Winter Farm Insurance

by Reuben Dourte
As temperatures plummet across the country, new challenges and opportunities arise for the agricultural industry.  While crop farmers may be looking to lock in seed and fertilizer prices, dairymen are utilizing the high value feed they put away in the prior fall months.  At the same time, farm mechanics may be working overtime to fulfill maintenance demands on equipment.  Farming, like all business, is cyclic, and the changing seasons bring forth new considerations and the chance to reorganize and streamline operations.  A few items for farmers to consider that can prove to keep their farm insurance policy current, up-to-date and claim-free are as follows:
A Review with Your Agent
As the cold sets in and a fair share of people across the country go into hibernation, many farmers are taking this season to make necessary adjustments for the coming growing season.  One of those adjustments can, and should be their Farm Owner’s Insurance Policy.  For most farmers, the months following fall harvest prove to be a perfect time to review coverages and discuss new risk exposures with their agent.  When a farmer asks his agent to sit down for a coverage review, he is taking a proactive approach to ensuring the future of his operation.  As equipment values change, farmers acquire new property (both real and personal) or add to, sell or discontinue a portion of their operations, both the premium and the insurance company best suited to provide coverage can also change.  Having a detailed farm review with an agent over these winter months can possibly provide premium savings!
Update Your Equipment Inventory
Whether a farmer’s equipment is insured on a scheduled or blanketed basis, it is not uncommon for that farmer to acquire new equipment during the year and forget to add it to their Farmowner’s policy.  Chances are there is some equipment maintenance to be done on farm implements over the winter months.  This is a great time to reassess the actual cash value of these items, especially if they are an integral part of the farming operations.  Some older tractors have a higher resale value today than when they were purchased 15 years ago.  If coverage for that tractor is provided under scheduled farm property for the purchase price as of 15 years ago, that is the maximum value the insurance company will pay in the event of a loss; even if replacing the tractor with one of like kind and quality costs $5,000 more than the policy limit.  Other equipment or implements may depreciate more quickly and the cost to replace that particular item would be far less today than it was a few years ago when it was initially added to the policy.  The insurance company will pay for lesser of the cost to purchase a similar year, make and model (in similar condition) or the policy limit.  For example, if a used no-till planter was purchased for $30,000 five years ago and could be purchased for $20,000 today, the insurance company will provide the $20,000 to make the farmer “whole” and put them back in the position they were in before the loss, even if the planter was insured for $30,000.  In this scenario, a farmer could be paying for more insurance limit than they will realistically be able to utilize, and a quick inventory value review, while conducting routine equipment maintenance, can save premium dollars.  Likewise, inventory reviews can help a farmer catch items that have been underinsured or cases where the addition of an item was overlooked.
Building Maintenance
Like equipment inventory reviews, building maintenance is something that is beneficial from an operational standpoint and can also put premium dollars back into a farmer’s pocket.  If a farmer is considering a renovation project this winter, a quick call to their agent can be advantageous.  Many building updates or renovation projects can ward against insurance claims and therefore can be used as justification for “superior structure” credits on your insurance policy.  What credit is available, and how much, widely varies between insurance companies.
Snow load requirements for new construction vary regionally, however, many older farm buildings were constructed before ordinance changes went into effect.  Collapse due to weight of ice and snow is a huge cause of winter insurance claims.  If replacing the roof of a farm building is on the docket this winter, farmers should into consideration the requirements of their area!  Instead of simply replacing the shingles or sheet metal, it may be important for the farmer to have a conversation with their contractor about the trussing that currently exists on the building and whether or not it meets the necessary snow capacity requirements.  Likewise, when a farmer is having a building rewired, superior structure credits may be available for electrical wiring installed within rigid conduit.  Over the course of several years this credit can help marginalize the additional cost of conduit, while the electrical conduit helps to reduce the chance of claims and make the farmer’s facility a safer and more insurable risk if they ever decide to shop their insurance in the future.  Beyond the larger building projects, fixing small items on buildings can help reduce claims as well.  While storm damage can be unpredictable and unavoidable, higher frequencies of smaller claims due to lack of maintenance, or “management claims”, are actually looked at more unfavorably by insurance companies than a large catastrophic weather related loss.
Keep Premises Maintained
Snow and ice creates hazards for people as well as buildings.  Given a busy schedule, it is easy to overlook some of the premises maintenance challenges of winter.  Icy farm lanes and front walks can create significant slip and fall dangers during these months.  The Medical Payments portion of a Farmowner’s Policy will pay for the medical costs of a person injured on the farm premises regardless of fault.  This means that a visitor to the farm can collect payment for injuries from the farmer’s policy even if the farmer is determined to have done nothing negligent.  These claims can go against the farmer’s loss ratio.  Farmer’s should keep in mind that a family friend who has to go to the emergency room for a twisted ankle may have no intention of submitting a Medical Payments claim against the farmer, but their health insurance company has the ability to subrogate (seek reimbursement) against the farmer’s insurance policy.   If a claim is bad enough, and the farmer is determined to be negligent, the Liability portion of the policy could pay for loss to a third party due to bodily injury or property damage.  Keeping driveways and walkways cindered or salted is a good precaution, as is having a safe plan for snow removal from roofs for the safety of pedestrians entering or leaving the building, and to ward against aforementioned property claims due to collapse.
Conclusion
Winter is a time of severe weather, and with that comes severe underwriting losses for insurance companies.  Insurers are constantly looking for ways to reduce claims, and addressing property concerns during the winter months can help a farmer achieve those objectives and reduce loss ratios.  Across a broad spectrum, several years of favorable loss ratios for an insurance company can and does lead to rate reductions, from time to time.  This becomes a benefit to all insureds as farm insurance premiums can be reduced or, at the least, increases can be avoided.  Additionally, inventory review and property maintenance initiatives help farmers to keep their individual policy costs in line as well as avoid debilitating, underinsured claims.  As always, bringing a professional insurance agent into the conversation is advisable in order to make sure that all of your loss exposures are properly covered and accounted for and you are getting the most “bang for your buck” out of your farm owner’s insurance policy.
Reuben Dourte is an Account Executive at Ruhl Insurance specializing in Farm and Agribusiness Insurance. He can be reached through https://www.iruhl.com/.