Joe didn’t expect it to be this complicated. He is the deacon in charge of facilities for a church in Midland. Nothing flashy. Just a humble, tight-knit congregation with a heart for helping families in the community.
When a local daycare approached the church about leasing space during the week, Joe thought it was a no-brainer. The church building was sitting empty five days a week. They had the classrooms. They had the parking. The extra income would help offset maintenance and utilities. Win-win, right?
But as Joe started working through the lease terms, he hit a wall. The church insurance agent informed them they need to be careful. Church Liability insurance policies typically won’t cover a daycare leasing your space as they are not part of your church organization.
That’s when the questions about insurance coverage started in earnest.
- Would the church be liable if a child got hurt?
- What if the daycare caused damage?
- Who’s responsible if a parent sues?
Joe suddenly realized this wasn’t just about unlocking a door on Monday morning. This was about protecting the church’s future. He had to think about the insurance impact of having a tenant like a daycare.
Three Things You Need To Know About Church Liability Insurance If You Have A Tenant
1. Your Church’s Insurance Likely Does Not Cover A Tenant
2. You Must Be Named as an Additional Insured
3. Require That the Daycare Has the Right Liability Coverages for Their Activities
But you can read on to learn what Joe needed to know about insurance coverages beyond an indemnification clause!
1. Your Church’s Insurance Likely Does Not Cover the Daycare
This is where most churches get it wrong.
They assume that because the daycare (or other tenant) is inside their walls, it falls under their property and building insurance.
It doesn’t.
Church property and liability insurance is written to protect the church and its operations as the named insured. If an outside group is running a daycare out of your church building, your insurance provider is going to draw a hard line between your regular ministries and their business during the week.
Anything can happen in the blink of an eye.
- A child is injured
- Property is damaged
- A parent files a lawsuit over a claim of abuse
Ultimately, your church liability coverage is not going to cover it as you are not the one running the daycare. What is worse, is that your church can be named in the lawsuit and be on the hook unless the daycare has their own active liability insurance policy that lists you on it.
This is non-negotiable. You need proof of coverage called a certificate of insurance. Every outside entity using your facility must carry their own liability policy. Period.
Even if it’s a Boy Scout troop. Or a homeschool group. Or a nonprofit tutoring program.
And especially if it’s a daycare.
2. You Must Be Named as an Additional Insured on the Daycare’s Policy
This is the second mistake most churches make. Even if the daycare shows you proof of insurance, that coverage doesn’t automatically extend to your church unless you’re specifically listed.
You need to be named as an “Additional Insured” on their general liability policy.
That wording matters.
Being listed as an additional insured gives your church direct access to the daycare’s liability protection if a claim arises from their operations on your property. Without this designation, your church may be left trying to defend itself without the backing of the daycare’s policy.
Joe made sure to add this clause to the lease. He required updated certificates every year before the contract renewed. That way, the church had proof on file and a clear path to legal protection.
It's a simple step, but one that can save you a mountain of stress.
3. Require That the Daycare Has the Right Liability Coverages for Their Activities
But it doesn't stop there. Just because the daycare has some coverage doesn’t mean it’s enough.
Joe needed to verify that their liability policy includes protection for the kinds of risks they actually face.
That includes things like:
- Abuse and Molestation Coverage – If there are children involved, this coverage must be in place. Period. If a serious allegation surfaces, this is what helps fund a legal defense.
- Professional Liability – This protects against claims of negligence or failure in the delivery of care, which is especially relevant since the daycare has teachers, aides, or special education programs.
- Property Damage and Tenant Liability – If the daycare damages your floors, walls, bathrooms, or equipment, you want to know they have coverage to make your church whole again.
Don’t assume they’re fully protected just because they flash a certificate. Ask questions. Review policy limits. Confirm with their insurance company.
Talk to your insurance advisor. This is about risk transfer. If something happens, you don’t want that risk landing in your lap.
A Smart Lease is Only One Piece of the Puzzle
Joe ended up working closely with a local attorney and his insurance agent to draft a lease agreement that addressed all these items. They made sure the daycare carried the right coverage, added the church as an additional insured, and gave the church the right to review policies annually.
But he didn’t stop there.
He also had a conversation with his insurance advisor at Insurance For Texans about what would happen if something went wrong. They reviewed the church’s existing policy. They looked at exclusions. They talked through the total cost of risk with and without the daycare leasing space.
That’s when Joe learned something valuable.
If a parent walks into your building and decides to sue you, you better have the right defense coverage in place. That's why True Texas Church Insurance exists.
Joe had a discussion with the other church leaders who help him with facilities and property insurance. They made a few updates to their general liability and property coverage. Joe wanted to make sure the church had a financial safety net of its own.
Texas churches are doing incredible things with their facilities and ministries. They’re feeding the hungry. Hosting recovery groups. Partnering with daycares to serve families that need affordable childcare.
These are great things. But good intentions don’t eliminate liability.
If your church is letting others use your space, you need to think like a steward. You’ve been entrusted with a resource, and protecting it means understanding the risks and putting the right coverage in place.
So if you’re Joe, or someone like him, don’t leave it to chance.
Ask the right questions. Work with a Texas church insurance expert. And make sure you’re covered before you sign the lease.
Click the button below to talk with a Texas church insurance advisor who understands the needs of ministries of folks in this state. Let’s protect what you’ve built so you can focus on serving others.
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