Droplet Deductible

August 23, 2013 08:49 PM
Droplet Deductible

How to insure your irrigation investment

You put tractors in a storage building, tools in the shop and grain in the bin for safekeeping. But how do you safeguard your center-pivot systems? Insurance is one option.

"These irrigation machines are always exposed to the elements," says Jon Taylor, regional insurance sales representative, Diversified Agrisurance Company. "We tell customers you can’t bring it into a shed at night and protect it."

Someone who knows that all too well is Mark Jagels, who raises white corn, yellow corn and soybeans under irrigation about 45 miles south of York, Neb. On Memorial Day this year, straight-line winds wreaked havoc on seven of his irrigation pivots. Several tornadoes touched down in his area damaging more than 300 pivots.

"They kind of get to bouncing, and it’s just like wires on electric poles," says Jagels, whose family has had irrigation system insurance since installing its first pivot in 1974.

More at stake. Weighing whether to get pivot insurance is a bigger deal now than in the past because of the growing value of irrigation equipment. Six years ago, the average quarter-mile pivot system might be valued at $50,000, Taylor says. Now, that same length of pivot is valued at $75,000 or higher in some parts of the country, thanks to the built-in technology.

Pivot insurance purchases happen most often right before planting and right after harvest. Taylor’s company sells a replacement program, which means Diversified will attempt to get 100% replacement value for farmers whose pivot systems have been damaged and are less than 25 years old.

It’s also possible to get an actual cash value policy, notes Kevin Gubbels, who sells pivot insurance in Norfolk, Neb. Gubbels sells both types of policies. Someone with few pivots who wants to keep premiums low might opt for the actual cash value policy and take the risk of paying the difference if damage occurs.

"We look at every state individually, so we have different rates depending on the state that the coverage is being written in, and then we have different levels of deductibles that the customer can choose," says Jeff Focht, president of the Omaha-based Diversified. Rates are often higher in tornado-prone states, such as Kansas and Arkansas. In general, three levels of deductibles are offered: $500, $1,000 and $2,500.

To determine how much you’ll pay per year to keep your pivot insured, consider this example. The average Nebraska farmer insured by Diversified uses quarter-mile pivot sections that cover approximately 160 acres each. He would choose a deductible level and pay an average annual premium of $1,100 per pivot system, Focht explains. That figure might be higher or lower depending on motors, pumps and other ancillary equipment also covered by the policy, among other factors.

Pivots 25 years old and older are insured by Diversified on a stated value determined before the policy is issued. Coverage ranges from $30 per foot of pivot section to $40 per foot. The insurance only covers weather events such as lightning, hail, fire, flood and overturning due to wind.

Gubbels suggests that farmers meet with their insurer on an annual basis."Make sure you are increasing the coverage level to keep up with inflation," he says.

Jagels carries replacement-cost pivot insurance with Farm Bureau separately from his blanket farm policy. This is the first year he’s had to file a claim on his pivots. Within two to three weeks, paperwork had been processed and repairs made so he could begin irrigating corn and beans. Insurance paid all of the costs.

Still, the decision to get pivot coverage is up to individual producers. "With the cost of new center pivots where they are, I think it’s a wise business decision to have insurance on them," Jagels says. 

You can e-mail Nate Birt at nbirt@farmjournal.com.

To learn more about the categories of pivot insurance coverage and the steps to follow when filing a claim after damage occurs, visit www.FarmJournal.com/irrigation_insurance

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