FARM INSURANCE
Informative Articles
Be Sure to Insure to Value
by Jeff Wilson
State Auto Insurance Company
In preparation for the planting season, farmers spend most of their time completing maintenance on their equipment and finalizing input costs. Why? When the rush to beat Mother Nature comes, proper maintenance of equipment prevents break downs and delays in getting the seed in the ground. Managing input costs helps to maximize your profit and helps to determine the cost per acre and what crops to grow. In theory, it is risk management.
When was the last time you completed a maintenance check on your farm insurance policy? If you would be unfortunate to experience a wind loss to a barn or a fire loss to a tractor, will your insurance provide the coverage to get you back in the field as soon as possible? With the increasing value of commodities, farm equipment, and farm outbuilding construction, your policy may be underinsured. Here is a brief checklist of some items to consider.
1) Most farmers insure their farm personal property as a “blanket.” Blanket farm personal property is a lump sum of insured value to cover all your farm personal property. Farm personal property includes equipment, implements, seed, fertilizer, tools, etc. It is basically anything mobile or portable you use in the farming operation. Most insurers require that the insured value be equal to or greater than 80% of your total inventory. If at the time of loss the value is below 80%, you may be penalized. Make sure to provide your agent with an updated inventory and compare the current value with your insured value.
2) Peak Season Coverage is used to cover those items which are seasonal in nature. In the spring, you have a substantial amount of investment in seed and fertilizer and, in the fall, a large amount of inventory in your bins. To cover these items in the barn or bins, peak season coverage can be added to your policy by endorsement, to cover these brief fluctuations in your inventory. If you have peak season limits now, is it enough? Think of the cost per bushel of beans three years ago compared to today. Have you reviewed your policy within the last four years?
3) Farm outbuilding construction costs have increased. We have not experienced a decrease in construction costs, like the housing industry. A few years ago a steel bin may have cost $1.00 or $1.25 per bushel to build. Today, we are seeing some areas to be as high as $2.25 per bushel. The demand for bin storage and steel prices has increased causing bin prices to skyrocket. Your insurance agent can evaluate your current outbuildings and suggest a proper amount of coverage.
Finally, we know most folks are looking for ways to save money. Our OFU farm program has competitive pricing and available discounts for preferred risks. We can also suggest changes in your risk management approach such as self retention and deductibles. Contact us today!