Farmers are a resilient bunch. They’re used to riding out fluctuations in the market, disastrous weather and so-called acts of God. In some cases they have been doing it for generations. Planning, managing resources, taking the long view – they are all factors that play into business survival.
But farmers do have another trait in common when it comes to farm insurance, according to Gallagher’s Head of Claims Adam Squire: underestimation. Here are some of the forms that it takes.
Underinsuring farm equipment – at less than the actual cost of replacement – is one of the most common errors Squire sees.
“Don’t scrimp because you don’t think it will happen to you,” he warns. After a fire, for example, multiple items could need replacing and that’s when underinsurance will really bite.
Another pitfall: insuring for the cost of rebuilding by the farmer themselves. If the asset has to be replaced quickly the farmer is left carrying a loss, according to Kylie Hull, Gallagher Area Director, Dubbo.
Don’t forget to insure critical fencing, she adds. “These days there are options that make it more affordable and you can choose what to cover.”
A standard farm insurance program has restrictions on livestock. Livestock in the open is often not covered by insurance, for example. A livestock-specific policy should cover as many options as possible. Don’t assume policies cover theft of livestock or losses resulting from storm damage. Look at the fine print.
3. Down time
A major event will have a huge impact on your whole community in terms of time to repair damage. It will take longer to restore operations than you could expect under normal circumstances so this needs to be reflected in your business interruption cover.
“Arrange a minimum of 24 months because you will probably need it,” Squire advises.
4. Meeting commitments
Make sure you have adequate increased cost of working cover. This is critical if you have contractual liability to customers and you are compelled to hire in resources in order to meet these obligations.
Name properties such as workers’ accommodation on the farm insurance schedule – or they may be excluded, Squire warns – and check the wording of the policy to make sure key assets are covered.
Theft of farm contents is not automatically covered and should appear in its own section of the policy.
6. Make records
Some repairs won’t wait. Take photos before starting emergency work such as fencing, and keep receipts for the costs involved.
Make sure copies of insurance documents are stored offsite: on a phone or with someone in another location, an accountant, for example. Have a back-up alternative such as the Cloud.
7. Update sums insured
Reassess the value of crop insurance regularly. Variation in prices changes the value of the yield.
“Gallagher has one of the only true after harvest policies on the market – variable yield at the end of harvest you pay on what you actually harvested,” Hull says. “Every other policy has overs and unders. Gallagher is flexible down to exactly whatever you strip.”
The cost of underinsuring your farm will always be higher than you think. Talk to a broker to review your cover or for a free of obligation discussion about your needs.