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Curb Common Insurance Mistakes

February 6, 2011
Wendell Rhoades meets with his insurance agent yearly to make sure he has the best possible coverage for his family’s farm in Marion, Ohio.  

Wendell Rhoades sleeps better at night knowing he’s covered. The Marion, Ohio, farmer has a proactive—and persistent—insurance agent to thank for his comfort level.

While choosing insurance coverage for his farm and family isn’t his favorite chore, Rhoades has learned how valuable it is to have an agent who insists upon a yearly review.

"For instance, there are so many different areas where we’re exposed to liability. When you have acreage scattered over several counties, you really don’t know if your landlord has any type of liability or not, and how you fall into that liability. That gets pretty confusing," Rhoades says.

The National Association of Insurance Commissioners (NAIC) says the majority of U.S. homeowners think they understand their insurance policy, but a November 2010 survey shows 86% of respondents don’t understand their liability insurance limitations. More than half don’t realize the effect credit scores have on vehicle insurance.

Not fully understanding the policy and not keeping the policy updated are two of the most common insurance mistakes that people make, says Jerry Hillard, director of farm sales for Nationwide Agribusiness Insurance Company in Des Moines, Iowa. This often leads to paying more than necessary or not realizing that coverage is inadequate until a claim is filed.

"In general, people think they should look for the cheapest premiums, but that’s not always going to give them the best coverage," Hillard says. "That’s why farmers need to sit down with their agent when [the policy] comes up for renewal. If the agent hasn’t been out to the farm in a while, the policy might not be up to date."

Rhoades farms more than 2,500 acres in and around Delaware County with his wife, Jan, and son, Ryan. He works with Allen Douce, Nationwide farm-certified agent with the Thomas Milligan Insurance Agency in Marion, to make sure the farm, rented ground and inventory (including seasonal stored chemicals, seed and crops) have the best protection for a manageable price.

Douce also manages insurance on the Rhoadeses’ hog operation.

"I usually bug them until they sit down with me. It’s too important not to do it," Douce says. Most often, the annual review captures changes in equipment owned or values impacted by commodity
prices. Douce says it is also an opportunity to update the policy based on new laws and changes in the insurance industry.

When reviewing insurance policies, experts say, farm families should pay close attention to:

  • water damage;
  • replacement cost versus actual cash value; and
  • liability.

According to NAIC, losses from earthquakes, floods, and water and sewer line breaks aren’t reimbursed under many standard policies. Farmers should talk with their agent about specific risks for water damage and make sure they have proper coverage, Hillard says.

"They may want to discuss an endorsement to provide sewer and sump pump coverage. A separate flood policy may be needed in flood-prone areas," he adds. Include in the conversation the type of reimbursement needed.

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FEATURED IN: Top Producer - February 2011

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