All churches should have some form of insurance to insulate them from risks. These policies may include protection against property damage due to various kinds of perils. The property may include buildings, vehicles, equipment, and records.
Insurance policies may provide recovery from other risks. A key man life insurance policy provides financial resources in a leadership transition. Disability insurance protects church employees from the harm of on-the-job injuries. Business continuity insurance helps the church operate after a disaster.
Insurance coverage is an important tool for risk mitigation. However, insurance is only as useful as the church’s access to claims when a covered event occurs. It is important for church leaders to manage their insurance programs before and after a claim is filed.
Let’s face a fact. Insurance companies are in business to make money for their stockholders. Like most companies, profits can be increased by limiting expenses. For insurance companies, reducing claims is a way to lower expenses and make more money.
When an insurance company denies a claim, it often leaves the church unprepared for the cost of recovering from a calamity.
In some instances, the church relied on the insurance company assertions the policy coverage was adequate. Occasionally, the church learns the policy limits were too low to cover the property value.
Often the person who approves the claim payout is not the agent who sold the policy to the church. The relationship the church has with the sales agent may not be helpful when a loss has been suffered. Church officials should expect the claims process could become prickly.
When damage happens, insurance companies will look for a reason to void the claim. If the insurance company finds the church shares fault, the claim may be denied.
Reasons an insurance company may deny a claim also include nonpayment of premiums, insufficient documentation, damage from an excluded cause, neglect, and misrepresentation. When the church submits an application for insurance, be particularly careful to ensure every bit of information is exactly accurate. An innocent error could cause a claim to be rejected.
The time to manage the claims process is before a misfortune occurs. This begins with a fundamental understanding of the insurance sales process. In nearly every instance, the insurance representative owes loyalty to the insurance company. This is not to disparage the insurance agent. Often these are friendly people who mean well and want to help the church.
Understanding insurance policies can feel daunting at first. Insurance policies include many pages of terms and conditions. In some instances, the church board should consider hiring an independent professional to examine the insurance proposal. This person should work for the church and have no conflicts of interests. An independent expert can help the church officers fully understand what they are buying.
The responsibility for ensuring the insurance coverage is right for the church falls on the church leadership. Management should understand the coverage sold to the church. The terms of the policy, limits, costs, exclusions, disclaimers, definitions, and requirements should be examined by someone experienced in insurance matters.
Church leaders should consider every conceivable circumstance when a claim could be filed for the policy. If the insurance is for fire protection, the church should have an off site inventory of its assets. The list, with photographs, will help prove to the insurance company the assets the church owns. Additionally, church leaders should be mindful of the replacement cost for insured assets.
If the insurance coverage is for liability protection, the church governing board should have up-to-date policies and procedures. These documents show the leadership had acted prudently.
Some policies have a notice provision as an important term. This means if an event occurs where a claim may be file, the insurance company has a deadline to be made aware of the loss. Church leaders should put in place a process for when a potential claim becomes apparent, how it will handle apprising the insurance company.
Insurance protection should be a part of management’s due diligence on a regular basis. Consider an exercise where officials imagine all kinds of risks the church faces.
Next, ask the question if the church has insurance coverage. If coverage exists, the next question is if the coverage is adequate.
Finally, officials should ask if the church has adequate procedures to file an effective claim.
Preparation for the time when an insurance claim may be necessary begins when all seems well. Churches should regularly inspect their coverages and internal procedures to ensure when a peril happens, the claim will be handled successfully.