It was a Tuesday morning when the phone rang on Joe's desk.
Joe serves as the Executive Pastor for a thriving church in Ft Worth. He is used to solving problems. But the voice on the other end of the line was panic stricken.
It was the church administrator calling from the fellowship hall.
The head janitor had been stripping wax off the floor. He stepped backward into a patch of wet stripper. His feet went out from under him and he hit the concrete hard.
They don't think he broke a bone. But he could not stand up. He was lying on the floor in excruciating back pain and the paramedics were loading him onto a stretcher.
Joe felt a knot form in his stomach as he worried about his friend and fellow staff member. He hung up the phone and walked to the filing cabinet.
He pulled the insurance file. He flipped past the Property Insurance that covers the hail damage and wind damage from spring storms. He saw the General Liability Insurance that covered the fall festival. He even saw the Equipment breakdown endorsement for the HVAC units.
But he was looking for a document that said workers' compensation.
He could not find it.
Then he remembered the finance committee meeting from last year. They had looked at the budget and decided the insurance costs were too high. Someone mentioned that Texas does not legally require churches to carry it. They said they could opt out and save the money.
Joe sat down and put his head in his hands.
He realized he was not just dealing with a medical emergency. He was potentially staring at a lawsuit if things didn't go well. A lawsuit that could bankrupt the church if goes horribly wrong.
Joe is not alone. Leaders looking for Texas Church Insurance are operating right now under the false assumption that they are safe. They do not realize they have left their widest gate unlocked.
Is Workers' Compensation Required for Texas Churches?
Texas is unique. It is the only state that allows private employers to opt out of the state Workers' Compensation system.
This is known as being a Non-Subscriber.
To a finance committee with a strained budget, this looks like a gift. It looks like a loophole to save money on church insurance policies. It is perfectly legal to run a church in Texas without this insurance. You will not go to jail.
But legal does not mean prudent.
When you choose to be a Non-Subscriber you are making a massive gamble. You are telling the state that you are willing to take full financial responsibility for any injury that happens to your staff.
Finance committees in Texas churches often assume that if an employee is hurt, they can just cover the bills out of their general liability policy. This is a fatal misunderstanding.
General Liability Insurance has specific exclusions for employees. It protects visitors against property damage or bodily injury. It does not protect the people on your payroll. If you do not have a Workers' Compensation policy you are self insuring that injury.
But the medical coverage is not the real problem. The lawsuit is.
When you opt out of the system you lose strong financial protections for your church.
When a church is a non-subscriber you lose the protections of legal defense and money available in policy limits that are available through your work comp policy.
The janitor can sue for his surgery. He can sue for his rehab. He can sue for pain and suffering. You have to find and pay for a lawyer out of your church's operating budget.
Joe realized that by saving a thousand dollars the church had exposed itself to a claim that could exceed five hundred thousand dollars if the injury is substantial and requires heavy treatment and lost wages.
The "Exclusive Remedy" Protection
There is a reason smart Texas churches buy a workers' comp insurance policy even though the state does not force them to.
It is not just about paying for medical bills or lost wages. It is about purchasing a legal shield.
When you carry a Workers' Compensation policy you gain the protection of the Exclusive Remedy provision.
The insurance companies guarantee that they will pay for the medical care and lost wages of the injured worker. In exchange the employee gives up the right to sue the employer per state guidelines.
This is the shield.
If Joe's church had carried this policy the carrier would have stepped in immediately. They would have paid for the ambulance and the back surgery. They would have paid the janitor his weekly wages while he recovered.
Crucially the janitor would generally be barred from filing a negligence lawsuit against the church.
The policy turns a hostile legal battle into a standard administrative process. It removes the threat of litigation and devastation to your budget.
This inexpensive layer of protection extends to defense costs as well. Even if an employee tries to sue the church the policy typically includes Employers Liability coverage. This means the insurance company pays for the lawyer to defend you.
In Texas the legal fees alone for a negligence lawsuit can bankrupt a small church. When you buy workers' compensation you are buying a legal team and financial protection at a low insurance cost.
Pastor Classification and Premium Calculation
Churches hesitate to buy this coverage because they fear the cost.
This fear is often based on a misconception that medical coverage or accident insurance is expensive. The great news is that these are very wrong and the price is calculated carefully.
Carriers base the premium on the specific job duties of your staff. These are defined by Class Codes.
Class Codes are numerical identifiers that rate the risk or employee on your staff.
A janitor has a higher risk of injury. They climb ladders and lift heavy tables. Their rate is a little higher.
But the majority of church staff are not janitors.
Pastors and clerical staff fall into professional class codes. The risk of a pastor injuring himself in his study is very low.
Because the risk is low the rate is much less expensive.
But there is a trap here that catches many churches.
It involves the pastor and the tax code.
Pastors have a unique dual tax status and are required to pay their own social security tax. As a result, many of them end up wanting to be classified as a 1099 contractor rather than a W-2 employee since they have to file their SECA taxes anyway.
This can create a massive gap in coverage if your not paying attention.
Insurance premiums are based on an audit of the church payroll. The auditor looks for W-2 employees. If your pastor is paid via 1099 the auditor may exclude him from the calculation.
If he is excluded from the calculation he is excluded from the coverage.
Imagine the pastor trips on a cable during the service and breaks a hip. The church files a claim. The carrier says no premium was paid for him because he was not on the payroll report.
The claim is denied.
Your church must be proactive. This is where an insurance agent who is experienced in Texas Church Insurance helps you. They will make sure the insurance company understands his status and rates your policy accordingly.
If you get the Class Codes right and handle the 1099 issue correctly the policy is often much more affordable than the committee realizes. It is certainly cheaper than a lawsuit.
Solving The Problem Before The Ambulance Comes
Joe sat in his office and looked at the empty file folder.
The janitor was already at the hospital. The liability was established. It was too late to fix the situation for the accident that happened this morning.
But Joe knew he had to protect the church for tomorrow.
He realized that relying on a committee member's opinion about what was legally required was a mistake. He needed a risk management expert.
This is where True Texas Church Insurance steps in.
The agents at Insurance For Texans do not just sell you a policy. We act as your guide. We perform a comprehensive audit for every church we serve.
We review your payroll to solve the Workers' Comp issue. But we also look for other gaps.
We check your entire policy suite to make sure you are properly protected for both liability and property coverage. Here is an easy Top 10 List to consider.
- Auto Insurance
- Property Coverage
- Hail & Wind Damage
- Cyber Insurance
- Directors and Officers Liability Insurance
- Employment Practices Liability
- Sexual Misconduct Liability
- Excess Liability Insurance
- Professional Liability
- Special Event Policies
Joe learned the hard way that opting out is not a savings plan. It is a liability magnet.
You do not have to make the same mistake. You can secure the protection that keeps your ministry out of the courtroom.
Don't wait for the slip.
Click the button below to get the Workers Comp Policy that protects your church and its staff.