Farm ownership and management calls for planning, managing resources, taking the long view when it comes to riding out fluctuations in seasonal returns. Sound business sense is essential to survival - but there's one area that tends to be a blind spot.
When it comes to farm insurance, according to Gallagher’s Head of Claims Adam Squire, many farmers routinely fall short on claims returns due to underestimating the costs involved. Here are 7 common pitfalls to avoid.
One of the most common errors Squire sees is farm equipment insured for less than the actual cost of replacement.
“Don’t scrimp,” he warns. After a fire, for example, multiple items could need replacing and that’s when underinsurance will really bite.
Another shortfall occurs when farmers insure cost of replacement of buildings, for example, assuming they carry out the labour involved themselves, says Kylie Hull, Gallagher Area Director, Dubbo. But if the asset has to be replaced fast the farmer gets stuck with covering the shortfall in labour costs.
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.”
Livestock can be subject to restrictions under standard farm insurance, such as livestock in the open which is often not covered. A livestock-specific policy should cover as many options as possible. Check the fine print to ensure policies cover theft of livestock or losses resulting from storm damage, for example.
3. Down time
Restoring operations after a major event that affects most of the surrounding community will take longer than you could expect under normal circumstances so this needs to be taken into consideration in your business interruption cover.
“Arrange a minimum of 24 months because you will probably need it,” Squire advises.
4. Meeting commitments
If you have contractual liability to customers it is critical that you also have adequate increased cost of working cover in case you need to hire in resources in order to meet these obligations.
Make sure you itemise properties such as workers’ accommodation on your 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
Log reminders to yourself to reassess the value of crop insurance regularly. Variation in prices changes the value of the yield from your business.
“Gallagher has one of the only true after-harvest policies on the market: variable yield at the end of harvest means 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. Click the button below to find out how Gallagher farm insurance cover can protect your business.