Farm Insurance Value…Good, Bad, & Ugly?

Farm Blog

You’ve heard the words uttered many times over, you’ve likely even suggested to others—YOU GET WHAT YOU PAY FOR. We all must concede that this invaluable warning is far easier to preach than practice, as humans tend to choose one side or the other—where do you fall?

I focus on helping farmers improve their protection programs, and find there is no product as misunderstood and somewhat commoditized as insurance. In fact, right now hanging on my wall is a picture of Thanos’ Gauntlet complete with infinity stones smartly aligned and eager to cause the Blip, alongside one of a yellow rubber glove with gummy bears glued to it. The caption below reads “Client EXPECTATION vs. Client BUDGET.” Don’t let this be your experience.

Let’s take a look at one recently encountered scenario:

Prior to our meeting, one client had a policy in place, with admittedly, a VERY attractive price.

When I dug deeper however, it became apparent that their home—their castle—was underinsured by 35%. In this case the barns and outbuildings fared even worse—they were only insured to 50% of their true replacement value. The actual farming equipment was “covered” in such a manner that the policy would never respond if it was damaged by an unforeseen occurrence. Many of the vehicles, although newer models, were carrying minimal amounts of liability coverage, without any physical damage protection. What makes matters worse in this instance is that this family thought they were fully insured and couldn’t possibly get a better program!

Unsurprisingly, when we first met, I was asked just to do a simple Apples-to-Apples comparison based off their current coverage. After the initial consultation, however, they realized what was once adequate for their needs no longer was. A deeper review ensued.

Is there value in the cheapest policy?

Perception is reality, and only you can determine how you perceive value. If you’re stuck on whether or not you’re getting value, ask yourself the following question:

“Do I have adequate coverage for all my farm exposures?”

This would include, but is not limited to, your buildings, liability, livestock and other animals, dwellings, vehicles, and equipment.

The choice of coverage should be made based on your unique needs, and not necessarily on a specific dollar amount. As you can see, the best value doesn’t always coincide with the cheapest premium—in fact, the opposite is usually true. Let’s take a look:

Excellent Coverage- full replacement cost for buildings, dwellings (including any rental property) and personal property, and other hard assets—all of which are covered on an open peril basis; physical damage coverage on vehicles with low deductibles; high limits of farm and personal liability and a comprehensive Umbrella policy.

Cost: $$$$ Value: Best

Great Coverage- full replacement cost on your dwelling (on an open peril basis) and contents, outbuildings, and other hard assets, covered only under certain loss scenarios; physical damage on newer vehicles with slightly higher deductibles; high limits of farm and personal liability on your policy.

Cost: $$$ Value: Better

Good Enough Coverage- borderline limits on your dwelling and contents, outbuildings, and other hard assets, none of which will be covered on an open peril basis with a high deductible, liability only on vehicles, mediocre limits of personal and farm liability.

Cost: $$ Value: Alright

Bare Minimum Coverage- depreciated values for all dwellings, contents, outbuildings, and other hard assets, all covered only under certain loss scenarios; minimum allowable liability limits on vehicles; low limits of farm and personal liability from the primary farm policy.

Cost: $ Value: Poor

As demonstrated above, I believe we can now agree that your knowledge and awareness of the coverage and protection you receive creates the value in insurance, not the price paid for it.

Life is full of uncontrollable events and the least we can do is prepare ourselves beforehand so we may be protected later. If we believe this to be true, and we know there is no crystal ball telling us what the future holds, why do we as consumers consistently sell our personal protection plans short to save $5/month? If you see value in complete protection, I’m here for you and happy to advise and implement a Farm Insurance program designed specifically for your needs.

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