Asset Exposure & Insurance Coverage
Apr 29, 2011
When was the last time you sat down with your insurance agent to discuss coverage? With the rapid changes that are occurring in agriculture it's more important than ever to review your coverage at least once per year. If you are making any changes in ownership, purchases, or equipment usage, make a point to do a review of your coverage as you adjust and make changes. Don't wait until you've already made changes to talk to your insurance company. Have the discussion before changes are made to make sure there are no gaps in your coverage.
Think about the dramatic changes that have taken place in just the past six months with market prices. At what value do you have your grain insured? If you currently have a 50,000 bushel bin insured for $3.00 corn, think of the loss exposure difference you have if your bin is filled with $6.00 corn. This example is a difference of $150,000 in coverage needs. Just think about all of the other examples on your farm that could possibly be under insured. Has the value of your equipment changed since you did your last insurance review? Have you purchased any new equipment? Are there other operational changes that have been made and not properly communicated?
Another important consideration is your umbrella coverage for the entire operation. A $1 million umbrella used to be adequate for many operations; however, with the extreme growth of many operations $5-$10 million umbrellas may be needed (Or more yet?). Invest some time reviewing your comprehensive coverage plan with your insurance agent. Ask questions to be sure you fully understand your coverage and any potential loss exposure. Be transparent in your description of your operation to your agent. Only with the proper information can insurance companies put together the appropriate plan for your operation. Discuss all of the possibilities, potential changes, and specific needs for your operation. Provide a list of every piece of property in detail with assigned values. The more information you can provide the more you will be able to rest assured that your hard-earned assets are protected.
Here is a list of basic topics to discuss with your agent in an insurance review. You may likely think of more topics of concern for discussion but this list will get you started.
1. Umbrella coverage level /deductibles
2. Liability coverage level /deductibles
3. Farm personal property & equipment values
4. Equipment lists and values
5. Buildings and grain storage values
6. On farm inventory -grain/livestock values
7. Custom work or commercial exposure (volume of work and level of coverage needed)
8. Plans for operational changes within the next year
9. rental equipment or unique usage arrangements
10. Partial ownership structure and coverage
11. Other interests, names, or exposures
Inadequate coverage could be a big blow to your bottom line. One of the best ways to manage your margins is to reduce risk and eliminate the possibility of any catastrophic expenses. The best margin managers are always the best risk managers.
Please send me your specific questions or comments.