Defining Term And Procedures

Today we believe it is critical for us to define terms and procedures so that ministry leaders we work with can make effective decisions as they review the risk factors of their ministry with us.  We believe good communication and properly tailored applications will result in the right balance with this knowledge and understanding as developed in the relationship we offer our clients.  Our assistance in person or other is as near as your email or phone.*

Each element presented needs to be reviewed for its possible value for your ministry and your specific risk factors.

Thanks for the opportunity to share with you in your ministry*

Assisting ministries with developing, perserving and restoring trust, with excellence.

I. RISK MANAGEMENT: The process of making and implementing decisions that can minimize the effect of loss.

.

A.  It is critical that the church or church school review all the possible risk that they could possibly be presented with, noting possible frequency and severity. Please note, this is an ongoing process.

B.   It is then possible to review which risk management technique should be applied to each possible risk. The techniques include retention, avoidance, modification, shared, and insurance "risk transfer".

C.   Insurance, without the foundation of a quality risk management program today, is like building a fine building on quicksand.  The critical factor is that the seeming smallest risk could destroy the entire ministry. Insurance can assist only with replacement or rebuilding because it is just contracted funding. Often it is not able to replace that which is lost or destroyed. It can never replace the loss of life, sight, or limbs that may be lost.

D. The risk management process.

      1.   Review all possible risk factors, noting frequency and severity factors for each.

      2.   Determine the correct risk technique for each as listed below.

      3.   Implement the proper techniques

      4.   Review and modify as necessary. 

      5.   The possible techniques for use.  

                     ·      Avoid the risk

                     ·      Reduce the risk

                     ·      Retain the risk

                     ·      Share the risk

                     ·      Transfer the risk "insurance"

II. DISASTER RECOVERY PLANS: The process of making and implementing decisions that can minimize the effects of a disaster.

    A.  A quality agent will review with you all known possible risks that could present themselves for your  organization,

         and then review with you those risks that could develop into possible disasters assisting your organization with

         the appropriate disaster recovery plan for each.                                                                          

    B.  It is critical that your disaster recovery plans are practiced from time to time so that you can consider their efficiency

         and modify them if necessary.

    C.  It is also important that your disaster recovery plans are continually reviewed against your risk factors,  since risk

          factors seem to change from time to time.

    D.  Remember the Titanic; there were over 1,500 lives lost because it was thought disaster was impossible, thus a

          disaster plan was thought to be unnecessary.  Far too many churches and church school ministries today believe the

          same, as they trust charitable immunity laws that no longer offer valid protection. Some justify their lack of risk

          management and disaster recovery plans because they feel they will cost money and time they do not have.  Others

          believe they do not fit their ministry program as they are further lauded into believing possible disaster to be

          rare only happening to others, just as those involved with the Titanic.

     E.  A quality agent will supply timely information and assistance to help your organization with these errors of thought 

          before your possible staff or ministry demise.

III. THE PROPERTY STUDY AND ITS INSURANCE  (the contracted funds can assist with the following):

 

        A. Special Multi-Peril Building & Contents coverage

    1. Special form including theft for building & contents - This form is the broadest type of coverage available and covers perils that cause possible causes of loss which are not excluded from the policy. The two other forms, basic & broad, cover only the perils listed in the policy. All organizations should carry the special form policy to be sure they are covered properly. It is not uncommon for many companies to offer special form for the building but only basic or broad "named peril" coverage for the personal property. This little error can leave your organization many gaps in coverage.  
    2. Replacement cost for building & personal property or ACV - Replacement Cost, the policy type most useful to a church or other ministry.  This provides for the replacement of all or parts of the building or personal property destroyed or missing with new parts or items, of like kind and quality, if the insured value meets the policy co-insurance requirements. There is no deduction for depreciation to either the building or personal property should a loss occur. ***Functional replacement cost - Some organizations are in buildings that are far too large or more ornate and expensive than they may feel they need. In these cases, if the building were to be destroyed, it is most likely that a more suitable and often smaller or less expensive structure would be built. If this is the case with your organization, you would want to have the functional replacement cost of the larger, more ornate structure.  ACV or actual cash value (Market value) a benefit for the average business provided by the tax code, however churches and related ministries do not pay taxes thus this could result in a major loss for the ministry.  When damage to an item or a building happens it is first depreciated then the policy deductible is applied before a settlement is paid.  The Replacement Cost policy type pays for the cost to replace damage less a deductible when settling the claim, a true benefit for a church ministry.   Example a 10 year old roof warranted as a twenty year roof if damaged, is noted with 50% of its life expectancy used, results for a claim payment short 50% or a $10,000 roof would only yield $5,000 less your policy deductible, where as the Replacement Cost policy type would pay the cost to replace $10,000 less your deductible.  Which would you appreciate more as a church ministry.  Most of the time I see church buildings and or their personal property with an ACV type which saves premium dollars and sometimes Replacement cost for all claims by for losses by wind and hail.  A true loss for a ministry should a claim happen.  The savings gained on a premium could be very costly should a claim happen.
    3. The building & personal property "contents" description  - it is important to understand that certain items you may consider personal property are actually a part of the building, and do not need to be included in the value of the personal property. Your building value should include any “built-in” items such as your organ, altar accouterments, sound system and pews, or any other items attached to the structure . Personal Property "Contents", would include any item that is not attached to the building in any way.  Today it is critical to have a complete up-to-date inventory of your personal property, otherwise your coverage will only be an average or educated guess by yourself or the agent that could leave you with a large gap in coverage should a loss occur. A quality agent will give you guidance with this important process to assure proper coverage.
    4. Replacement Cost Insurance Value - We specifically appraise all structures that we insure for their proper replacement cost value using provided data and collected data which we enter into a software program called Marshall & Swift/Boeckh. This software has become the main accepted tool for determining the standard of value for most all new construction and replacement construction. This has thus also become the accepted tool for determining the replacement values for insuring and claims adjustment by most insurance companies today.  To be assured we are providing the best possible insured value for our clients we have adopted the use of this online software that is updated for construction costs of materials and labor in real time continually for all parts of the country and all types of construction.  We believe a quality agent would do the same to properly protect their clients.  Without an accepted standard of value insurance companies, agents, and policyholders would have no standard by which to know if the insured value is a proper insured value for the replacement cost. Please understand there are certified appraisers that charge a premium for this service but it does offer the added benefit of being certified which we are not as insurance agents. We do use the same software and thus should arrive at similar results. I must point out however, that all appraising is an art and not a science, thus the agreed value amount clause as noted next if included in your insurance plan will take away most of the contention for replacement cost value when a claim should be presented.  With the agreed value clause included in your policy the value is adjusted to proper replacement cost at the time of a loss if for some reason it is less in error. The MSB appraisal company software is adjusted daily by zip code for building quality and type.  We assess this by means of their online internet connection which is in real time. If you should have a question concerning the values in our report for your property, please let us know.  We also strongly encourage our clients to have a certified appraisal completed if they feel there is doubt with their values.  We trust you appreciate this added professional value that we offer our clients. The appraisal process should thus determine the value to replace your building on the specific date completed for each component building element in like kind and quality to the best of our ability and judgement.  This value is however, not a certified value since we are not certified for such appraisals. 
    5. .Agreed Amount - One of the most criticial policy benefits that should be included in your policy and is usually missing. This option is extremely important to your policy and can wave possible penalties for insufficient insured values at a time of loss. With the agreed value endosement included in your policy the value is automatically adjusted to its proper replacement cost or market value (which every your policy states) at the time of a loss, if for some reason it is less then your policy requires by contract. Without it you can find yourself short in meeting the required co-insurance amount as stipulated in your policy at the time it is written whether replacement cost or actual cash value (market value).  For example, let’s say that your building has a 90% co-insurance clause, and that you have $600,000 worth of insurance on your building. At the time of loss an appraisal for the adjustment of the claim shows that your building replacement cost is  $1,000,000. By your insurance contract you have agreed to maintain an amount that is equal to 90% of the replacement value, which would be $900,000. The amount of the claim paid by the insurance company then becomes a factor of what you should have carried and what you did carry. In this case, the insurance company would pay 60/90 or 2/3 of the claim leaving you with a short fall. With the agreed amount clause included, the claim is paid up to the amount the policy requires without a penalty because the endorsed agreed amount increases the value to the proper replacement value.  As appraising is an art and not a science, the agreed amount clause thus takes the contention out of your insurance policy for insured replacement values at the time of a claim. 
    6. Co-insurance - It is important to understand that most policies offer a co-insurance limit for the insured value from 80% to 100%.  For a total loss you are left with the amount above the co-insurance limit which is usually stated on the policy declaration page. For a religious organization we recommend 100% because unlike a commercial business which depreciates their property for a tax advantage, the non-profit religious organization does not need this tax advantage. Second, it is important to understand that most religious organizational policies are written for the replacement cost of the building as noted above by the replacement cost definition as opposed to actual cash value or market value because they do not need the tax advantage provided to a business that might use this to their advantage.  Thus it would be proper to state that your policy for your religious organization should have an insured value equal to the stated co-insurance of 100% of its replacement cost. The replacement cost value for most insurance policies, claim adjusters, and insurance company underwriters, is now the standard of value as developed using the appraisal software by Marshall and Swift/Boeckh as discussed above under replacement cost.  If the insured replacement value as stated on the policy declaration page as the insured value is less than the calculated replaced percentage replacement value at the time of loss, your claim may be subject to a co-insurance penalty as defined within your policy in addition to your chosen deductible.  In simple terms you may only collect an amount that is equal to the percentage of the  replacement cost you are insured for at a time of loss.  This possible settlement value could leave you far short of your expectations for your claim settlement.  For those insured for the proper value a settlement is assured to provide the amount of capital to replace or repair the claim damage. Most insurance policy contracts for religious organizations do not offer claim adjustment based on what you paid for a building, or what it may have cost you to build, but by their accepted standard of value for the replacement cost of the building.  Your may have gotten "a very good deal to buy or construct the building, but that is not what your policy contract  has stated for its adjustment bases for your possible loss.  Example: A building that has a current replacement cost value as developed by MSB of $100,000 but has an insurance policy which states an insured value of only $40,000 for a stated policy co-insurance of 100% and also does not include an agreed value endorsement could save premium dollars, but could have a resulting claim settlement for a $10,000 loss and receive only $4,000 or an amount equal to the percentage it was insured for at the time of loss. (40% of the replacement cost of $100,000)  Some are quick to say"this is our building and we should be able to insure it for what we want or for what we can afford, which happens to be what we paid for the building or what it cost us to build.  However, the person that gave you the "good deal" or the volunteers that helped may not be available when a claim happens or you may not realize just how much the cost for construction has increased in the last few years.  There must be a standard of value accepted by all that fits the policy contract if one is to receive a fair settlement for claims presented.  Most all claims are reviewed by your state department of insurance to see if the settlement followed the insured contract to prevent possible insurance fraud, discrimination, or even worse issues that can result from a "good old boy" settlement that could result in all parties facing insurance fraud charges if caught by the department of insurance's review.  Properly insuring your building to value may cost you more premium but when you are presented with a possible claim there will be less concern as to whether you will receive the necessary amount to replace or repair the loss to your building.  I have seen the results of improper insurance values for churches that others have insured, which leaves them to languish with the aftermath and financial results.  This is like the father who died leaving his wife and three small children with only a life policy of $3,000 to cover the loss.  His wife and children will pay dearly for this error of choice. 
    7.  Blanket Building & Contents - This takes the policy from a stated value for each building and its contents, to a total value for any loss especially if you have multiple buildings. For example, if you have three buildings and their contents insured for $200,000 each on a standard form, and one burns down, you could receive $200,000 if it were found at the time of loss to be the proper value to meet its replacement cost for both the building and its contents. However, on a blanket form, the total amount of coverage or $600,000 is applied to a loss for any one building.  Therefore, if a building burned down and it was determined to have a replacement cost for both the building and its contents of $240,000, you could receive a check for $240,000, thus covering the insured shortfall of insured value. This provides another layer of protection to avoid a possible underinsured value claim and its resulting penalty from a policy co-insurance clause. 
    8.  Ordinance of Law Coverage - Many political jurisdictions have changed and are continually changing building requirements on new construction. Often times, in order to rebuild after a partial loss, the building commission in your area will require the building to be brought up to code to receive a permit. It is important that you have coverage to fulfill this need. For example you may have to add a handicap access for your building, have different electrical wiring installed or other changes to meet new codes. Most policies are written with a clause that requires replacement with like and quality which would not include this new code change that would result in added expense not covered by your policy. 
    9.  Plain windows, stained glass windows and art glass windows - Unless your windows are truly of unusual and expensive value, they should be included as part of the building with the limitation of payment subject only to the amount of the insurance on the building itself. If any of your windows are unusual or of high value, they should be separately scheduled on a fine arts floater policy which will provide coverage for the amount stated for each.  A qualified appraisal would be necessary for this fine arts coverage to be correct. 
    10. Clergy And Staff Business Personal Property - Many clergy and staff have musical instruments, computers, art and decorative works, as well as large libraries in the building and in their homes. Under normal insurance policies, protection for these types of contents is often limited to as little as $500. In addition, most homeowner’s forms exclude business personal property as tools of the trade or professional, thus offering little if any coverage.  It is important for you to address this matter at the time your insurance is written. In most cases this coverage cannot be added to their homeowner’s policy, and even if it could, it is much less expensive to add it to the organizational policy.  
    11. Extra Expense - At the time of loss it may become necessary for the organization to rent space at another location in order to continue their ministry while the building is being rebuilt. Extra expense provides dollars to offset additional costs incurred over your normal monthly expenses while operating at another location. It also covers expediting expenses such as overtime or air freighting of needed materials in order to complete the job faster.***Loss of tuition - This is a special form of extra expense that relates to schools and off sets tuition losses that may be incurred because you are not able to function while the building is being rebuilt or replaced.
    12. Sewer Backup - This simply means that if your sewer backs up, the damage caused is insured and covered. The policy should provide coverage up to the policy limit. (Most policies written today either exclude or limit this coverage.)   

       B. Earthquake - This is written in two different forms and should be considered if you are located in an active area.  It can either be an endorsement to the Special Multi-Peril Policy or it can be written as a separate policy called a Difference in Conditions form. (There are some variations between the two, but they are normally significant.)  

    1. Deductibles - Earthquake deductibles are written in one of two ways. The most common form is a percentage, usually either 5%, 10% or 15%. Many people confuse this with a percentage of loss, thinking that if they have a 10% deductible and have a $5,000 loss they have a $500 deductible. However, this is incorrect. The percentage deductible is calculated on the total building and contents value, so a 10% deductible on a $3,000,000 building containing $200,000 in contents would result in a $320,000 deductible regardless of the amount of loss. The other deductible form, while not often quoted, is a flat deductible and subject to availability in your region. The deductible normally written is a minimum of $10,000.
    2. Building Structure - There are normally three types of rating factors used on earthquake. These are brick or masonry, brick veneer, and frame. Be certain that your building is not incorrectly classified as it may affect your coverage limit if a loss occurs.

       C. Flood - Organizations that need flood coverage are located in flood plains and normally cannot purchase this   coverage from a standard insurance market. However, the federal government has established the National Flood Insurance Program, and this coverage is readily available through our agency. If you do not know whether you are in a flood plain, you may contact the National Flood Bureau, which is listed under the federal government section of your telephone pages or we would be able to assist you with that information. 

        D. Mechanical, Electrical, and Pressure Equipment Coverage - Basic or Comprehensive - This coverage is normally written in one of two ways; basic or comprehensive. The basic form is very limited, and we recommend the comprehensive or broad form (as it is sometimes called). The basic form is very limited in scope and often times covers only the equipment listed, whereas the comprehensive form covers all equipment that is applicable to the coverage. This includes but is not limited to air conditioning, heating systems, electrical panels, phone systems, computer systems. other electrical equipment. Some of the coverage provided under this form, which are specifically excluded on special multi-peril coverage policies, are explosion of pressure vessels, mechanical breakdown, and outside power surges of electrical equipment. 

           E.  Inland Marine - The Inland Marine coverage is designed to insure specific items of property at a designated value. The coverage for those specific pieces is broader than what is normally provided on the standard Special Multi-Peril Form.  Items that should on a schedule would include equipment that moves from location to location as a laptop computer, cell phone or lawn equipment.  Other items would be items that sit on your grounds like picnic tables or such that are not affixed to the property in some way.  Other items would be items of fine art, collector items, one of a kind items, worship service items as communion pieces, crosses or other items.***Valuation for these items - The value for a piece of equipment or a specific item such as a computer is fairly well defined by the cost as is equipment on your grounds, and need only be scheduled for that amount. However, fine arts, collector items, or one of a kind items that have intrinsic value attached to them should be appraised and insured for the intrinsic value. If this is not done, the policy is not obligated to do any more than replace the item with as close as they can to like kind and quality. In addition, if you don’t schedule intrinsic value items, the coverage provided under the Special Multi-Peril policy is usually limited if any.  

.

IV. SPECIAL MULTI-PERIL GENERAL LIABILITY ( Contracted funds can assist with the following)

The general liability limits of your policy should be no less than $1,000,000 per occurrence and $3,000,000 annual     aggregate in amount. The form on the insurance policy is relatively similar throughout most companies in terms of coverage they provide. However, there are some areas of difference, and you should address them when purchasing your insurance package. These are:

A. Named Insured - The definition of the Named Insured should be as broad as possible including, employees,  volunteers, and members for the organization.  Some of these are usually missing.

B. Personal Injury - The definition of personal injury should include disparagement (belittlement) of a person or organization.

C. Property Damage Legal Liability - Provides coverage for damage to those premises that are leased or rented to you. This limit should not be any lower than the total value of all your leased and rented premises.

D. Non-Owned & Hired Auto - Hired auto protects the church against lawsuits brought against it when someone on business for the organization has an accident while using a rented vehicle, i.e. members attending a convention in a rented vehicle. Non-owned auto insurance protects the organization against lawsuits brought against it while a person on business for the organization, driving a privately owned vehicle, has an accident and the organization is sued. For example, it could be as innocent as a volunteer driving to the post office to mail a letter for the organization and having an accident on the way. The individual’s insurance will protect him, but it does not extend to the organization. If the organization does not have non-owned auto coverage, the organization is without protection on this type of loss. While this coverage is listed under the special multi-peril liability form for some companies, it may also be found on a business auto policy if there is an insured auto. This coverage should be provided in either one of these two places. (Limits should be a minimum of $1,000,000 per occurrence.) 

E.   Ministers Counseling - This is an extremely important coverage to have and may be written in one of two ways either as an endorsement to your Special Multi-Peril policy or as a separate policy. From a coverage standpoint, it can also be written in one of three ways, by name, position or blanket. The by name type could leave you with a missing named person if the person were to leave your ministry and go to another. Often I see this type with the left person listed and the current person or pastor thus not listed.  This leaves the minsitry paying for something that will offer no benefit. Position is a very limited way to write this coverage as it will only cover listed positions such as “only called pastors, clergy” or “called pastors and assistant pastors.” The preferred way to carry this coverage is on a blanket format, as it will provide coverage for the minister, and the lay counselor, employees, and volunteers while performing activities within the defined ministry of the organization. (Limits should be a minimum of  $1,000,000 per occurrence, $3,000,000 aggregate.) If a policy does happen to cover this, it is usually listed positions only coverage. 

F.  Sexual Misconduct - This coverage provides protection for the organization in the event that a lawsuit is brought claiming that a person of the staff, a volunteer, or employee, working for the organization has been involved in some type of sexual misconduct or harassment. This coverage is provided to cover the neglect of screening and or background check usually, which is the basis of most of these suits.

G. Directors & Officers - This coverage protects the directors, officers, and volunteers of your organization from lawsuits brought against them and your organization for alleged wrongdoing, or wrongful acts. The wrongful acts should include breach of duty, errors, omissions, neglect, misstatement or misleading statements. We believe a Directors and Officers policy should provide insurance protection not only for directors, trustees, officers, employees, committee members, and volunteers, but for the organization as well if you are to meet today's cultural demands properly. Director and Officers claims including Employee and Employer claims are second today for non-profits below sexual misconduct claims. Many insurance agents will tell you that you don’t have to worry about this coverage as state statutes protect you from liability. Each state has its own statutes and in most cases they are extremely limited in what protection they afford, if any. However, there are no provisions to protect your non-profit organization from possible violations of a Federal nature. These can be much greater then state violations.  In addition, you do not have to be liable to be sued, and in most cases you still have to defend yourself in court. (Limits should be no less than $1,000,000 per occurrence, $1,000,000 aggregate). Today your leaders and volunteers would have at risk all of their personal assets, if this critical coverage is not included in your policy. 

     H .    Employment Benefits Liability – This coverage is important today if you have even one employee.  It protects the organization against unwise benefit plan choices or the way they are administered.  The premium is based on the number of full time and part-time employees you have employed.

    

     I.   Employment Practices Liability -  This coverage is very important today if you have even one employee.  Next to sexual misconduct litigation it is the next highest form of litigation for religious organizations including and often includes litigation from clergy as well. It is important to have written procedures and good risk management for this area. It protects the organization regarding your employment practices including employing and dismissal of employees. Minimum coverage should no less then $1,000,000. The premium is based on the number of employees you have total, full time and part-time.  Sadly this critical coverage is found usually missing on most church policies today.

    

     J.    Specialty Coverage - If your organization includes a daycare facility or a school or you are a stand alone organization of this type, there are other areas of insurance you need to consider carrying that are not a typical part of the basic insurance policy. These are corporal punishment and excess medical payments for students. In addition, schools, instructors, and the school board require a specialized form of Directors and Officers Liability Coverage. This coverage is commonly referred to as Educators Legal Liability coverage and may be purchased with limits of $500,000 or higher. Coverage that should be included are: First Dollar Defense, Discrimination, Failure to Educate, Civil Rights Violations, Unfair Employment Practices, and Wrongful Termination. As coverage forms vary a great deal, it is essential that they be compared in detail. You should also be sure the coverage form chosen will provide defense for the individual accused as well as the school itself. Never accept an oral statement as to the extent of coverage provided, always require that it be written and signed by your insurance agent.

V. CRIME: (The Contact of funds can assist with the following)

     

A.  Employee Dishonesty or Fidelity Bonding - This coverage protects the organization against thefts of money by employees. This type of loss normally occurs in small amounts over a period of time, but  for proper fidelity should be 10% of the average monies on deposit in a month, times 12 months. This is considered the average amount that can disappear, and the length of time over which it can disappear before discovery. A limit of $10,000 of fidelity coverage will usually fulfill this need for small & medium sized organizations. Larger organizations may need considerably more coverage. The bond form is written in two different formats:

Scheduled position or blanket  A scheduled position bond covers only the designated positions, such as treasurer and assistant treasurer. If a secretary were to steal funds, then coverage would not extend. The most desirable method of writing this coverage is on a blanket format. This provides protection against any employee or officer who might take funds from the organization. In order to help the organization protect itself from these losses, a counter signature requirement should be in force so that no one person can write a check over a certain dollar amount. It is also wise that the person who deposits the funds is not the same person who signs the checks. It is also wise that several persons count the funds before deposit and none of them are signers. This should provide a proper check and balance for the organization. (Please note that in order for a claim to be processed, the guilty party must be turned into law enforcement officials as theft is considered a crime.) 

B. Loss of Monies - This includes theft and robbery of monies or securities from the organizational premises or off- premises  while being taken for deposit. The amount you need to carry is determined by the highest amount of negotiable cash that may be available for theft at any given time. Keep in mind that checks can be replaced if you have a record of who wrote them.

                C. Forgery - Forgery protects the organization against someone forging checks. It is normally written in dollar incremental amounts.                         

V VI. VEHICLE COVERAGE (contracted funds can assist with the following)

.

           A. Liability - Liability is written in one of two ways; split limit or combined single limit. The split limit example we will use is $100,000/$300,000/$100,000. This means that the policy will pay for the liability you incur for bodily injury to an individual or individuals at $100,000 per person up to a maximum of $300,000 per accident. For damage you may cause to the property of others that you become liable for, it will pay a maximum of $100,000 per accident. Many property damage losses will exceed $100,000. For example, a tractor trailer with a load of goods could go as high as $500,000. You may purchase higher limits on a split limit policy, but the property damage will always remain as a lower limit. Combined single limit coverage is the preferred coverage, on the other hand, which means that you have $1,000,000 of coverage that applies to the total amount of the bodily injury and property damage incurred. This is the recommended way of purchasing auto liability insurance because there are fewer limitations for a loss.

           B. Medical Payments - Medical payments under the auto insurance policy pays for injury sustained by the driver of the vehicle or anyone else in the vehicle. This is known as a complimentary payment. Guilt is not necessary for payment only injury needs to occur. It is written as excess coverage, which means that it will pay the difference between what the individual’s health insurance, and/or Workers Compensation will pay, and the actual amount of the bill. The lowest recommended limit is $10,000.

           C. Uninsured Motorists - If you are involved in an accident with an individual who is uninsured , and they are found to be at fault, injury to your driver and/or people in your vehicle may result in your being responsible to them. Uninsured Motorist coverage provides protection against this and it should be written in the same limit as the automobile liability. (No less than $1,000,000 is suggested)

           D. Underinsured Motorist - Underinsured motorist is similar to uninsured motorist.  However, it protects you against those who have low limits of liability that are insufficient to cover the loss. Some states are “no-fault states” and have coverage different than described above. Each no-fault state is different and needs to be addressed individually as to what coverage is required and/or available.  (No less than $1,000,000 is suggested)

           E. Physical Damage Collision - Collision coverage protects you against  loss to your owned auto when it is involved in an auto accident collides with something or someone.  It is almost always written on an actual cash value basis less the deductible. The car will be repaired, or it will be replaced if the cash value is less than the cost of repair. Deductibles for collision range from $100 and up. The organization should carry as high a deductible as it can absorb in the repair of the vehicle to reduce the premium costs

           F. Physical Damage Comprehensive - Comprehensive coverage protects your vehicle against loss other than collision such as fire, vandalism, window breakage, theft, etc. Deductibles for comprehensive usually start at $100 and up. Again, the organization should purchase the highest deductible it can absorb.

            G.   Non-owned & Hired Auto - Hired auto protects the church against lawsuits brought against it when someone on business for the organization has an accident while using a rented vehicle, i.e. members attending a convention in a rented vehicle. Non-owned auto insurance protects the organization against lawsuits brought against it while a person on business for the organization, driving a privately owned vehicle, has an accident and the organization is sued. For example, it could be as innocent as a volunteer driving to the post office to mail a letter for the organization and having an accident on the way. The individual’s insurance will protect him, but it does not extend to the organization. If the organization does not have non-owned auto coverage, the organization is without protection on this type of loss. While this coverage is listed under the special multi-peril liability form for some companies, it may also be found on a business auto policy if there is an insured auto. This coverage should be provided in either one of these two places. (Limits should be a minimum of $1,000,000 per occurrence.) 

         H. Hired Auto Physical Damage - This coverage is often purchased at the time you rent a vehicle on the rental vehicle contract and includes coverage for the loss of use to the rental company while the vehicle is being repaired. When you rent a vehicle, the rental agreement obligates you to reimburse them for loss of use. Purchasing insurance from the rental company can be very expensive way to cover this exposure.  Even purchasing it on your organizational vehicle insurance policy while not as expensive, it often does not provide for the loss of use coverage you contracted for when you rent a vehicle. (Check with us to sure of what you have or what is covered) 

            I.    Employees and Volunteers As Insured - Your organization probably utilizes many employees and volunteers to drive your vehicles for various functions. If they were to have an accident while using your vehicle, the organization is covered for the loss as you are the named insured on the policy. Your employees and volunteers, however, are not covered individually under many policies, if sued unless specifically added as an insured to your policy by endorsement. It is very important that both your employees and volunteers be included as an insured under this policy.

.

    VII. EXCESS LIABILITY OR UMBRELLA COVERAGE:

            This coverage is an extra layer of liability protection that adds coverage above and in addition to most of the liability policies you have: Special Multi-Peril, Automobile, and Employers Liability (This is a part of Workers Compensation that will be discussed in the next section). If a lawsuit were to occur that caused a loss potential of more than $1,000,000 on an occurrence basis, or several losses that caused a total loss of over $3,000,000 during a policy period, the umbrella or excess policy would normally provide a layer of protection over that. In addition, in the event that there is an uninsured liability, the umbrella or excess policy will normally, unless the loss is excluded, drop down and provide protection subject to a $10,000 deductible. We highly recommend that all religious organizations carry an umbrella liability policy especially if you have a school, day care facility, provide any unique ministry to the community, or are in an urban or semi-urban location. Limits on the particular policy are normally purchased in $1,000,000 increments. Most organizations should have at least a minimum policy of  $1,000,000 . However, if your organization is a very large organization with a school, or is a school, or has varied ministries, higher limits should be purchased.

VIII. WORKERS COMPENSATION & EMPLOYERS LIABILITY:

 .

     Workers Compensation seems to be a highly misunderstood issue within the religious organization today. Organizations have often confused their statutory obligation to carry workers’ compensation with the need to provide protection for the organization against the liability they may have for their employees. State statues simply provide the requirements that mandate whether or not an organization must carry workers’ compensation. In some states all organizations have to carry workers compensation coverage, as in Ohio where it is like a tax and is required for all employees both part-time and full time, and  is provided  by the state. Opportunities  for reducing the normal Ohio state’s rate can be had with a system called Group Rating.  We offer this service that can assist you as you deal with the BWC in Ohio with possible savings up to 95% . 

In other states you may be required to have 1, 2, 3, 4, 5 or more employees before it is mandated. However, in all states, if an employee sues you, and you do not have Workers Compensation, you do not have protection. In fact, in most instances because you failed to purchase Workers Compensation, whether mandated or not, the courts have upheld that you abdicated your right to defense and you are liable for injuries sustained to the full extent of the law. This type of coverage and protection is specifically excluded from your Special Multi-Peril General Liability form.

This particular coverage has many facets that need to be addressed. The most misunderstood is the definition of what an employee is. By state statues, an employee is anyone who provides services for you under contract or is employed by you. For example, most churches this is having a pastor and secretary. (In Ohio Clergy have a choice to be included or not but the cost is usually very minimum and should be taken.  It is very low cost life, health, and disability coverage.)  In addition, in the case of churches, they often pay someone to cut the grass, and an organist or music director. All four of these are employees. If you hired somebody to paint your building or some other work, and you did not obtain a certificate of insurance from them stating they have Workers Compensation insurance, the individual and all of their employees become your employees. If they are injured, you are responsible.

.

The Employers Liability or sometimes called gap coverage   provides coverage for most claims from employees and/or their families or other parties that are not otherwise covered by the Workers Compensation policy. Claims of this nature are excluded from your general liability form i.e. if an employee is injured and the spouse of the injured were to sue you for loss of consortium, your protection would come under this form.  If your janitor modifies a ladder that is used by them or somebody else and it collapses, the ladder manufacturer would most likely be sued. In all probability, the manufacturer would be held liable in the court environment we have today. However, because your employee modified the ladder, you then became a manufacturer and are subject to the lawsuit from the ladder “manufacturer “ for reimbursement or partial reimbursement of the loss. This type of claim is covered only under employers liability, a coverage many times missing on policies.

I  IX. EMPLOYEE BENEFITS:

         Without quality employee benefits your most valuable assets may not be so valuable in time.

.

          A.  Employees are the organization’s most valuable asset without which it may not exist.  Providing employee benefits will bring you a valuable yield of employee loyalty, productive efficiency, good attitudes, less absenteeism, less management issues, and retention.  (Less likely litigation issues, are usually a special side benefit for the thoughtful organization. This can save you many dollars and grief.)

          B.   We offer group or individual health, life, disability long-term and short-term, long term care, vision, dental, drug, Medicare Supplement coverage, auto insurance, home insurance, retirement benefits, wholesale auto purchases, and home financing.

          C.   You should also consider possible housing allowances, travel allowances, continuing educational allowances, library allowances, and generous vacation times and days off.

          D.  The average lay person receives 35% or more of their compensation in the form of benefits which the average religious employed worker receives less than 5% if any. (review our page on our web site at http://www.phelpsfinancial.com/employee/selecting/church called “How to intelligently provide for your pastor and staff”.) 

 

X. OTHER RISK FACTORS TO CONSIDER:

.

          A.  Key Person Insurance -  A provision that provides financial funding in the event of an untimely death of a key person in the organization.  The size of organization could a big factor for this, a new construction time, or other major changes.  An untimely death usually will affect the organization’s income especially if a church causing untold financial hardships as the organization attempts to not only deal with the loss but to make ends meet financially.       

  B. Provided Housing Embarrassment Fund: If a pastor or employee of your organization should live in provided housing and the employee dies, when would have to ask the remaining spouse to move to be able to provide for the next employee or pastor or if you would not how would you pay for the relocation of a remaining spouse and possible family to another provided home. 

    XI.  Knowing the important factors that can position your organization to qualify for the best premiums and necessary products today is critical. 

.

     PROTECTING YOUR RIGHT TO PURCHASE INSURANCE AND ACQUIRING THE  LOWEST AVAILABLE PRICE HAS A LOT TO DO WITH THE QUALITY OF YOUR RISK MANAGEMENT PROGRAM.

T 

   The property section of the insurance policies is not intended to be maintenance policies for the organization. If claims are occurring because your organization is failing to maintain the property, you stand a chance of having your insurance canceled or having the rate increase dramatically at the renewal. Insurance is intended to cover losses that are accidental and unforeseen. As a good steward of your congregational properties, you should be maintaining them to the best of your ability. Liability portions of your policy can be adversely affected by this same maintenance problem. Crumbling, broken steps, parking lots with large potholes, interior/exterior steps without railings, deficient lighting, etc. are all potential injury spots for, your employees, and the general public. Once again, while the insurance carrier will pay these claims, they will not pay them for long because you are not maintaining the property to a level that is expected. Proper maintenance will assure you of the right to purchase insurance and also assure that it is at the lowest possible price. Missing safeguards in your programs, practices, and property use and design, developed by a quality ongoing risk management can present another challenge to obtaining good pricing today for your organization and sometimes insurance at all.

XII.   PURCHASING INSURANCE TODAY IS A LITTLE LIKE PICKING A BRAIN SURGEON

   Using a little humor to provoke your thinking, we are as our title suggests trying to show that the purchase of your insurance is far more important and complex than most people treat the decisions and resulting act. Insurance has become very complex and it changes continually, as it attempts to meet the rapidly changing and growing risks that our society continually presents us with today. Some people treat the purchase of insurance, as if they were buying a commodity like bread or milk, fooling them into believing there is little at risk.  This would never happen if they were selecting a skilled surgeon to perform a difficult procedure on themselves. Yet today many call around to find the cheapest price in order to "get it done". 

   The problem with looking at price only as the main basis for decision; a policyholder may drop into that agent's office with no knowledge of the agent's skills or the product, to buy something "insurance" to protect their most valuable assets and financial plans. They then mindlessly put the policy into a draw or in a pile.  At some time in the future when they are unfortunately presented with a claim, they call the agent and expect everything to be covered. When to their horror they find their claim is not covered to their expectation they feel insurance is just a terrible concept.  Sometimes they are tempted and many times because of its ease, to make a similar decision with the click of a mouse over the internet, not realizing they are purchasing an insurance policy as if it were bubblegum which can be mindlessly bought from a vending machine. They do not realize they are totally on their own until they are in the middle of a serious claim, and lack coverage without the assistance of an agent who knows them and their specific risks. The person on the other end of a phone call may be a different person each time they call. The CSR unknown by the policyholder is just moving activity along, they seldom know policyholders nor have the time on their timed schedules, or care to know them or their risks at all. The CSR is usually presented with some very little data on a computer screen before them to answer questions hurriedly, but not necessarily properly nor correctly.  In both cases the person's mind justifies their actions very proudly as they attempt to convince themselves they have completed a decision and action they know they should do and that it was done as painlessly as possible. In their rejoicing they totally overlook the possible consequences of their careless decision.  It could be as serious for some as trying to attempt surgery on themselves, as presented in a recent TV by an insurance company.  We believe an ongoing inactive relationship with your agent has great value and should be a major factor in providing the necessary security for the risks you face today. You need to have someone who can analyze all your possible risks and takes the time to understand the need for reviews with you from time to time as things change with your risks. Today's society presents changes continually.  Policiy's changes require adjustments for proper application to meet your risks so as to provide the necessary security and peace of mind.

   

    Other reasons why the justified practice of commodity buying as the chosen method for an insurance policy dangerous?  As presented above insurance is not a commodity like something you take down off the shelf and carry to the checkout clerk.  An insurance policy is a 20-30 page (more or less) contract, full of complicated and confusing language that can be challenging even to those who work with those policies every day. Example, many times a person when purchasing insurance, will compare the insurance value on a structure, the liability limit, and if medical is provided but never ask when the component parts of the policy provide coverage for the different areas or much less look at the internal limits provided by the contract, things that can really make the difference from policy to policy. How, then, is it possible for you to just walk up, take down a policy from a shelf, and be confident of what you bought? The services of a qualified insurance professional are really what you pay for when buying insurance. Anything less underestimates the value of your decision which could be very costly later if you have an uncovered loss.

    

     A quality agency (the people behind the products and services): They should attempt to get to know you and build an ongoing relationship with you, they will ask you many qualifying questions, and offer reviews with you from time to time. Quality agents are also available for you when you need them, and they can discuss issues with you because they know you and understand your risks. Based up these factors an agent can be in the best position, after reviewing your risks, to assist you with the proper coverage for your specific risks. This is not to say an agent is not sensitive to the price you have to pay, but much like the old saying, "you get what you pay for," you can be left holding the short end of the stick if you have commodity shopped and not paid attention to the quality of your coverage, or to your agent's level of knowledge or care of their relationship with you and your risks. From the Professional Insurance Agent Newsletter Oct 2004

To view general possible insurance coverage for a church and related ministries (click here)

Insurance, without the foundation of a quality comprehensive risk and disaster study which deals with each realized risk factor, is really a disaster in waiting for your staff and those of your community of faith.  Would you think it a wise choice to never take the time to timely check your auto brakes feeling justified with this decision because you have auto insurance? Healthy life choices, as are checking your auto brakes, are the risk mangement safeguards you choose to put in place in your life, to lesson the risk of the premature loss of your life.  Ministry insurance is like life insurance, which can not stop you from dying, but can assist with the possible financial aftermath of your death. 

XIII. To review our background, experience, education, and business philosophy note: click here to review your choice from the provided list. We present you the experience of over 30 years and continual education in our attempt to present our clients quality and up to date advise, products, and service for their security and peace of mind.

Our Phone : 614-899-6000 toll free:  877-471-7997 for AZ, CO, OH, MI, KY, IN, IL, TN, WV, and WI. We are currently working on adding TX, PA, and MD.

Email :  dphelps@phelpsfinancial.com

    For specific needs please note our staffing selection and contact the specific specialist for your need. Please note this by a click here: www.phelpsfinancial.com/ourstaff

* The consulting contracted fees for non-clients are usually $100 per hour plus the cost of materials, usually a small amount. Any felt legal assistance is offered at an agreed fee as contracted with each attorney for requested work for written safeguards/procedures reviews, other reviews, incorporation issues, or other matters including defense.  Each attorney charges very resonable fees and has worked with us and our clients for many years.    

_______________________________________________

* Please be reminded that the presentation above presents general concepts of a minimum nature necessary for church and or church schools in today's cultural setting.  As stated above only a comprehensive study with you of your church, its ministries, church leaders, and your church community of your risk factors will allow us to then work with you for proper applications to meet your specific needs. We feel this is the most critical  step your church can make to have a  ministry that offers the necessary security and peace of mind for today to its employees,  volunteers, and attenders.  Without this study your purchase of insurance will be a contract to fund what, that is what is its purpose?  Without a proper risk management study how do you know what you purchased will do what you think it should do?   Please note that specific definitions are defined by the insurance contact you purchased or are purchasing and should be viewed as the definitions that apply for your ministry.   The above terms, concepts and definitions are not an insurance policy and are given only as a guide to assist you, these can vary by company or state in which you are located in.  For your specific risk study and its insurance applications please contact us for best results.  Most minstires will find if difficult to preform such a comprehemsive study on themselves as would one that might attempt to do surgery on themselves to care for an ailment. 

. 

This material may only be used by permission of the author and may not be sold or used otherwise as presented here in part or in whole.

  

        Phelps Financial Services, Inc.,659-H Park Meadow Rd. Westerville, OH 43081
                                       Phone: (614) 899-6000 Fax: (614) 899-6022
                                              ©Phelps Financial Services, Inc. 2000-2006 All rights reserved

Ed(10/06)