When a Church School Needs Its Own Policy Instead of an Endorsement

Oct 20

Almost every church school starts the same way. The congregation opens a preschool, the broker adds an endorsement to the church policy, and everyone moves on. Ten years later there are three hundred students from kindergarten through twelfth grade, forty employees, a gymnasium and two buses, and the insurance structure is still the one written for a preschool.

An endorsement is not inherently wrong. It is efficient, it avoids duplicate coverage, and for a small program it is the right answer. The question is when the school outgrows it.

Five tests

1. Is the school a separate legal entity?

If the school is separately incorporated with its own board and its own EIN, it generally needs to be a named insured in its own right, and frequently its own policy. Insuring a separate corporation as an afterthought on another entity's policy creates coverage arguments at exactly the wrong moment.

2. Does the school have its own revenue and its own payroll?

Tuition income and a payroll that rivals or exceeds the congregation's changes the risk profile enough that underwriters want to see it rated on its own terms rather than as an add on.

3. Are the limits shared?

This is the one that bites. On an endorsed structure, the school and the church typically share a single general aggregate. One serious school claim can exhaust the limit that also protects the congregation. If the aggregate is three million and a school incident consumes it in March, the church is uninsured for the rest of the policy year.

4. Does the school run athletics, labs or transportation?

Interscholastic sports, science labs, shop classes and student transportation are exposures a church endorsement was never priced for. They usually need their own treatment and sometimes their own carrier.

5. Does anyone require evidence from the school directly?

Accreditors, athletic conferences, lenders and landlords increasingly ask for a certificate naming the school. Producing one off a church policy where the school is an endorsement is awkward and sometimes insufficient.

Not sure which structure you have?

Send the declarations page. We can tell you in one read whether the school is a named insured, an endorsement, or neither. Request a free church risk assessment or call 978.712.0111.

What separating actually costs

More than an endorsement, almost always. The honest trade is that you are buying dedicated limits rather than shared ones. A church that separates is paying for the certainty that a school claim cannot exhaust the congregation's protection, which is a different product from the one it had.

There are also structures in between. A shared package with separate aggregates by location or by operation, or an endorsement with a dedicated school limit sitting underneath a common umbrella. These are worth asking about before jumping to two complete programs.

The question to put to your broker

Ask it precisely: if the school has a serious claim in month two of the policy year, what limit remains available to the church for the following ten months? If the answer is anything other than a clear number, the structure has not been examined recently enough.

Questions school boards ask

We are not separately incorporated. Does that settle it?

No, it makes an endorsement more workable but the shared aggregate question still applies. Legal structure and limit structure are different issues.

Will separating complicate certificates?

It usually simplifies them. The school produces its own evidence of coverage rather than relying on a church policy that may not clearly extend to it.

Can we keep property together and split liability?

Frequently yes, and it is a common compromise. The buildings are owned by the church and insured together, while liability is structured to give the school its own limits.

When should we review this?

Any year the school adds a grade level, a sport, a building or a bus. Those are the four changes that most often outgrow an existing structure quietly.

Not ready for a full review? Start with our church insurance checklist, a short list of the coverages and limits worth confirming on your current policy before you talk to anyone.

If you would like a second opinion on whether your school and church coverage structure is properly structured for insurance purposes, contact us for a free church risk assessment.

Contact Hale Street Insurance at 978.712.0111 or [email protected] for a free church insurance review. You can also visit our church insurance page or request a quote to get started.

Jake Lubinski is the founder of Hale Street Insurance and a licensed insurance broker with years of church board and stewardship experience. Based in Boxford, MA he works with churches throughout Massachusetts and the US to build insurance and risk programs designed around how ministry actually operates. Reach Jake at [email protected] or 978.712.0111.

Jake Lubinski