Farmers often think of risk management, but not many consider the risk associated with losing their management. In the event of an accident could your farm survive?
Agriculture is estimated to be one of the most hazardous industries in America. In fact the Center for Disease Control reports that each day around 243 agriculture workers suffer a lost-work-time injury and nearly 5% of those injuries result in permanent impairment. What if that happened to you? Would your crops get in the ground without you? Would harvest continue despite your leadership?
The thought of securing his farm’s productivity without him is top of mind for Iowa farmer Chris Barron. Barron says that it is important for the survivability of a farm that more than one employee be competent enough to keep things going should an injury happen to those in management.
"I don’t want to be the only one who knows how to do this," Barron says of their record keeping procedures. He also says that what is important to him is knowing that harvest and planting will get done on time even if he can’t be in the seat of a tractor.
"Most farmers don’t consider disability a potential problem," says Kevin Spafford Farm Journal succession planning expert. "Most people assume they’re invincible, that disaster happens to the ‘other guy’ not me." He says that purchasing a disability insurance coverage plan from an insurance provider is an important tool for financial security and one of the key factors to a farm surviving succession.
Farmers shouldn’t look at any single tool alone to serve this need. Disability insurance should be integrated into the family’s financial security plan to ensure stability if the bread winner is injured and cannot work. Disability insurance isn’t always cheap, but coverage is priceless according to Spafford.
"Farmers who may have considered disability insurance are often surprised by an initial price quote," he says. "They should weigh the cost of coverage against the probability of loss and the financial support necessary to maintain the family’s financial security."
When finding the policy that is right for you, Spafford says you must consider how much money it will take to keep your family’s finances afloat. To calculate the dollar figure necessary for adequate coverage, add together your monthly income needed with any other additional needs you might have. Additional needs are things that aren’t paid for monthly but have a real cost, these could include tax payments, cash for car maintenance etc. Next add together your disability insurance benefits, your salary, your spouse’s salary, income from investments and other income you could potentially have.
To determine monthly coverage excess or deficiency, subtract your income during disability from your total pretax income needs. A tool to help with this process is available on the Farm Journal Legacy Project website. Once needs are calculated a family can seek coverage from an insurance provider.
So you have an employee capable of taking over the day to day operations, and you have disability insurance, do you have all your bases covered? Spafford says there is one more important piece. He recommends farm business large and small have a disaster relief plan in case a disaster does occur. He says this should inform management, employees, customers and strategic partners what to do in the wake of a disaster.
"The guide should spell out the who, when, what and how of managing the operation when faced with a devastating circumstance including death, disability and illness," Spafford says.
In turbulent times, it’s important to be prepared.