Attention to detail essential for adequate farm insurance cover
FARM accidents are at an all-time high and the issue of adequate farm insurance ought to be a concern for all land owners and farmers. The risks associated with operating a farm business are very high in terms of potential liability for injuries to others which makes having a adequate insurance an absolute necessity.
When deciding on whether to purchase a policy of farm insurance, remember that farm insurance policies tend to be very broad in nature.
It is only when you need to make a claim that you realise the devil is in the detail of the policy.
Caution and careful reading of the detail is advised to ensure that the policy that you are purchasing covers the risks that arise on your farm.
Insurance policies tend to vary as much in price as they do in what they cover and from one insurer to another, so it is important to shop around and consider what you are purchasing.
You cannot decide if what you are purchasing is good value unless you can compare like with like.
If you are nervous about understanding the detail of the policy you are being offered by an insurance company, using a broker for farm insurance is a wise decision as they can guide you through many of the main issues that arise.
It is never advisable to simply renew your policy year on year as this will not inform you of changes to the level of cover.
A copy of your policy should be requested from your broker each year.
RISKS
When it comes to the actual cover you are purchasing this is a very individual matter and should be tailored to the type of farm business that you have.
Damage caused by livestock is always a major issue and you should consider the type and nature of your stock as well as their proximity to a road etc when deciding on livestock insurance.
Injuries and fatalities caused by machinery in inevitably one of the biggest risks on farms.
Insurance will always be dependent on certain factors including the taking of reasonable precautions and the proper maintenance of equipment. While this might sound obvious, your insurer may not have to cover you in the case of a claim if you are not safely operating you machinery and have it well maintained.
Visitors and walkers are a regular on many Irish farms and you should consider whether you will need cover for injury which may be caused to these persons.
These are only some of the many risks you will have to consider purchasing insurance cover for.
TERMS
There are many confusing terms which are associated with the purchase of insurance and an understanding of some of these may make the process a little easier.
÷Average Clause This clause is included in most policies. The meaning and effect of this clause is that if you undervalue the item you insured and subsequently make a claim, your claim will be proportionate to the amount you have under-insured.
Say, for example, your property is worth €100,000 but you insure it for €80,000 and you subsequently make a claim for some damage. Your policy will only cover 80pc of the damage when the ‘Average Clause’ provision is applied, so be sure to value the property as accurately as you can.
÷Excess This is the portion of any claim that is not recoverable under a policy when you make a claim.
This amount varies considerably, not only between insurers, but also between sections of policies.
It is important to check out the excess which relates to each possible type of claim. Also, you should check whether you can make a claim for certain smaller items like windscreens without affecting your no claims bonus for the following year.
÷Insured Sum This is the limit on the amount that you could recover under a policy.
÷Policy Document This is the pre-printed booklet you will receive which will contain all of the conditions of your policy.
÷Exclusion Clauses These are clauses contained in the policy document that an insurer will expressly leave out of your policy.
It is essential that you read this section carefully and be aware of exactly what and who is covered by the policy.
For example, family members working on the farm are often excluded from the policy and this could have a big effect if for instance a spouse was seriously injured while working on the farm.
÷Endorsement This is a document specific to you which will list items that you may have specifically requested (eg pedigree bulls) or exclude specific items that may carry excessive risk for an insurer (eg lands situated on a flood plain).
÷Consequential Loss These are any indirect losses that are not insured but you may suffer if an insured item is out of use.
For example, you may suffer a loss of earnings if your shed is burned down, but you may not be entitled to claim for the loss of income caused by the loss of the use of the shed.
In general, consequential losses are not covered under policies because they are difficult to quantify at the time of underwriting a policy.
÷Building Sum Insured (BSI) This is the estimated amount that it would cost to rebuild your property.
This is a different value to the market value of your property and you should consider all of the costs that might be involved when providing an insurer with this figure.
This is especially important if you are not familiar with current building costs.
The old adage of ‘better safe than sorry’ is what encourages us to take out insurance in the first place. That’s why it is essential to examine the policy carefully and make sure it fits with the individual needs of your farming enterprise.
This article is intended as a general guide only and you should seek professional advice for your individual circumstances. ÷Never undervalue your farm property. ÷Be aware, most insurers will include not only the dwelling house itself in calculating the BSI value of the Farmhouse. They will tend to include the driveway, tarmac/concrete yard, ornate brickwork etc. ÷Farm property includes sheds, outbuildings, yards and crushes etc so include all structures when calculating the BSI. ÷Factor in any mortgage that you may have over a property. Generally, when entering a mortgage, you will be required to insure your property to the value you placed on your property and this cannot be reduced. ÷Know the excess and limit on the sum insured. In the event of a claim the most you are entitled to recover is the balance between these two figures Know what specific covers you are purchasing. ÷Insurers offer everything from fire-only cover to comprehensive cover so know what you are buying. ÷Always ask if theft is covered, particularly for farm machinery.