incompatible is a result of several misunderstandings. We lock our doors, wear our seatbelts and replace our smoke detector batteries. Why? To manage risk. Insurance, whether on behalf of an individual or church, recognizes that we live in a fallen world where bad things happen to good people. Insurance helps continue the legacy of churches and nonprofits by enabling them overcome storm damage, lawsuits, criminal acts and other symptoms of a fallen world.

Q. What are some of the risks churches and nonprofit organizations face?

A. With very few exceptions, churches and nonprofits face the same risks as all other organizations that serve the public. We rarely think about these things until we’re faced with a concrete threat. There are two basic categories of coverage: property coverage and liability coverage. Liability coverage is generally related to actions that could expose an organization to lawsuits or state sanctions.

Property coverage includes:

  • Weather-related property damage

  • Facility rebuilding costs

  • Crime-related property damage

  • Theft or destruction of building contents

  • Church vehicle damage

Liability coverage includes:

  • Embezzlement

  • Data breach (personal information of members or donors is inadvertently released)

  • Lawsuits from slip-and-fall accidents, a parking lot car crash or a claim that buildings were not accommodating to people with disabilities.

Lawsuits against churches and nonprofits can also allege sexual misconduct, professional negligence, or claims regarding the free expression of religion. There are numerous other suits people can bring against churches and nonprofits. Liability insurance funds a legal defense.

Q. How do property and building insurance reduce risk for churches and nonprofits?

A. As much as we’d like our buildings to stand forever, they’re surrounded by the same forces of entropy that slowly eat away at all buildings. Risks include:

  • Fires (whether arson, electrical or lightning)

  • Flooding

  • Storm damage

  • Earthquakes

  • Frozen pipes

  • Utility damage (a ruptured gas line)

  • Building or property contamination (toxic mold, EPA hazards)

  • And more

Although we hope your congregation never has to face any of these issues, property and building insurance can help you move forward in the face of these challenges.

Q. How can churches and nonprofits know if they have adequate property and facility insurance?

A. This is an important question and deserves more space than can be devoted here. Insurance coverage should begin with an accurate valuation of the property being insured. An updated valuation will be based on today’s cost of materials and labor, ensuring actual costs are used. It’s critical that the value assigned to a building reflects the true cost of rebuilding. If it doesn’t, a church or nonprofit will come up short when it’s time to rebuild. Facing the loss of a building is challenging in the best of circumstances. Trying to rebuild with an underfunded construction budget exacerbates the problem. Property insurance should fully account for brick and mortar costs. But there are others. For example, city building codes are constantly evolving. It costs more to comply with codes today than it did in 1990, 2000 and 2010. In addition, new environmental regulations drive costs higher. If a building is destroyed, churches will have to pay for debris removal and expend funds for a temporary place to meet. They may also need to tap into funds available through business interruption insurance in order to pay their staff and continue programs that serve the community.

Learn more about your church or nonprofit facility and its value.

Q. Since churches and nonprofits are not businesses, why would they need business interruption insurance?

A. Business interruption insurance is a general term for coverage that provides funds in the event operations must temporarily cease or be curtailed. For example, if a fire renders a building temporarily or permanently unusable, an organization will experience a disruption to its operations. Business interruption insurance can provide funds for temporary meeting space, salaries, loan payments and other expenses. Business interruption insurance is available to both churches and nonprofits.

Q: Does liability coverage protect board members, leaders and volunteers of churches and nonprofit organizations?

A. The lives of churches and nonprofits are sustained by an army of volunteers and committed employees. Few would be willing to serve if they put their personal assets on the line by volunteering. Directors and Officers Liability insurance protects these individuals from litigation directed at their volunteer efforts. Their work on behalf of the church or nonprofit is shielded by liability insurance coverage.

Q: Churches are increasingly facing conflict over church and state First Amendment issues (freedom of religious expression). Does liability insurance protect churches?

A: Freedom of Religious Expression Liability insurance cannot prevent lawsuits against churches or faith-based organizations. However, it does fund a legal defense, making it possible for these organizations to stand their Constitutional ground and advocate for their rights to freedom of religious expression.

Q: What is no-fault medical (personal injury) insurance and why do churches and nonprofit organizations need it?

A: No-fault medical insurance helps cover medical expenses when someone is injured through an accident on an organization’s property. It is usually not purchased as a separate policy and is included in a customer’s overall insurance plan. Contact one of our representatives to learn more.

Q. What is employee or volunteer bonding insurance?

A. Bonding is a type of insurance that protects an organization from theft by an employee or volunteer. This could include stealing or damaging property. Unfortunately, these types of things happen with regularity at churches and nonprofits. With bonding, losses are covered. Learn more.

Q. What is cyber liability insurance and how can churches or nonprofits be liable for cyber-related crimes?

A. Our digitally interconnected world has helped to build and sustain relational community. But it also has a dark side: data theft, financial fraud and extortion. Churches and nonprofits possess confidential information about their members. If this data is stolen, these organizations could be exposed to lawsuits. In the event of a data hack, churches and nonprofits are also obligated for the expenses associated with notifying people of the breach. Cyber liability coverage can address:

  • Loss of income due to a cyber attack

  • Data recovery

  • Cyber extortion

  • Reputation damage and crisis management

  • Fines from regulatory agencies

  • Legal fees related to the cyber attack

Learn more about cyber liability coverage for churches and nonprofits.

Q: What is electronic media liability insurance?

A. Electronic media coverage provides a legal defense to litigation involving:

  • Libel, slander and defamation

  • Copyright infringement

  • Invasion of privacy

Churches and nonprofits that use third-party media without consent of the creator could be sued for copyright infringement. Libel, slander and defamation are related the public criticism of people and organizations that results in demonstrable damage to their reputation and income.

Q. What is international insurance and travel insurance and how can nonprofits and churches benefit from it?

A. When you cross an international border, the rules suddenly change. Everything from health care to civil rights to traffic law now operate under a new sovereign regime. International travel insurance prepares you for challenges you may encounter in a foreign country. Travel insurance can protect from loss resulting from:

  • Illnesses and injuries

  • Trip cancellation or interruption

  • Loss of passport or wallet

  • Lost luggage

  • Emergency evacuation due to a medical condition or crisis

  • Other factors

International travel insurance is for short-term trips outside the United States. As such, it’s not the type of insurance you need for a long-term reassignment or residence outside the country. However, it is an ideal component of a short-term mission trip undertaken by a church, nonprofit or even a business. In addition, this insurance is important to international tourist travel.

Wherever you’re working in the world, Ministry Pacific has you covered. Through our subsidiary, MP Global, we can meet the international insurance needs of individuals, churches, nonprofits and more.

We provide coverage for international travel and business including:

  • International travel and medical insurance (individual and group plans) for mission trips, business trips and more.

  • Health insurance for international visitors to the United States

  • Student travel insurance

  • Evacuation and repatriation (return home) insurance

  • International workers’ compensation insurance

  • Foreign liability insurance

  • Kidnap and ransom insurance

Emergency travel insurance
If you are urgently in need of international travel and medical insurance (for example, you leave today or tomorrow), please contact Ministry Pacific and we’ll be glad to help you secure the travel insurance you need.

Q. What are group insurance plans and does Ministry Pacific use them?

A. When possible, Ministry Pacific enrolls churches and nonprofits in group plans. By including multiple customers in the same plan, risks to the insurer are reduced. That often results in competitive pricing for policy holders. In addition to group plans, Ministry Pacific insures individual churches and customers who cannot or do not want to be a part of a group.

Q. Does Ministry Pacific provider customer support for Spanish-speaking customers?

A. We are delighted to provide a full range of customer support and service for Spanish speaking customers at churches and nonprofits. Visit our Spanish site.

Q. What is the difference between an insurance broker and an insurance carrier?

A. Ministry Pacific is an insurance broker. This means we are not insurers. Instead, we are the point of sale, service, contact and advocate on behalf of multiple customers. We provide the day-to-day service you need, taking care of communication with the insurer. This saves you time and headaches. In addition, insurers are generally restricted to offering their own company’s products. Ministry Pacific, as a broker, has no such restrictions. We are free to find the lowest price and the best policy for our customers regardless of which company it comes from. However, we do not compromise quality for price and only do business with highly-rated, reputable insurers.

Q. Can churches and nonprofits purchase active shooter insurance coverage? What does it cover?

A. Churches and nonprofits (and businesses) can purchase active shooter insurance as an extension of their property and liability coverage. If people are injured in an attack, they can sue the facility owner for negligence. In addition, if a church security team takes action against an aggressor, the aggressor can sue for unlawful use of force. Active shooter insurance helps cover the cost of legal defense and other expenses related to violent incidents, whether there is an actual shooting or not. We encourage all active shooter policy holders to seek professional security training through Strategos International. We hope no one ever has to file an active shooter claim, but we want you to be prepared if you do. Learn more about active shooter/violent incident coverage.

Q. If an individual in a church or nonprofit is accused of sexual misconduct, what role does liability insurance play?

A. Sexual misconduct is a devastating offense, wounding many people and damaging an organization’s reputation. Liability insurance covers the cost of a legal defense when someone is accused of misconduct in the service of the organization. It’s important to note that no one has to be guilty for a lawsuit to be filed. Nevertheless, a defense must be made because the organization itself has been sued. We encourage all of our liability insurance policy holders to receive professional training on preventing and responding to sexual misconduct from Ministry Safe.

Learn more about protecting children and others from sexual abuse.