Churches and religious facilities provide a special environment for community and fellowship for many Americans. Though these facilities often provide a sense of security for worshipers, they are not immune from suffering property damage due to a fire, natural disaster, or weather event. Some religious facilities may be lacking in property insurance coverage, leaving them vulnerable to costly losses. Examining the potential for gaps, also known as hidden exposure, and how to mitigate them can help provide peace of mind to the community and commercial property owners alike.

Hidden Exposure in Church Insurance Coverage

The past year has been quite challenging for those who had to make the switch from in-person religious services to virtual attendance. However, the distribution of vaccines and the lifting of COVID-related restrictions has steadily made way for in-person communal worship to resume.

The occurrence of several severe weather events, during a global pandemic, has increased the awareness of many people to the risk of unexpected, and ill-prepared for, events. It’s important for religious leaders and commercial property owners to be prepared and ensure they have adequate, up-to-date commercial property insurance coverage in the event of costly damage.

Commercial insurance policies for religious facilities often have gaps in coverage in several areas, which can lead to major expenses. Some of these common gaps in coverage include:

Mandated Facility Upgrades

Building ordinance and law insurance coverage constitute a common property insurance endorsement that works by reimbursing property owners for costs associated with demolishing, repairing, rebuilding, or constructing a structure in the event a covered loss prompts additional changes due to laws and regulations.

Unlike paying taxes, religious facilities are not exempt from complying with building codes. Lack of compliance can lead to large out-of-pocket costs for required upgrades. Local building codes and ordinances may require real property structures to meet certain specifications when it comes to the façade; electrical, wiring, and plumbing systems; and HVAC and roofing systems. Buildings constructed a long time ago likely were built to lower standards and require upgrades to protect the health and safety of the public as it relates to the occupancy of the buildings and structures. Therefore, having building ordinance and law insurance coverage in place can help mitigate these costs.

Unplanned Shutdowns

Churches and religious facilities often function as a multi-purpose building for a community, such as a school and daycare, rather than solely as a place of worship. Therefore, an unplanned shutdown due to property damage can leave many people – not just the congregation – without a place to turn for community services. Furthermore, property owners may not be able to run the facilities without the adequate funding. In the event a church relies on funding from operations outside of donations during services, property owners and leadership should consider a business and income insurance extension.

Similar to business interruption coverage, business income insurance can provide added coverage if a facility becomes inoperable from damage. Business income insurance could potentially help cover costs until a facility is up and running again; including expenses, such as payroll and monthly bills while the property is being repaired.

Equipment Upgrades and Replacements

Many churches rely on various forms of technology for services, such as projectors, speakers, and lighting. In the event this equipment is damaged, stolen, or lost, the replacement cost could be an out-of-pocket expense.

Most insurance policies contain terms for replacement costs (RC) and actual cost value (ACV). RC and ACV are the two most common methods utilized by insurers to calculate how much they will pay for losses. Under an ACV model, the insurer reviews the current market value of the property that needs to be replaced in determining the amount of the claim payment. This represents the amount of money that the property owner could get for the items if they were sold, which is typically less than what was initially paid due to depreciation in value.

On the other hand, RC payments will compensate a business for the actual cost of replacing damaged or stolen property. Under an RC policy, the insurer would have to pay an amount sufficient for the policyholder to repurchase a new item of equal quality. RC commercial policies usually cost more but can be worth it in the event of a loss. This can be quite helpful for items that depreciate in value, such as A/V equipment and vehicles used by the facility.

Property Damage Claims for Places of Worship in Texas

While the unexpected can happen at anytime, it’s important for those who own and operate churches and other religious facilities to regularly review their insurance coverage to ensure they are adequately protected should property become damaged or inoperable. While having the necessary coverage in place can provide peace of mind, it’s important to remember that insurance companies often work to turn a profit for themselves by underpaying, delaying, or denying valid claims.

At Raizner Law, our team of insurance coverage attorneys works to help commercial clients that have been wrongfully taken advantage of by insurers. If you or someone you know has filed a valid insurance claim for a place of worship that has been delayed, grossly underpaid, or denied, contact us today to see how we can help.

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