Special Form Including theft – This form is the broadest type of coverage available and covers everything that is not excluded from the policy. The two other forms, basic & broad, cover only the perils named in the policy. The Special Form should be carried unless your church does not qualify.
Replacement Cost Building & Contents – This means the insurance policy will replace the parts of the building or the pieces of contents destroyed with new parts of like kind and quality. There is no deduction for depreciation to either the building or contents should a loss occur.
***Functional replacement cost – Some churches are in buildings that are far too large or more ornate and expensive than they need. In these cases, if the building were to be destroyed, it is most likely that a more suitable and often smaller or less expensive structure would be built. If this is the case with your church, you would want to have a functional replacement cost of the larger, more ornate structure.
Plain windows, stained glass windows and art glass windows – Unless your windows are truly of unusual and expensive value, they should be included as part of the building with the limitation of payment subject only to the amount of the insurance on the building itself. If any of your windows are unusual or of high value, they should be separately scheduled on a fine arts floater policy which will provide coverage for the amount stated for each item.
The building description for the church is important in that certain items you may consider contents are actually a part of the building, and do not need to be included in the value of the contents. Your building value should include any “built-in” items such as your organ, altar accouterments, sound system and pews.
Agreed Amount – This option is extremely important to your policy. Without it you are obligated to maintain the insurance on your building to a co-insurance amount that is stipulated at the time the policy is written. For example, let’s say that your building has a 90% co-insurance clause, and that you have $600,000 worth of insurance on your building. At the time of loss an appraisal shows that your building is worth $1,000,000. By contract you have agreed to maintain 90% of the value which would be $900,000. The amount of the claim paid by the insurance company then becomes a factor of what you should have carried and what you did carry. In this case, the insurance company would pay 60/90 or 2/3 of the claim. With agreed amount, the claim is paid up to the amount of the insurance that you carry without a penalty clause. As appraising is an art and not a science, the agreed amount clause takes a large area of contention out of your insurance policy.
Blanket Building & Contents – You should always have your insurance policy written in this manner. This takes the policy from a stated value for each building and its contents, to a total value for any loss. For example, if you have three buildings insured for $200,000 each on a standard form, and one burns down, you would receive $200,000 even if it was found at the time that it was worth more. However, on a blanket form, the total amount of coverage, or $600,000 is applied to a loss at any location. Therefore, if a building burned down and it was determined to be worth $240,000, you would receive a check for $240,000.
Ordinance Coverage – Many political jurisdictions have changed and are continually changing building requirements on new construction. Oftentimes, in order to rebuild after a partial loss, the building commission in your area will require the building be brought up to code to receive a permit. It is important that you have coverage to fulfill this need.
Business Personal Property – Many ministers have musical instruments, computers, art and decorative works, as well as large libraries at the church. Under church insurance policies, protection for these types of contents is often limited to as little as $500. In addition, most homeowners forms limit business personal property away from the home to a maximum of $1,000. It is important for your pastors to address this matter at the time your insurance is written. In most cases this coverage cannot be added to their homeowners policy, and even if it could, it is much less expensive to add it to the church policy.
Extra Expense – At the time of loss it may become necessary for the church or school to rent space at another location in order to continue their ministry while the building is being rebuilt. Extra expense provides dollars to offset additional costs incurred over your normal monthly expenses while operating at another location. It also covers expediting expenses such as overtime or air freighting of needed materials in order to complete the job faster.
***Loss of tuition – This is a special form of extra expense that relates to schools and offsets tuition losses that may be incurred because you are not able to function while the building is being rebuilt.
Sewer Backup – This simply means that if your sewer backs up, the damage caused is insured and covered. The policy should provide coverage up to the policy limit. (Most policies written today either exclude or limit this coverage.)
This is written in two different forms. It can either be an endorsement to the Special Multi-Peril Policy or it can be written as a separate policy called a Difference in Conditions form. (There are some variations between the two, but they are normally not significant.)
Deductibles – Earthquake deductibles are written in one of two ways. The most common form is a percentage, usually either 5%, 10% or 15%. Many people confuse this with a percentage of loss, thinking that if they have a 10% deductible and have a $5,000 loss they have a $500 deductible. However, this is incorrect. The percentage deductible is calculated on the total building and contents value, so a 10% deductible on a $3,000,000 building containing $200,000 in contents would result in a $320,000 deductible regardless of the amount of loss. The other deductible form, while not often quoted, is a flat deductible and subject to availability in your region. The deductible normally written is a minimum of $10,000.
Building Structure – There are normally three types of rating factors used on earthquake. These are brick or masonry, brick veneer, and frame. Be certain that your building is not incorrectly classified as it may affect your coverage limit if a loss occurs.
Churches that need flood coverage are located in flood plains and normally cannot purchase this coverage from a standard insurance market. However, the federal government has established the National Flood Insurance Program, and this coverage is readily available through this program. If you do not know whether you are in a flood plain, you may contact the National Flood Bureau which is listed under the federal government section of your telephone pages.
Mechanical, Electrical, and Pressure Equipment Coverage
Basic or Comprehensive – This coverage is normally written in one of two ways; basic or comprehensive. The basic form is very limited, and we recommend the comprehensive, or broad form (as it is sometimes called). The basic form is very limited in scope and oftentimes covers only the equipment listed, whereas the comprehensive form covers all equipment that is applicable to the coverage. This includes but is not limited to air conditioning, heating systems, electrical panels, phone systems, and computer systems. Some of the coverages provided under this form, which are specifically excluded on special multi- peril coverage policies, are explosion of pressure vessels, mechanical breakdown, and outside power surges of electrical equipment.
The Inland Marine coverage is designed to list specific pieces of property at a designated value. The coverage for those specific pieces is broader than what is normally provided on the standard Special Multi-Peril Form.
***Valuation – The value for a piece of equipment or a specific item such as a computer is fairly well defined by the cost, and needs only be scheduled for that amount. However, fine arts, collectors items, or one of a kind items that have intrinsic value attached to them should be appraised and insured for the intrinsic value. If this is not done, the policy is not obligated to do any more than replace the item with as close as they can to like kind and quality. In addition, if you don’t schedule intrinsic value items, the coverage provided under the Special Multi-Peril policy is often limited.