How Much Liability Insurance Do I Need?

Accidents happen…even at ministry events.

Liability insurance can help protect your ministry if someone sustains injury or loss in connection with ministry activities — on or off your property. It can also help defend you if you or the people working in your ministry are sued, whether the suit arises out of injury to people or damage to property.

It typically includes compensation for the injured party, the cost of defending you in court, and any court awards or settlements up to the limits of your policy.

What are Coverage Limits?

Liability limits determine the maximum amount that the insurer will pay on behalf of the ministry (and covered individuals) if a liability claim is made. Michael Allison, chief counsel for Brotherhood Mutual, encourages you to look at the following four factors when selecting liability limits:

  • The likelihood of loss
  • The assets of the ministry
  • The likely damages a court would award for a loss
  • The ministry’s “appetite for risk”

Four Factors to Consider

Let’s look at these four factors, recognizing that determining proper liability insurance limits isn’t an exact science. The extent to which your liability limits are sufficient will depend on the details of a specific loss and whether a plaintiff's attorney seeks to recover more funds than your insurance policy provides.

1.  The likelihood of loss.

Your ministry’s probability of getting sued depends on the scope of activities you offer, the number of participants, and how well you manage risks.

Let’s say that your ministry offers child, youth, and teen activities. Your chance of facing a sexual abuse claim rises in proportion to the number of young people involved in the ministry and the extent of programming. You can reduce the likelihood of loss in your ministry with a sound child protection program that includes both worker screening and appropriate supervision. Even if your program doesn’t prevent a loss, it can significantly reduce its claim value. Another activity that can decrease the likelihood of loss is regular safety inspections of your property.

Keep in mind that even a low level of ministry activity and great risk management preparation doesn’t mean that all losses will be eliminated; it simply means that the odds of a loss are reduced.

2. The ministry’s assets.

A plaintiff’s attorney typically won’t pursue a liability claim beyond insurance proceeds if the ministry has no significant assets. Attorneys typically look for easy money, even when a claim involves clear liability. There is an exception, however, to this general rule. If a claim involves clear liability, damages greater than the insurance limits, and the ministry holds relatively liquid assets, a plaintiff’s attorney might be motivated to go after these assets. The greater your ministry’s liquid assets, the more likely it is that an attorney will seek additional funds.

3. The likely damages a court would award for a loss.

A combination of loss that could have been foreseen, combined with serious injury, is what typically drives juries to award higher amounts. In addition, juries in some locations are more prone to award higher damages than in other locations. When selecting liability limits, it’s a good idea to check with a local attorney to gauge the “judicial environment” in your area. The less favorable the judicial environment, the more likely it is that higher awards will be granted, and the greater the need for higher liability limits. It’s also important that your ministry takes safety seriously. This ties closely to the first factor: likelihood of loss. Having a sound risk management program at your ministry will reduce not only losses but also their claim value.

4. The ministry’s “appetite for risk.”

Ministries have different views of risk. If your ministry is conservative, you may desire higher limits even though you’ve taken every precaution and have little in the way of liquid assets. Ministry leaders may simply sleep better at night knowing that higher liability limits are in place. Other ministries would rather pay less for liability insurance, maintain lower limits, and bear a greater risk that a claim will exceed the limit selected. Neither approach is right or wrong; it's just a matter of how decision-makers within the ministry view the risk of loss.

How to Decide?

In addition to thinking through the above factors, it’s a good idea to discuss your options with an independent insurance agent who has experience working with ministries. A qualified agent can advise your ministry about the type of insurance required by law and can further advise you about the cost associated with various liability limits. He or she can also advise you about additional insurance options, such as coverage for employment practices liability, sexual acts liability, and officers and directors liability. Working with an experienced church insurance agent can help you to determine what liability limits are right for you.