What To Know About Church & Ministry Insurance in 2024

Insurance is hard to get right now

It’s difficult for everyone to find good insurance right now. It’s especially hard in California, for a few reasons:

• Inflation: Increased costs in construction and material costs mean that when property damages occur, it’s getting increasingly expensive to restore the property to it’s pre-loss state. These higher costs are passed along as higher premiums for insureds.
• Fire Claims: California has suffered historically destructive wildfires in recent years, with damages in the billions of dollars. Even if buildings are not directly impacted by these catastrophes, the related smoke damage can still result in tens of thousands of dollars in property damages.
• Liability Claims: The courts and legislature continue to reopen and amend the statue of limitations. For both employment and child abuse lawsuits, the longer statute of limitations means more and more claimants come forward every day. The defense and payment of these claims ultimately means higher premium payments for ministries. 
• Rising Reinsurance Costs: Did you know that insurance companies buy insurance? They do, and their insurance is getting more and more expensive. Even when large claims occur that don’t directly impact churches or ministries, the burden is still felt across the insurance industry. These rising costs for insurers are largely out of our control, but they do have a significant impact on everybody’s premium.

A Brief Note on Proposition 103

Another factor that contributes to the rising costs and shrinking options for ministries is Proposition 103, a bill passed in California in 1988. This bill made the Insurance Commissioner an elected position and essentially requires that insurance companies get ‘prior approval’ before they can raise rates. While well intended, this economic restriction of the insurance industry is a big reason why fewer and fewer insurance companies choose to do business in California.

What to Discuss With Your Agent

In this hard insurance market, it’s more important than ever to partner with your agent and craft an insurance program that considers both your ministry’s unique risks and your budget. Some questions to ask include: 

• Are We Covered Against Water Damage? Water damage claims continue to be one of the common types of property damages for ministries. This coverage varies by insurance policy, and the industry has become increasingly restrictive due to the frequency of these claims. 
• Are We Keeping Up With Local Ordinances?  If your ministry operates an older facility, you may be behind on local ordinances and code upgrades. In the event of a property loss, this could result in increased cost of construction to bring the building up to code. Ordinance and law coverage pays for the increased cost of construction or repairs due to changes in building codes or ordinances that apply after a covered loss.
• How Much Will It Cost To Stay Open During A Claim? Sometimes catastrophe strikes, and can indefinitely disrupt ministry. Extra expense coverage can help your ministry continue operations in the event of a property loss that forces you to temporarily relocate or incur additional costs.  
• Are Your Liability Limits Keeping Up With Verdicts? When securing liability insurance, you must consider the long-term perspective. Verdicts for sexual abuse claims are significantly higher today than in the past and likely to increase in the future. It’s crucial to set liability limits that account for the future financial landscape, ensuring the coverage purchased now remains adequate for potential claims decades ahead. 
• Are The Limits For Your Board Adequate? Leaders care about managing their ministries well. Yet, even when making decisions that align with the best interests of the ministry, lawsuits could arise that challenge those decisions. If sued, their personal assets could be at stake. Directors & Officers Liability Coverage protects against financial damage claims based on decisions by ministry leaders. To fully protect these individuals, make sure that your D&O liability limits match the limits that protect your organization.

Go Beyond Your Insurance

Protecting your ministry requires a holistic approach. In addition to insurance, here are some other risk management items to review: 

– AB-506 & Child Safety: If you are not already AB-506 compliant, start here. When this law became effective in 2022, it formalized the requirements for preventing and detecting child abuse. This comprehensive bill involves background checks, mandated reporter training and policies & procedures. For a comprehensive breakdown, check out our Ultimate Guide to AB-506. 

– Implement Faith-Based HR: Human Resources in ministry is a nuanced art. As a religious non-profit employer, you enjoy certain protections under the First Amendment that simply don’t apply to secular organizations. Positive steps your ministry can take include reviewing your employee handbook with a specialist and replacing your traditional Labor Law poster with one designed for ministries. For a comprehensive approach, consider subscribing to Church HR Network for 1-1 guidance and support.  

– Prevent Water Damages: Water damage continues to be one of the most common forms of property damage for churches and ministries. To manage this risk, consider installing a commercial automatic shutoff valve to reduce the risk of water damage from faulty pipes, especially in older facilities. This device can detect leaks and shut off the water supply before extensive damage occurs. 

Next Steps

These are some of the key insurance considerations for ministries in California, but they are not exhaustive. Ministries should work with their agent or broker to evaluate their specific needs and risks and tailor their insurance program accordingly. By doing so, ministries can have peace of mind that they are prepared for whatever challenges they may face in the future.