Insurance is a form of legalized gambling. You pay a company in case something bad happens (the covered loss) and the company, based on their analysis of you and the environment you operate in sets the rate to cover the potential loss based on the likelihood of the loss, what you are actually covered for in terms of loss, and their expected ability to use your funds to make money while waiting for the loss to happen. Life Insurance or property insurance it doesn’t matter the same basic concept applies.
Motorcycle insurance is high, in part, because at least one study showed that the likelihood of a claim or accident on an insured motorcycle in 7 years is 100%. If you are objecting saying you have gone longer, congrats, but that likely means somebody else has had two in the same time period. Dealing with insurance in the farm operation is important.
The next time on Netflix you see “The Umbrella Academy” or on Disney “Mary Poppins”, or “Singing in the Rain” on a DVD, think of your insurance coverage and if you have or need to have an umbrella policy.
Umbrella policy protection for farm business remain one of the few bright spots in the necessary evil that is business insurance. They generally provide greater protection for all assets under the umbrella for reasonable price.
Since you are thinking about your insurance, also think about these issues that relate to how effective your insurance is.
- Are all the named insureds really named. Do you have everybody associated with the business identified? Are all the actual operators of the vehicles in the company listed on the policy? Are the LLCs that you made for estate planning listed or is the insurance still held under the old sole proprietorship before you saw the estate planning attorney?
- Is your policy for actual cash value or replacement cost? One is cheaper and more painful when you have a loss while the other is painful to pay but far more delightful when you have a loss.
- Are your buildings and equipment over or under valued? Take a look and think. That farrowing house addition in 2000 is likely not worth the same as it was when it was first placed into service. On grain bins, does your policy require them to be listed or can you get a gran handling facility endorsement that covers it all?
- Do you have duplications? Is your farm trailer listed multiple places?
- Does your policy cover extra expenses? If you had a fire and had to rent another facility to store grain, milk or conduct repairs, is that covered?
- What is your pollution coverage? Pollution isn’t just for giant multinational corporations to worry about, spray drift is pollution. Chemicals that fall out of your moving truck could be pollution and your auto policy might not cover that. Does your farm policy cover transport of chemicals gone wrong?
- Are you pound wise and penny foolish? State minimums call for $25,000 coverage on an auto. $25,000 barely covers a cheap foreign import car and an ambulance ride. If a helicopter is involved, you are looking at $50,000 easy. Do you have enough policy coverage? How much damage can a low boy hauling a large piece of equipment do if the breaks fail on a Clayton County road?
When was the last time you and your insurance agent actually went over your policy? What does it actually cover? If you have a fire and lose stored grain is it covered? If your employee diverts a load of corn to another grain elevator and sells it in her name, is that inventory theft covered? What would it look like if the next tornado, derecho, fire, flood or hail event focused on your operation.