5 Abuses of Church Property Insurance

Since early in establishing Cool Solutions Group, I have had a number of beliefs and convictions around how we insure our church facilities and why insurers do not “appear” to be more interested in the condition of the facilities they insure. Still don’t get that.

When you couple that with the fact that I have been watching the intersection of Facility Stewardship to Financial Stewardship to Personal Integrity to “Doing What is Right” as it relates to church property/facility insurance claims, I have been both bothered and concerned.  I have seen things that really bother me from both sides of the insurance “table”, and not just a little.

Let me share with you 5 abuses I have witnessed and why I think they need to be addressed:

  1. Pray for a Hail Storm – I have seen this first hand more than once.  A church does not plan for the inevitable cost of roof maintenance and replacement and start praying for a hail storm.  That is just wrong! Why should any company (insurance or not) pay for your lack of planning for the inevitable cost of roof maintenance and replacement? To take this a step further, I do not understand why church insurance continues to increase the value of church facilities when they are incurring more and more deferred maintenance that actually decreases the value. This really perplexes me (I told you I have concerns on both sides of the table). Can you imagine the outcry of churches whose coverage is reduced based on deferred maintenance or lack of maintenance? On the flip side, can you imagine what elation there would be to have little to no premium increases for churches that could empirically prove they were maintaining their facilities?  I would LOVE to see that. That would be true Facility Stewardship!
  2. The insurance company has lots of money – Aren’t you glad they do?!?!  I know I am glad Allstate does when we have a claim at the house. If they did not, how would claims get paid?  But here is the real fallacy with that line of thinking.  Where did that money come from?  Right…premiums. And who pays the premiums?  Right…all the churches (or people) they insure.  So when the insurance company pays a claim, the likelihood of all their other church clients premiums increasing is high. This is as much a Kingdom issue as it is insurance…maybe more. Talk about Financial Stewardship.
  3. We Won The Lottery  – “We just had a major insurance event…NEW SHOES FOR EVERYONE!” Insurance is bought in order to have coverage to repair/replace content and facilities that were directly impacted by the insurance event. It is not a “get out of jail free” card or a license to spend or the golden egg to offset a deficit in your budget. Yet, far too often the mindset of church leaders and staff is not aligned with the real reason for the claim dollars.  Think of it this way…if the insurance event had not occurred, what then?
  4. Pushed to the limit – We have insurance limits in the policy…let’s max them out. If there is a limit for contents or extra expenses or the like, are we not entitled to use ALL of it. Answer = NO.  In fact, not just no, but…
  5. 10 and 10 –  This one is an abuse that the insurance companies have allowed for too long. The term “10 and 10” is a construction industry term for 10% profit and 10% overhead. That means you take the raw cost of material and labor, then add 10% for overhead and 10% for profit…and you allow the general contractor to include their “General Conditions” cost of the superintendent, project manager, etc, the contractor is likely to walk away with 25-30% of the claim. Let me drill this down.  Say you have a $2 Million claim and you allow the contractor to charge 10/10 and general conditions…that could be $500,000 and a nail is not even driven.  In contrast, take that same project value for new construction, the current going rates we see are 6-8% plus general conditions…which equates to only about 15-17%. That is a potential swing of over $200,000. Now, I am not suggesting that the church get that money (refer back to #3 above), but it should reduce the amount of the claim the insurance company pays out…which saves them money…but…as indicated above in #2…it ultimately saves all the insured churches money in the form of less premium increases. NOTE:  The “10 and 10” issue I have is not with the small sub-contractor, but rather with larger claims where a bonafide General Contractor has to be engaged.

So…I realize that the above may not make me popular with many churches and even some insurance companies.  I am OK with that…because Facility Stewardship…coupled with Financial Stewardship are not just a good idea, but spiritual tenets.

One comment on “5 Abuses of Church Property Insurance

  1. Amen to ALL of this, Tim. I see too much during the day in and day out that shows a major lack in planning for the inevitable – hoping that somehow our situation will turn out differently. Your take on what to do when insurance DOES cover is spot on. I know too many Christians who are willing to take advantage of things, because it’s “obviously God’s provision”.

    God stuff.

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