As a leading provider of financial services for churches, Christian schools, ministries, and non-profit organisations in Australia, ACS Financial understands the unique challenges and risks these organisations face. Ensuring your church or charity has the right insurance coverage is essential to protect against potential losses and liabilities. This article outlines five essential insurance policies to consider: Property Protection, Public Liability, Volunteer Workers Personal Accident, Professional Indemnity, and Associations/Management Liability.
1. Property Protection
Most people only consider the worst-case scenario of a total loss by fire or flood. However, the most common claims we see are storm/weather-related claims or burglaries. Churches or ministries may not have the financial capacity to recover or replace equipment in the absence of insurance and can’t always rely on volunteer donations, volunteer labour, or fundraising to cover costs.
A property protection policy provides protection against physical loss, destruction, or damage to property belonging to the organisation or for which they are responsible. Depending on the type of property protection taken, it may also include consequential losses arising out of an interruption to the ministry following a physical loss. Loss or damage to buildings and contents, and the financial implications of relocating and rebuilding, can impact an organisation’s ability to continue to provide the important services that communities rely on (counselling, food welfare, ministry etc). Furthermore, if your property is mortgaged by a bank, it will be a requirement of the lender that appropriate insurance is in place to cover the buildings. If your organisation owns property, it is essential that you consider appropriate protection of your assets.
What a Property Protection Policy can cover
The way insurers can provide cover for buildings and contents can take different forms. Some insurers will provide cover for buildings and contents under a Fire and Perils policy which will provide you with basic cover for loss or damage resulting from fire, storm, flood, impact, lightning, malicious damage. If this is the case, then it may be necessary to purchase additional policies to broaden cover to include Burglary/Theft, Money Cover, General Property (accidental damage and cover away from the premises) and Glass Breakage. Business Interruption or Consequential Loss, which will cover loss of income, costs to rent alternative premises, and additional increased costs of working (e.g. hiring equipment to continue running services), is not always automatically included, so it is important to request that it is included.
Other providers (like ACS Mutual), provide a comprehensive Property Protection which automatically incorporates all of these things, providing you with peace of mind that most causes of loss and damage will be protected in the event of a claim. These comprehensive policies may also be referred to as an Industrial Special Risks policy by some providers.
Example of a Property Protection Claim
A severe storm damages the church roof, causing interior water damage and ceiling collapse. Extensive repairs will take several months, requiring the church to rent another property. A comprehensive property insurance policy covers the repairs, replacement of damaged contents, and, if included the cost of renting alternative facilities during the repair period.
2. Public Liability
If, due to a negligent act or breach of duty of care on the part of your organisation, a person is injured, suffers a loss or has their property damaged, you will need a Public Liability Insurance policy to respond to the claim. Public Liability will also provide access to specialist legal advice in the event of a claim. It can provide cover to pay costs to investigate the circumstances of a claim, legal costs to defend an action and covers the cost of damages or compensation which may be awarded to a third party.
Even if a church has not been proven to be negligent in a matter, it can still be quite costly to defend claims of alleged negligence. Defence legal costs alone can be very expensive.
Hiring a Venue
Public Liability Insurance is often required when hiring a venue, as most venues demand proof of coverage to protect against potential damages caused by the hirer’s activities. Additionally, government agencies may require this insurance for grant applications and special funding.
Sexual Abuse Cover
Some Public Liability policies may incorporate Sexual Abuse cover. If you are an organisation that engages with children or other vulnerable people, it is very important that you consider including this cover. Before providing cover against Sexual Abuse claims, an insurer will require you to demonstrate that your organisation has robust Child Protection or Vulnerable Persons Policies in place. This type of insurance cover is becoming more challenging to secure in many Australian insurance markets, but it is a key policy for churches and similar organisations to have in place.
Failing to purchase Public Liability for your organisation could cause significant reputational damage to an organisation in the event a claim is made against you. In addition, not having appropriate insurance could result in Directors being held personally liable for not taking necessary precautions to protect the organisation (refer to Management/Associations Liability)
Example of a Public Liability Claim
During a church conference, Sarah trips over a lifted carpet in the foyer, fracturing her wrist and spraining her ankle. Unable to work for several weeks, she incurs significant medical expenses. Her lawyer alleges the church’s negligence caused the accident. The church’s Public Liability insurer investigates, confirms negligence, and covers Sarah’s medical bills and lost wages.
3. Volunteer Workers Personal Accident
Considering most churches and ministries rely on volunteers, this policy provides cover for accidental death of, or bodily injury to, all nominated voluntary workers of the church whilst they are engaged in voluntary work authorised by and under the control of the church or ministry. This policy can also include volunteer Directors & Committee Members.
What a Volunteer Worker’s Personal Accident Policy Can Cover
- Percentage of loss of income following an injury sustained whilst volunteering which prevents a person from carrying out their normal paid employment (assuming they have no sick leave entitlements).
- Lump sum benefit in the event of a death or permanent disability.
- Domestic home help allowance to cover the cost of home assistance following an injury.
- Student tutorial expenses if the volunteer is unable to attend school for a period following an injury.
- Non-Medicare medical expenses (i.e., medical costs incurred that are not subject to any Medicare reimbursement, such as physiotherapy, hydrotherapy, or hire of mobility aids).
Claim/Scenario Examples
John, a volunteer, injures his back while setting up for an event and cannot work as a carpenter. The policy cover provides a percentage of his lost income during recovery as well as the cost of physiotherapy treatment recommended by his doctor to aid in his rehabilitation. This support allows John to focus on healing without financial stress, highlighting the importance of protecting volunteers who support the church or ministry’s mission.
Differences from Other Policies
This policy can respond in situations where the injury has been caused by an accident. There does not need to be evidence of negligence on the part of the organisation for a claim to be accepted. Be aware that this type of policy may have age limits on volunteers (e.g. no cover for volunteers over the age of 80). Check policies carefully.
Refer to our Valuing our Volunteers article for more info
4. Professional Indemnity
Regardless of years of experience or education, professionals are ultimately human and can make mistakes. Financial loss, injury or damage to a third party due to a mistake or failure to carry out your duties professionally, could result in a claim being brought against you.
Professional Indemnity Insurance provides cover for pastors, ministry leaders, counsellors, etc. for breaches of their professional duty. When we consider what constitutes the “professional duty” of a church or ministry, it will often point to the spoken or written word associated with preaching, teaching, pastoral advice or counselling. Professional Indemnity for religious organisations is designed to protect your church against legal costs and claims for damages arising out of an act, omission, or breach of professional duty.
What the Policy Covers
A comprehensive Professional Indemnity policy designed to protect the church or ministry for the professional advice and services provided by its ministers, staff, and volunteers should provide cover in the following areas:
- Wrongful advice
- Libel, slander or defamation
- Discrimination
- Loss of documents
- Inadvertent breach of Copyright
- Defence Costs
- Court Attendance Costs
- Public Relations Expenses
- Legal Representation Costs associated with attendance at an inquiry
- Compensation or awards made to third parties
When considering Professional Indemnity Insurance for your organisation, it is essential that the product is tailored to the ministry’s unique needs. Each religious organisation has distinct activities; the coverage should align with these specific services.
Working closely with insurance professionals experienced in serving church organisations ensures that the policy is customised to address the specific risks associated with your faith-based organisation. For more information on Professional Indemnity – refer to the article here
Example of Professional Indemnity Insurance Claim
One of the most interesting claims centred around a pastor using a piece of poetry as part of a funeral service. The order of service was published online with the prose included. Sometime later, the pastor received a legal letter from a legal firm acting on behalf of the poem’s author seeking compensation of $100,000 for breach of copyright as permission was not sought before using and publishing the poem with appropriate acknowledgement.
5. Management/Associations Liability
This type of insurance protects your organisation and its senior leadership, board of directors or eldership from potential legal challenges that may arise while fulfilling your mission. It not only provides cover for Executive, Non-Executive Directors, and the entity against claims resulting from a wrongful act, but it also protects Directors and the Church from claims brought by employees for unfair dismissal, harassment, discrimination, and/or unfair work practices.
This type of insurance also protects the Church from direct losses resulting from employee theft and the Church from statutory civil fines and penalties.
What the Policy Covers
Here’s a very brief overview of the main five areas a typical Management/Associations Liability policy covers for churches. We recommend you access more information on the Management/Associations Liability Insurance for Churches article we published.
- Directors and Officers Liability: Protection for church leaders, directors, and officers against personal financial liability arising from alleged wrongful acts in managing the affairs of the church.
- Employment Practices Liability: Safeguarding the church against claims related to employment practices, including wrongful dismissal, discrimination, harassment, and other employment-related disputes.
- Statutory Liability and Workplace Health and Safety Cover: Board members can be held liable for failing to address OH&S risks in their organisation. Quite often, board members can be called to account, not for what they have done, but rather for what they didn’t do but should have done.
- Crime: Coverage for direct financial losses sustained by the church due to theft, fraud, or other criminal activities committed by employees or third parties.
- Tax Audit: Coverage for fees, charges, or expenses incurred by an accountant or registered tax agent when the church is issued a formal notice from the Australian Taxation Office.
What a Management/Associations Liability Policy may Cover
A Management/Associations Liability policy will usually cover not just the damage caused by the breach but also the legal costs and expenses associated with investigating the circumstances of the alleged breach and, if warranted, the defence costs that may arise. The cost of defending an allegation of negligence can cause significant financial pressure on an organisation. A Management/Associations Liability Policy can alleviate some of this burden.
Example of a Management/Associations Liability Claim
Imagine the church board approves a high-risk community project aimed at revitalising a local neighbourhood. Unfortunately, the project fails financially, leading to significant losses. Disappointed donors, feeling that proper due diligence wasn’t conducted, decide to sue the board for negligence and reimbursement of donated funds. In this stressful scenario, Directors’ and Officers’ Liability insurance steps in, covering the legal defence costs and any settlements. This protection ensures that the church’s leadership can navigate the legal challenges and the associated costs to defend actions brought against them.
Additional Optional Add-Ons
While the above five policies form a solid base package for churches and similar organisations, additional optional coverages to consider include:
- Motor Vehicle Insurance
- Pastors Personal Accident and Illness
- Corporate Travel Insurance
- Cyber Liability and Privacy Protection
By ensuring comprehensive protection through these essential policies, churches and similar organisations can guard against the financial costs of claims that may otherwise impact their ability to focus on vital community work. ACS Financial has provided expert insurance advice and tailored solutions to churches and ministries across Australia for 30 years.
Contact our team on 1800 531 743 to discuss your insurance and protection requirements today.