Whether you are insuring a car, a home, or a church, the premium is what you pay the insurance company in exchange for them to take on a specific financial risk for you. Think of it as purchasing a financial shield.
The Missed Premium Payment in Sherman
A church in Sherman had been paying its property insurance premium every month without a problem. Then the church hit a tight stretch financially. A large repair bill came due at the same time several other expenses piled up. Church leaders decided to delay the insurance payment for a couple of months, assuming they could catch up once giving improved.
The insurance company sent notices warning that the policy would cancel if the church did not pay the premium. But they ignored them and missed the deadline. Their policy was canceled. A few weeks later, a severe Texas hailstorm moved through Sherman and caused major damage to the church roof and several HVAC units. Church leaders called the insurance company expecting to file a claim. That is when they learned the policy was no longer active.
Because the church had stopped paying the premium and allowed the policy to lapse before the storm happened, the insurance company did not owe payment for the damage.The church now had to handle the entire repair bill on its own.
How Premiums Are Calculated: The Risk Equation
Insurance companies don’t pull premium numbers out of thin air. They use a complex math equation based entirely on risk. The basic rule is simple: the higher the likelihood that you will file a claim, the higher your premium will be.
When calculating your rate, insurance underwriters look at several key factors:
- The Value of the Asset: It costs more to insure a $500,000 church building than a $200,000 home because the potential payout for a total loss is much higher.
- Location, Location, Location: A church on the Texas coast faces a high risk of hurricanes, and a church in North Texas faces frequent hail. Higher regional risk always equals a higher premium.
- Your History: If you have a history of filing multiple insurance claims or have a poor driving record, your premiums are higher because the insurance company considers you high risk.
- The Deductible Choice: Your deductible (what you pay out of pocket during a claim) sits on a seesaw with your premium. If you choose a high deductible, you are taking on more of the risk, which lowers your premium. If you choose a low deductible, the insurance company takes on more risk, raising your premium.
Payment Schedules: Flexibility for Your Budget
Insurance companies usually calculate your premium as an annual amount, but they may give your church several ways to pay it.
If your church pays the annual premium in full, you make one payment for the entire policy year. This option may come with a discount or help you avoid installment fees, but it requires more cash upfront.
Some insurance companies offer a semi-annual payment plan, which splits the annual premium into two payments. For churches with larger insurance costs, this can make the expense easier to manage without committing to monthly billing.
A monthly installment plan breaks the premium into smaller payments throughout the year. This can help with cash flow and budgeting, but the insurance company may charge billing or administrative fees with each installment.
The total premium may stay the same regardless of the payment schedule, but fees and discounts can change what your church actually pays over the course of the year.
Premium vs. Deductible: Don't Confuse the Two
It is incredibly common for people to mix up these two terms, but they represent entirely different parts of your insurance plan:
- The Premium is what you pay regularly just to keep the policy active, whether you ever have an accident or not.
- The Deductible is the one-time, out-of-pocket fee you pay only when a disaster happens and you actually file a claim.
Finding the Sweet Spot for Your Budget
The goal of smart insurance planning isn't just finding the cheapest premium. It is about your total cost of risk. A rock-bottom price could mean major gaps in your coverage or a deductible so high you can't afford to pay it when a crisis hits.
Is your Texas church paying too much for the wrong insurance coverage? Don't guess when it comes to your financial protection. Through our True Texas Church insurance program, we look at your church’s specific assets and budget to find the right balance between your premium and your protection.