Brian Hunter considers himself lucky. In the more than 30 years he’s been farming, he’s never had to make a claim against his property or liability insurance. He also knows that being properly covered is as necessary as the pickup he drives.
“Insurance is one of those things you hope you never have to use, but it’s good to know you do have it should you need it,” says Hunter. “It’s also more important now than ever.”
More assets = more risk
As his Scranton, Iowa, operation grew through the years, so did the cost of doing business.
“When I bought my first new pickup back in 1983, I paid $12,500,” he says. “Today, I can’t buy anything for less than $40,000. It’s the same on the machinery side. A combine costs nearly eight times what it did back then.”
Hunter’s net worth climbs quickly once he adds up land, livestock, buildings, and equipment. Out of all the things he manages in his business, safeguarding those assets against an unforeseen exposure worries him the most.
“If I have a combine burn in the field or the wind blows down a grain bin, I can handle that,” says Hunter. “If my employee gets into an accident and is at fault, that’s a concern. In a split second, one claim could wipe out what I’ve worked decades to build.”
Property is a physical object. “You know what it’s worth because it’s a tangible item,” says Jeremy Greiner, an agriculture farm insurance specialist with MacDonald Insurance. “If there is a catastrophic loss, you’re capped at a certain amount.”
Liability, however, has several shades of gray. Although there are limits you can place on your policy, that doesn’t mean you can’t be held responsible for more.
So how much coverage is enough? It’s a question Hunter is continually asking Greiner.
“Farmers like Brian want to know whether or not a $1 million limit on liability is enough in today’s world if they’re worth $10 million,” says Greiner. “If I’m an attorney on the other side of the table, I’m going to go after what they’re worth.”
Yet, a number of farmers are only insured for a fraction of their value.
“The assumption with liability is that if you have a liability policy, you’re covered for whatever you do, which isn’t correct,” says Greiner. “There are a number of endorsements you can add to your farm liability policy that aren’t automatically included in your base policy and will provide the coverage needed.”
It’s the one area he and Hunter have worked diligently on since Greiner took over Hunter’s account about four years ago.
“As my operation grew, I wasn’t keeping up to ensure I was covered properly,” says Hunter. “I wasn’t willing to risk that exposure to the unknown. Jeremy ran the numbers and advised me on where I really should be to fully cover the net worth of my operation.” If you don’t use that rule, you could be at risk of being underinsured, liability-wise, notes Greiner.
While Greiner’s average farm client spends around $15,000 to $20,000 annually, added protection comes with a much higher price tag. “I pay about $40,000 yearly, which is about 15% of my overall budget. That amount may sound high, but I’m insuring more dollars. One loss offsets that by a lot,” explains Hunter.
His policies through the agency include farm property, farm liability, ATV/UTV coverage, commercial/personal auto coverage, workers’ compensation, cargo coverage, umbrella coverage, boat owner’s coverage, rental dwelling coverage, and transportation pollution liability.
With so much at stake, the men evaluate these needs as Hunter’s annual renewal is about to come due.
“Brian and I spend a lot of time on liability to make sure we have that part covered right,” says Greiner. “We will talk about each piece of equipment, each building, and each location. We even itemize every change he has made over the last 12 months. It pays to be particular, because it seems like we find something every year.”
In general, typical gaps include adding or removing equipment, discovering new exposures like custom applications, and increasing umbrella coverage limits.
What it comes down to is how much you think your business could absorb if you had to self-insure a claim. “The future is unpredictable,” says Greiner. “You need to decide what your operation can withstand until assistance is needed from an insurance company.”
6 tips for better coverage
As your renewal date nears, consider the following six tips to shop smarter for insurance.
1. Build a relationship. Since the late 1970s, Hunter has had his property and liability coverage with the agency, which is located in the same town as his farm. Through the years, the mantra has stayed the same: The relationship you develop with clients is critical to properly covering their assets.
“It’s all about communication and trust,” says Greiner. “Brian trusts me to make sure he’s covered correctly, but he has to be honest with me, too.”
“I know farming; I don’t know insurance. I put my trust in Jeremy to make sure I’m covered correctly,” says Hunter.
As his operation has grown, he says it’s been nice to be with the same agency long enough so his agent knows him and where his business is going. That’s not to say the agency hasn’t had to work to keep his business.
“Jeremy worked hard to put together a manure-handling policy,” he says. “We went back and forth several times before we settled on one.”
2. Comparison shop. “Don’t always go cheap,” says Greiner. “If you do, you may find what you’re paying for is probably not the best product out there.”
Review the deductibles and limits of what a policy does – and doesn’t – cover.
3. Don’t assume you’re covered. “There are a number of other coverages, like cargo coverage, you need to talk to your agent about,” says Greiner. “Once something is in transit, it’s a whole new ball game. Whatever you’re hauling may not have the correct, or any, coverage with your current carrier.”
4. Look at pollution coverage. Each farm operation has different pollution exposures. “Because I was hauling manure, Jeremy needed to know what I was hauling, what I was hauling with, and who was driving, because my policy had certain exclusions,” says Hunter.
5. Consider workers’ compensation. “If you have employees, you both need to be protected for bodily injury, loss of wages, and short- or long-term disability,” says Greiner. “You are opening yourself up to a large lawsuit and not protecting that person if you don’t have the right coverage.”
6. Evaluate yearly. “You need to have that sit-down with your agent on an annual basis to explain what has changed in your operation,” says Greiner. “You are never too busy to take one or two hours once a year to protect what you’ve built for years.”
Did you know?
When ATVs and UTVs hit the ag market, farmers quickly realized what a valuable tool they could be. Today, nearly 70% of farmers own more than one ATV; 20% own at least one UTV. As their utility on the farm evolved, the way they were insured did, as well.
“An ATV and a UTV are used for different purposes,” says Jeremy Greiner, MacDonald Insurance. “An ATV is seen more as a pleasure vehicle, but it is also used on the farm from time to time. On the other hand, a UTV is used for farming and sometimes used for pleasure. One has automatic liability if it is taken off-premise; the other doesn’t. If you don’t have the right coverage, you are self-insuring that loss.”
There are ATV policies that can be written just like an auto policy. There are also other policies that let you add coverage to a farm policy, which may be a more cost-effective way to go and one that requires less paperwork.
“There are numerous ways to get to the end result,” says Greiner. “Agents need to make sure they fill in those gaps to get to the coverage you want.”
(Source – http://www.agriculture.com/farm-management/other-farm-business/shop-smarter-f-insurce_326-ar51880)