Understanding Church Insurance: Liability Coverage


While property insurance covers the things you own, liability insurance covers the actions that could leave your church liable for damage to others (injuries, property, or reputation). Many ministries wonder what type of liability insurance they need for their organization. Churches have become increasingly susceptible to lawsuits and claims for false accusations or inappropriate behavior. If someone claims any level of harm, you will want coverage to fall back on. Optional coverages are available for a wide variety of risks. Discuss all the aspects of your ministry and any possible exposures with your agent so that you can obtain proper protection. Below are some of the available types of liability coverage.

  • General liability. Liability comes into play when the church is legally liable for bodily injury or property damage. In addition to paying the damages for the injured party, the policy usually covers defense costs for litigation. It is recommended that churches carry at least $1 million in general liability coverage.
  • Sexual misconduct liability. Not only is it wise to have coverage for a real incident but also to defend against an allegation. Defense costs can climb into the hundreds of thousands of dollars. The amount paid to the plaintiff is often substantial and can force a church into bankruptcy or liquidation. It is recommended that a church has a minimum of $250,000 and should strive to obtain higher limits if at all possible.
  • Directors and officers liability. This is coverage for decisions made by your board, officers, or trustees. Even though many states offer protection for volunteer board members of nonprofit organizations, there can still be significant defense costs should someone bring legal action against board members.
  • Employment practices liability. This coverage provides for claims arising from practices associated with employment-related events. This includes claims of discrimination, wrongful termination, etc. The premium cost for this item is usually less than only a few hours of attorney fees. We are seeing more claims in this area due to age or gender discrimination.
  • Employee benefits liability. This coverage provides for claims arising from an error or omission by an employer with regard to the benefits an employee should have received. This would include group health plans, retirement plans, group life, etc.
  • Professional liability/counseling acts liability (nonfee-based and fee-based). Sometimes people accuse pastors and counselors of physical and emotional harm. This coverage provides for a claim arising from pastoral direction or counseling. Limits should match the general liability limits.
  • Garage insurance. If your church offers valet parking, provides automotive services (like free oil changes to widows or single mothers), or accepts donated vehicles and sells or gives them away, it needs a form of garage liability. The amount of coverage varies depending on the activity of the church.
  • Foreign liability and foreign travel insurance. If members of your church travel outside the continental United States, your basic coverage may have limits or exclusions.
  • Workers’ compensation. Each state has its own version of Workers’ Compensation laws and coverage. In general, Workers’ Compensation insurance covers 100 percent of the medical bills for an employee who is injured on the job due to a job-related activity. Each state determines the percentage by which it compensates lost wages. The employer’s liability portion of this policy covers the employer for any negligent acts that result in injury to an employee. Your agent should be able to assist you in determining the appropriate coverage and limitations required in your state.
  • Hired and non-owned autos. This provides liability coverage for rented automobiles and use of other non-owned autos. In the event that church members or employees are using personal autos, their insurance is primary and this insurance is available only after the primary insurance is exhausted. All churches should have this coverage.
  • Medical payments. This endorsement allows a goodwill payment to individuals who are injured on the church property regardless of fault. Usually it is limited to $5,000.
  • Excess liability (umbrella). This is an added coverage that acts as an umbrella over your other liability coverage should those coverage limits be reached through claims activity. This coverage is for those rare, but extremely expensive, liability claims.
  • Business auto. Any time a church owns its own vehicles, coverage is necessary. Some insurance providers have limitations both on vehicles and drivers. For instance, many will not cover the older 15-passenger vans. Others may limit the age of the drivers. It is recommended that a church has a minimum of $1 million liability limits on its auto policy. This is perhaps the greatest exposure for loss for the average church. Check with your agent for advice on your auto policy and for direction on physical damage to your autos.
  • Other coverages. There are other coverages available depending on the level of need and activity your church is involved in. The key is always maintaining a good relationship with your agent and keeping communication open should you have questions regarding your coverage. Also, if you engage in a new ministry, add a new building or room, or obtain a piece of equipment, contact your insurance professional so he can review your policy for sufficient coverage.

Choosing an Agency

It is important to place coverage with an insurance company that has a Best’s Credit Rating of A- or better. Also, place coverage with an agent that is knowledgeable about insuring churches. The General Council of the Assemblies of God has a customized insurance program AG Churches. Church Mutual, an A+ rated company with over 100 years experience in insuring churches, underwrites this coverage.

Furthermore, developing a good relationship with your agent is critical. Openly discussing your needs and current situation with your agent will enable you to better prepare for future scenarios. Keep in mind that your insurance agent is in the best position to clarify coverage, help you understand terminology, and keep your ministries protected. They are your best ally should the unthinkable happen.

What liability insurance or risk management practices have you put in place to protect the people in your ministry? Share your story below.

Jerry Sparks, President
AGFinancial Insurance Solutions

Information is from sources deemed reliable. Information is subject to error, omission, withdrawal, or change.

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