Insurance for Sexual Abuse
A few months ago my good friend Fletch over at XPastor.org brought me this question one of his readers posed to him about their church: “Hey Fletch … Our church has $2 million in umbrella insurance. Does that cover sexual abuse as well?”
It’s a great question, Fletch! Let’s start with some background questions: What are the different types of insurance that a church should consider— property, liability, sexual abuse, and so on?
Let’s suppose that this church has 500 people in worship, two to 10 passenger vans, VBS, high school trips in the summer and a $1 million budget. What kind of levels of coverage should a church consider for each area?
Here’s my response:
Hey Fletch- Glad to be brought into the conversation. If this particular church hasn’t jumped through quite a few hoops to include abuse in the umbrella, then they likely doesn’t have that coverage. The term ‘umbrella’ is a bit misleading. It sounds like there is a broad policy that covers anything that happens at a church. Policies used to be written this way, but virtually all ‘umbrellas’ nowadays require that there are limits on the base policy AND that wording on the umbrella policy says that particular coverage is included in the higher limits. A more appropriate term is actually ‘excess’…this means that you have limits ‘in excess’ of the base policy.
Key items in the insurance policy should include Directors & Officers, Counseling, Sexual Misconduct, Coverage for your Security Team (especially if you have a formal team and/or if anyone is armed), Cyberliability, Foreign Liability, and Nonowned Autos. The key to determining the limit is that it shouldn’t ever be one person’s decision. The board should annually be informed what the current limit is and be sure that they are all comfortable with it.
For an active church like the one you describe, most boards would be comfortable with $1MM plus a $2MM umbrella (total protection of $3MM), but I’d still have the board be brought into the conversation. A key point on the limit is that $1MM for Directors & Officers isn’t $1MM each board member…that is the total amount of protection for the entire board. If you have board members with high assets, those boards want to be sure that the umbrella/excess extends over the Directors & Officers Insurance to cover their personal exposure.
The majority of claim dollars are spent in the property area. With construction growing and employment low, replacement costs are growing faster than most insurance policy limits. Most churches should increase their property limit by about 10% from 2017 to 2018.
Additionally, we see that most churches don’t think about the other costs during a claim…what it takes to rent an alternative location, lost tuition income, decreased giving, and much more. A major property claim (especially where the cities are difficult to work with) can last 2 years…think of what it would cost to rent a space for 2 years to keep your ministry going.
Lastly, I’d like to emphasize the importance of Ordinance & Law Coverage. If your church was built more than a couple of years ago, it doesn’t meet current codes…fire sprinklers, ‘green’ upgrades, energy efficient requirements, ADA access, etc. Talk about this with your agent (and hopefully a contractor in your congregation) to get a feel for what would be appropriate.
Insurance is more than an annoying line item in your budget…it’s a tool for ministry protection and continuity. A good agent should have a ministry focused discussion with how this applies at your church!
Hope this helps with your church and your understanding of how umbrella insurance relates to sexual abuse in ministry.