If you are thinking of reducing your insurance costs on the farm, approach it the way an insurer would. Reduce your risk.
Farms are filled with many perils. Weather, accidents and theft are all waiting in the wings to take centre stage on any farm. In some cases they might steal the show forever.
“What would put me out of the game for good?” is a great place to start when it comes to considering what to insure with a broker and what to self-insure. “And ask yourself what would hurt me substantially if I didn’t have enough coverage,” said Blair McClinton, head of SGI’s farm insurance group in Regina.
Begun a few years ago, the specialty division of the insurance company assists producers in making choices about their insurance, from a farmer’s point of view.
“Everyone wants to lower their premiums, and you can usually do it. But at some point, you will be shifting your risk from someone else to yourself. And making the right choices for your farm and business takes some consideration,” he said.
Raising the amount of the deductible can instantly lower the cost of the policy. Higher deductibles also send a message to the insurer that a producer doesn’t intend to collect on the plan unless something very serious happens.
“Most producers can stomach a higher deductible, as they tend not to make too many claims for smaller amounts,” said McClinton.
Even smaller claims will drive up future costs of premiums far in excess of the value of the claim, so electing to not claim is financially prudent in the longer term.
“In fact, when you are claims-free for a while you get a break on your rates,” he said.
Producers can also find savings in choosing to not insure some parts of the farm.
“But you need to ask yourself if you can take that risk. If you self-insure for something, what would you do to minimize the threats of making a claim,” he said.
Cleaning up around a farmyard can cut the chances that fire will spread quickly and past the point of control. Tilling a firebreak about the yard can help to halt or slow a fire moving into or out of the yard.
“Sometimes the threat to your farm comes from outside it,” he said.
Liability coverage for the potential loss by neighbours or staff though a farm’s activities is a big part of any agricultural insurance policy.
Using provincial workers’ compensation programs can limit threats to costs that could lead very quickly to bankruptcy for many farms.
“WCB coverage or making sure you have the right levels of other insurance coverage for people working for you is critical,” said McClinton.
“WCB is one of those ways you can help get and retain workers. Good farm staff are very hard to attract and retain. It is expected by the best ones,” he said.
Employment firms suggest that many experienced farm workers will not consider employment without it. Should they become injured on a job where it isn’t present, they might have to sue their employer and its insurance company for compensation, leaving them stranded without income for what could an extended period as they work through the courts and have to pay large fees for legal representation.
Choosing not to spray at night when there is a threat of a thermal inversion the following morning is another way to reduce risk of making a claim for liability.
“Do you have any neighbours with organic operations? Consider your spraying when you are next to their fields and what they might do if there is some drift,” he said.
Making sure machinery is well maintained can also reduce the risk of a claim. While an insurance policy won’t pay the cost of failed bearing, it will likely end up paying if the bearing causes a combine to burn.
“Keeping fire extinguishers on all the equipment, including service trucks can stop a problem before it becomes a claim,” he said.
“Many farms have put fire tanks and pumps in the field where they are working just in case something larger happens,” said McClinton.
Older buildings often have older wiring and a relatively small investment of hiring the local electrician to have a look the state of it and advise on what is a potential threat and how to minimize it can also be a good investment.
“Especially if you choose not to insure it. You have shifted the risk back to you, and you need to minimize it,” said the agrologist.
Anchoring grain bins to avoid wind damage is another thing that growers can do to reduce risk of loss and other damage to a farmyard or equipment and some insurance companies will reduce premiums to point of nearly paying for the anchors if these are installed.
Buildings with sewage systems can be outfitted with check valves, backwater valves, to prevent sewers from reversing into farm houses or shops in the event of a flood. Discounts are also available for the installation of these systems.
“If you take a little time away in the winter, for instance, they can be great peace of mind too,” said McClinton.
“If you were providing the insurance coverage, what would you want your customer’s best practices to reduce risk be? That is what you want to do for yourself on your farm. And, often the insurance company will reward you for it,” said McClinton.
Installing security systems with cameras too will often provide a break on premiums, but also act as deterrent to thieves. Modern security systems provide live views of the farm, as well as a recorded document of what has been taking place in a farmer’s absence.
Properly valuing buildings and contents is important, as insurance companies will, in the event of a partial loss provide only a correct percentage of claim. For instance, if a building had a replacement cost of $300,000 and it was insured for $200,000, and was half destroyed by wind, the coverage would only pay $100,000, not the $150,000 needed for the repairs.
While it might not reduce the cost of insurance or risk farmers should also photograph their farm thoroughly, documenting farm tools and other equipment that can be easily stolen or lost in a fire. The record of these makes the job of settling a claim easier and ensures that the full value of the insurance is found should it be necessary to call in that card.