Are you wondering what are all those numbers in your insurance renewal packet?
Are you afraid that you are paying too much or that you may not even have the coverage you need?
Are you unsure when you should discuss your policy with your insurance agent?
You are not alone. I get these questions from current and prospective clients every day. There is not one “best way” to save on farm insurance but I will first share what parts of your policy you should review. In the second half of this article I will list what topics should be reviewed annually with your insurance agent that can affect pricing.
These aren’t really secret but I bet no one has taken the time to let you in on what to look for and what to discuss.
These parts of your policy should show up in your copy of your insurance renewal. These items are found in the declarations pages of the policy and should be labeled similarly:
FARM RESIDENCE. One of the factors that can affect price on a farm policy is that your home may increase in coverage each year to reflect the rising building costs. That’s a good thing because being underinsured at the time of a loss on your house could determine if you get your whole house back – and who wants just half a house?
However if the yearly increase to the coverage amount has exceeded the cost to rebuild in your area you can have your insurance agent re-evaluate it with an updated replacement cost estimate to make sure.
EXTRA TIP: Should you go by sales prices or tax values? No. Market value can drop even if construction costs do not. What you could sell your home for or even the tax value of the home could still be less than what it costs to build a new home where your old home once stood. In the case of a farm you may however see a higher tax value for the whole property where they are including land.
Land itself is not covered by insurance since it will still be there even if a home is lost.
DEDUCTIBLES. Another place to save money on farm insurance is to review your deductibles. Although raising a deductible from $250 to $500 may not be much of a savings – if you are able to accept a $1000 or higher deductible the price consideration may be worthwhile. That higher deductible certainly means that you will not be able to file small losses. The other benefit to fewer losses is that the insurance carrier will consider you a better risk and could lower your rates over time.
EXTRA TIP: Even if your current carrier doesn’t offer a better rate for your good loss history it could make you more marketable to other carriers.The reality of the farm insurance marketplace is that your current carrier may not provide coverage you need if your operation changes (i.e. adding Agritourism or adding processed food products like cheese making).
Or the carrier may change their operations, merge with another carrier or even go out of business. Regardless of circumstance if your coverage has to be moved you will find the best rates if you have a good risk operation.
FARM OUTBUILDINGS. You may be covering structures that you no longer use. Especially if you have an older farm with multiple outbuildings there could be some sheds, barns or other structures that aren’t valuable enough to you to need insurance. That’s part of the beauty of a farm policy is you can pick and choose what outbuildings to cover. If you don’t list it there is normally no automatic coverage however and if you would want to rebuild it then definitely list it on your insurance.
For those buildings you list you do have to insure it to at least the actual value of the current structure but you can also choose the types of losses that are covered from all peril (every loss is covered except those that it specifically excludes) to maybe limiting to just fire & lightning.
EXTRA TIP: If you have invested in significantly updating a barn with new electrical system you may need to raise coverage but there may be some credit available since modern updates can improve safety and reduce risk.
SCHEDULED FARM EQUIPMENT. Just like the outbuildings you could be insuring equipment you no longer own, is no longer in operation, or may not be valuable enough to insure. Again it is up to you to decide what to list and if it isn’t listed there is most likely no automatic coverage.
EXTRA TIP: If you have been paying for some sort of coverage through the loan on the equipment you may get better coverage for less by covering it yourself.
Here are the topics to review with your insurance agent annually (or when appropriate) that can affect pricing:
FIRE DEPARTMENT IMPROVEMENTS. If your local fire department has upgraded and especially if there are now fire hydrants within 1000 feet of your main home and barn you could qualify for better rates. If you have installed a dry hydrant on your property or enlarged a pond that could be used for water at the time of a fire this could also count towards better pricing.
PRODUCT LIABILITY. For those carrying agribusiness insurance where you have product liability – annual sales are very important. Notify your agent if you are no longer selling something or if you’ve experienced lower sales.
Your change in business could mean a change in coverage is needed. It’s important to review this with your agent annually to also make sure any additional products are covered or if higher sales are anticipated (i.e. contracting with a larger distribution source like a grocery chain can require higher limits as well).
AGRITOURISM ACTIVITIES. The same considerations should be made for those of you with Agritourism coverage. Eliminating activities or adding to them is both causes for discussion. Additional recreation or events including alcohol may require significant changes in your insurance plans.
Spending your insurance dollars wisely is important, however ignoring risks means adding gaps that could cost you severely in the long run.If you haven’t ever discussed what activities you might want to add to you farm then definitely talk to your insurance agent as soon as possible.
Don’t wait until renewal and don’t wait until you’ve sold 500 tickets to a festival on your farm before you ask how it will affect (or if it will even be covered) your farm insurance.
CHANGE IN OCCUPANCY. If any of the residences on your farm are occupied differently then it could affect your rates. If you previously rented out one of your houses to a tenant but now are using it to house employees or are letting a family member use it could change the rating more favorably for you. A house being used for family, employees, or personal guests (not paying) is typically classified differently than a house being rented to others. Temporary, short term type rentals (via online like VRBO or AirBnB) are also very important to review with your agent since this type of risk is not widely accepted by farm insurance carriers.
EXTRA TIP: A home that is vacant can be considered higher risk however and finding some regular use for the building is preferred.Reviewing your renewal is the best way to be reassured you are getting the best value from your insurance.
There are several key areas that are important that I listed. Making sure you are getting the coverage you need without paying for what you don’t need is worth discussing with your insurance agent.For NC farm owners you can always contact me if you feel that your current agent is not giving you the time or attention you deserve.
Even if you are not in NC, I welcome your questions and may know an agent in your area I can suggest. My email address is firstname.lastname@example.org and office phone is 828-652-6212. Don’t let the mystery of farm insurance pricing keep you from getting piece of mind.