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4 Tips to Prevent the Sacrifice of Ag Insurance Coverage
Are you feeling the need to decrease your insurance premiums with the understanding that you can’t afford to sacrifice coverage? If you find yourself in this position, Jeremy Greiner, an agriculture insurance specialist with MacDonald Insurance, offers these four tips to help you minimize risk.
1. Self-insure larger amounts of physical damage to dwellings, farm structures, farm machinery, autos, livestock, etc.
“To achieve this, explore increasing the deductible limits you currently have and see what type of premium difference there will be between your current deductible and your what-if optional deductibles,” says Greiner.
2. Review current values.
Consult with your agent on the items listed below to make sure values are up-to-date.
Farm structures. “If your policy has an inflation guard on your structures, over time the inflation guard can exceed the actual inflation for the material costs and labor costs to build your farm structures,” he explains.
Greiner says it’s important to note that an inflation guard is typically only used when a company is using the replacement type of replacement cost on a farm structure.
- Farm machinery. “Most, if not all, companies who insure farm machinery only insure the machinery at the replacement type of actual cash value,” he says. “Meaning, at the time of a loss, depreciation will be considered into the indemnity you would receive on damaged machinery. Make sure the value of each piece of machinery is not overinsured.”
For example, if you have a tractor that, in today’s market, is worth no more than $100,000, yet is insured at $150,000 on your insurance policy, you’re likely overinsured.
“Even though you had the tractor listed at a value of $150,000 and were paying a premium to insure the tractor at that value, at the time of a complete loss, you’re only going to be paid $100,000 minus your deductible,” says Greiner.
3. Insure structures at the replacement type of replacement cost vs. actual cash value.
“When a structure is insured at the replacement type of replacement cost, you will be required to insure the structure at what today’s values (i.e., material and labor costs) would be to replace that structure,” he explains.
“If the structure qualifies (Condition of Structural Integrity and Appearance), this replacement type is more expensive due to the required value amount of the structure,” Greiner says.
When a structure is insured at the replacement type of actual cash value, there are fewer requirements regarding the value that is required to be placed on that structure.
“With this coverage, structures tend to be insured at less value, which, in turn, provides a lower premium,” he says. “However, keep in mind that at the time of loss, depreciation will be a factor in determining the loss amount on the structure.”
Even though MacDonald Insurance does not consider actual cash value the best option, Greiner notes that it is still an option.
4. Ask yourself these questions.
Here are three main questions you should answer before deciding on coverages for your operation:
- What can I self-insure before I will need assistance from my insurance provider?
- Will my operation be able to continue or survive at the time of a loss if I don’t have a certain coverage that I’ve elected to go without?
- What premium am I willing to pay to provide myself the peace of mind, knowing that at the time of a loss, I’ll be able to continue my operations?