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Ensure peace of mind with proper insurance

Nicole Richardson for Progressive Forage Published on 31 December 2019

Insurance is one of the top expenses for any person – and especially for farm owners. Paying for coverage seems redundant when a claim is filed and the conclusion is: The situation is not covered by insurance.

Gaining knowledge about insurance and the specifics of the policy in force can make a difference in not only the premium required but the result of a claim if it should arise.

Insurance is an intricate world with endorsements, amendments and exclusions. Having a captain to navigate those muddy waters can make all the difference in your coverage and pocketbook. Be diligent when hand-picking an agent or broker to hire. It is a lot like conducting a job interview; that representative needs to match the qualifications, knowledge and experience for the operation. Take time to do the research and find the highest-qualified candidate.

Understanding ACV vs. RC

Actual cash value (ACV) and replacement cost (RC) are terms that are going to be prevalent in the policy wording. ACV in a nutshell is the cost to replace the item, less depreciation. RC is a full replacement, no depreciation. These values are based on the actual cost of the item, whether it be a barn, tractor, etc., not market value.

Structure coverage

If the home is on the property, it can be covered on your farm/ranch policy. It can be covered under that policy like a standard homeowner’s insurance. Barns and other structures will be listed individually on the policy along with their contents. Typically, all feed, hay, grain, etc., will be listed separately as well. Ensure the value of the hay is covered along with the value of the barn in the event a fire or other incident occurs.

Equipment coverage

The equipment can be insured for its value and, in some cases, also for breakdown repair. Some companies offer a replacement cost option for equipment; it is highly recommended to add this endorsement. That way the piece is replaced at full value, and you are able to go out and purchase an identical piece without money from your pocket. Also, in the equipment sector, an endorsement that can typically be added is for loss of use of that equipment.

Say the combine is listed under the equipment section of the policy for $450,000 RC; a fire occurs and destroys the electrical in the machine, deeming it inoperable. In the middle of harvest, that machine’s daily use value is at $4,000 per day; it takes the shop four days to repair it. Loss-of-use coverage will look at this situation as a $16,000 loss due to it being a vital piece of equipment the operation cannot continue without.

Liability coverage

Liability situations for a farm look much different than for the standard person. As the sector of population that can be deemed the hardest-working, an agent should ensure the policy covers them effectively so that, in the event of a lawsuit, the operations are covered. The largest liability claims for the standard homeowner are slip-and-fall and dog-bite situations. On a farm operation, there are inherently more risks than that, depending on the type of operation. Animal waste, equine, livestock and a growing concern for chemical drift are all types of liability farm operations can incur that may bring a lawsuit.

If a cattle operation has fence damage and the cattle reach a road, that puts drivers in danger. If one were to hit a cow, they could bring a lawsuit against the farm owner for damages, injuries, loss of income, etc. Equine operations have inherently more risk, especially if it is an operation that boards horses and gives lessons. For crop farmers, a rapid concern surrounding chemical drift has been a push-button topic lately.

Some companies are now allowing chemical drift liability as an endorsement as well. On top of the standard liability covered on the farm/ranch policy, it is always highly recommended that farm owners carry a separate umbrella policy as well. This coverage starts at $1 million and increases dependent on your operation.

Crop and livestock coverage

For crop operations, a separate crop insurance policy can be vital, especially in growing years such as the current one. The year of 2019 was one of the wettest on record, and insurance payouts to farmers are projected to be the highest they have been in years. Standardly, corn and beans are what comes to mind when this situation occurs, but beet farmers in the north and cotton farmers in the south have also experienced disastrous weather this year.

Crop insurance protects the value lost of the acres planted in the event of damage. Most common damage types are hail and floods. There are many different types of crop protection programs available; with the use of a knowledgeable agent, the correct package of products can be determined for each operation.

While the physical value of livestock is covered on a farm/ranch policy, the value lost due to rising feed costs, market swings, etc., are not covered. For this, a standalone livestock insurance policy is needed. Similarly to crop insurance, this protects the rancher from value lost come market time for the animals. With the devastation seen in the dairy sector over the last several years, many can tell you how vital this protection is to keep an operation running.

Life insurance

An area of coverage often overlooked by individuals is life insurance. This type of policy is common in future business planning. Especially in a family operation, the loss of someone, including a key employee, can be devastating. Life insurance can not only protect the value of the members of the business but also the peace of mind for everyone involved. A life insurance payout can be used to cover debt, buy out non-participating family members and ensure the operation stays on track during the time of mourning.

Coverage can also be purchased for a key employee, say a farm manager who is vital to keeping the operation running on a daily basis. This coverage would pay out to the business, who could use those funds to properly compensate a replacement who has the same or higher qualifications as the original employee.

While the world of insurance is oftentimes a difficult one to navigate, it can be made easier by securing a qualified agent to assist in business planning. Safeguarding an operation is a complicated process and oftentimes is ever-changing. Securing the assistance and open communication of a solid insurance agent will be essential to guarantee the insurance paid for is the insurance needed.  end mark

Nicole Richardson is a freelancer from Missouri.

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