Understanding the different types of farm insurance
Insurance is the only way to manage and reduce any risk to your assets.
Today, many farmers are so overwhelmed by initial start up expenses that they tend to overlook agricultural insurance as their number one priority.
It’s not easy but once you know what types of insurance are available and what level of coverage you need, you’ll be able to distinguish an option that is best suited for your business.
Running a farming business can be risky, especially with so many variables out of your control. While every business faces negative scenarios that could impact business success, it is important for farmers to get the right kind of insurance to meet their production needs, in the event that something does happen. When searching for suitable insurance cover, you need to be certain that you are getting sufficient coverage at a competitive rate. After all, you are paying to retrieve your losses.
Here are the different types of farm insurance:
Crop insurance
Crop production has everything to do with climate change, and unfortunately, with ever-changing environmental factors, you can’t always guarantee your next harvest. It’s always best to be prepared for the worst. This type of insurance also covers you for any natural occurrences like fire, lightning, frost, chemical spray reactions or flooding, but it only covers once the crop has emerged and it stops when the crop is harvested, reworked, chopped, cut, lifted, picked or gathered.
Livestock insurance
Livestock insurance can be expensive but is particularly important when you have highly valuable breeding stock. From death caused by sickness to disease, accidents, fire, lightning or poaching, livestock insurance will ensure that all your animals are covered. All types of livestock cover are available for short periods of time or on an annual basis, and they include the following:
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Individual coverage: This insurance is mostly used to cover higher-value animals on an individual basis, for example, the main breeding bull. The animals you choose are listed on the policy according to their identity along with the amount they’re insured for.
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Blanket coverage: This covers a much broader spectrum of the farm, as you’re able to insure all your farm property for a predetermined value. When doing this, make sure you insure the correct values and that the policy provides for the cost of rebuilding. (This is different from the market value and, in many instances, is substantially higher.) Other coverage can include equipment and machinery, systems and the actual livestock. No matter what happens to your farm, whether it’s just a section of the farm or the farm in its entirety, you will get back what you put down.
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Herd coverage: Herd coverage is usually the easiest way to cover your livestock unless you prefer to cover individual animals. Herd coverage allows you to cover a specific number of animals, for example, 200 dairy cattle or 500 pigs.
Multi-peril insurance
Multi-peril cover bundles together many different aspects that usually work together. For example, if the temperature rises well-above what your crops can handle but there is no drought or fire, then you will be able to claim for any environmental factor such as drought, frost, floods, wild animals, uncontrollable plant sicknesses and insect damage, windstorms, excess heat or snow and cold weather. The multi-peril cover is popular with crop production because you can claim from natural causes even if there wasn’t a specific event causing the damage to your plants.
Asset and vehicle insurance
If you’re a startup agricultural business owner, you should look at getting adequate insurance that will cover you for both your business and personal needs into one single policy. As your farming requirements grow and change with your business, you can select the suitable cover for specific business needs.
Farm equipment insurance allows you to replace any assets that are affected by fire, natural disasters or simply failure, without having to suffer a large financial loss. These assets can be covered in one of two ways: individually, where each piece of equipment is listed separately on the policy with its own value, or under a blanket policy (similar to livestock) where everything is covered up to a designated amount.
If you are transporting your goods across borders, it’s important to safeguard your business with a customised vehicle and asset insurance policy. This can include cover for goods-in-transit for local and across the border operations, protection of imported and exported equipment (depending on your level of coverage) and the optional cover for stand-alone assets such as generators.
In conclusion
While any external factor can have a negative impact on your agricultural business, if you keep yourself and your farm covered, you’ll be able to prevent anything from taking a huge knock at your business.