Policy must be tailored to farm

Taking inventory | Detailed planning necessary to find the right plan

It’s important for producers to invite their insurance brokers to the kitchen table every year to advise and update the farm’s policy, says Reid Henderson of Agri-Trend.

“Do a good job of calculating what the buildings, equipment and tools are worth,” the company’s risk management and insurance manager told the recent 2013 Farm Forum Event in Saskatoon.

“That’s really important because those are often underinsured.”

Of particular concern is the replacement cost of tools, which often accumulate on farms over generations.

“A lot of people don’t realize how much they have in the value of tools in that shop,” Henderson said.

“It’s a huge, huge problem on farms because there’s typically a cap on tools on a farm policy at $5,000. That can get eaten really quick.… It’s multigenerational acquisition of farm tools that could be going back to the 1940s. You could have a big drill press, a shear or brake that Grandpa picked up for $1,200 but to replace it is now $12,000. It’s being used because you have a farm shop that is actually a manufacturing facility. Loss of use is huge.”

Henderson said farmers should compile a complete list of what it would cost to buy a new tool, and then keep the list current.

“Even though you picked up that Mac tool set at auction for $500, it might be $5,000 worth of tools to replace,” he said.

Henderson said farmers need to be up front with their brokers.

“If there’s something in your operations that you think the broker should know, tell him because you don’t want to find out afterwards that it was misrepresentation of the risk and your policy is void,” he said.

“You never want to have that conversation. Tell everything, even if you don’t think it is relevant. Let him know.”

Henderson said farmers should always try to prepare for a major loss.

“This includes emergency preparedness and a plan. You should have clearly defined roles and responsibilities if this ever happens,” he said.

With farming ranked as the most dangerous occupation, Henderson said prevention is the key factor to understand when developing an insurance strategy.

“It’s heightened during harvest season and seeding because there’s deadlines, stress and lack of sleep. That’s when accidents happen, unfortunately,” he said.

Henderson said sloppiness can also lead to accidents. Lack of attention to little details can lead to big problems in an emergency, resulting in major insurance claims.

“We’ve got a fire extinguisher. When is the last time on that tractor or combine that it was recharged? Is it going to work when you need it to work,” he said.

Henderson said losses always seem to occur at the worst possible time.

“The combine never burns in May, it’s always on Sept. 5 when you’re right in the middle of harvest.”

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