Churches are always wondering what insurance coverage they need to have in place. As a church, you are considered a nonprofit organization, which requires your church to have a board of directors. Churches most commonly refer to their board members as Elders and/or Council Members.
As church board member, they take on additional personal liabilities for the financial decisions they make on behalf of the church. As a result, most informed board members want an insurance policy to protect them financially.
Directors and officers insurance for churches (D&O Insurance) protects the personal assets of each person who sits on the directors and officers board. These personal assets include their personal checking and savings account, stocks, and even the equity within their home.
In addition, it provides additional protection to their spouses, in the event they are personally sued. Lawsuit can come from any number of parties to include an employee, vendors, competitors, investors, customers, or other church members, for actual or alleged wrongful acts in managing the church organization.
D&O insurance, also extends coverage to the church organization as well. The insurance protects the church for legal fees, settlements, and other costs associated with a claim.
Most board members, especially those who have been involved in a prior claim will want to ensure they are protected from both indemnification and a church D&O insurance policy.
The good news is your D&O insurance policy includes language that provides financial backing for your churches standard indemnification provision. The provision found within the D&O policy, holds officers harmless for losses due to their role in the company.
A church Elder Board who are considered to be the churches Directors and officers, can be sued for a variety of reasons related to their church’s roles and responsibilities, including:
As with any insurance policy, Illegal acts or illegal profits are generally not covered under a church D&O insurance policy.
It’s a common misconception that D&O claims are rare within a church. For the most part we would agree with this assessment. This is evident in the low annual premiums, church property insurance companies charge for this coverage for the average church. For a typical small or average size church, D&O insurance only cost a few hundred dollars per year.
As your church insurance brokers, it is our job to help you identify all your liabilities your church could face in the future. This includes both small and medium size risks. We have partnered with church insurance companies that have been specializing in church insurance for over a half century. These church insurance companies provide competitive pricing for their directors and officers insurance for churches.
Churches of all sizes who have a corporate board or should consider including a church D&O insurance policy. We have found that church members will not agree to be nominated as an Elder of the church, unless there is a D&O policy in place. They risk losing a lot for their volunteer service. Making sure your church has a D&O insurance policy in place, is the least you can do for your board member.
While we never want to think a church member would sue one of our trusted elders or even the entire elder board, this can and does happen. Following is a claims example that occured in 2008.
During a church business meeting, one of the items being discussed was their churches group health insurance monthly cost. During 2008 our economy was in bad shape, as a result churches were struggling.
A long standing member of the church raised their hand and voiced their opinion on why the elder board agreed to such an expense health insurance plan. They were very upset as the church member believed they had purchased a health plan that was far to expensive.
They stated the elder board was misusing the churches funds by selecting the plan they did, especially during a time of economic difficulties. The church member was not happy his offering was being wasted on what he believed was a very lavish health insurance plan.
As mentioned above directors and officers insurance for churches, covers your board member for both “actual or alleged wrongful acts”.
In this case the church member was incorrect in their assumptions, as the church had obtained the cheapest available plan in the health insurance market.
The church member was out of touch on the true cost of health insurance, as they were a union employee and paid almost no monthly insurance premium.
Something as simple as group health insurance, could have spelled disaster for the churches board members. Had this individual pressed the issue further, they could have filed a lawsuit. Thankfully this did not turn into a lawsuit, and he was satisfied with the response from the board members of the church.
We understand that you don’t have time to read your church insurance policies. Below are common exclusions you can expect to find in your Directors and Officers insurance for churches:
Fraud and criminal offenses. An church board member will not be covered if they steal money from the church or commit other criminal acts.
Pending and prior litigation started before you obtain your D&O insurance coverage.
Bodily injury/property damage. Customer injuries or property damage would typically fall under a churches general liability insurance policy.
Insured-versus-insured claims. One director or officer suing another is not covered.
Employee Retirement Income Security Act claims. Claims of mismanagement of employee benefit plans would typically be covered by fiduciary liability insurance.
The cost for Directors and Officers Insurance for Churches can range from a few hundred dollars a year to thousands of dollars.
The more assets your church has will increase the cost associated with D&O Insurance.
Another factor dealing with the cost of D&O Insurance is how you purchase the coverage. A D&O insurance policy purchased on a standalone basis will cost more than a policy obtained as a package policy.
When your church is insured with a insurance company that specializes in churches, these companies will typically offer a package policy.
Your D&O Insurance policy will also include a deductible that is seperate from the church liability and property policy deductible. These deductibles range from $1,000 to $5,000.
Integrity Now Insurance Brokers specializes in insurance for churches. One of our church insurance agents are here to help you navigate all of the needed coverages your church should have in place. Directors and officers insurance for churches is just one of many different coverages you will need to have in place.
As your church continues to grow and prosper, we are here to provide additional recommendations when it comes to adding additional ministry insurance coverages or increasing existing church insurance limits.
We provide religious institutions and non-profit organizations with insurance policies that cater to their specific needs. Some of the coverages we help your church with includes general liability insurance, workers’ compensation insurance, business auto insurance, EPLI, and more.
If you are running a church in California, Ohio, Nevada, Washington, Colorado, Arizona, or Texas, Integrity Now Insurance is at your disposal. Our competent church insurance agents are determined to help churches across the US to find church property insurance companies that caters to their special needs. Call us for more information.