Reviewing your farm insurance to save money
It seems that everything we purchase these days is becoming more expensive and farm insurance is no different. It’s generally down to supply and demand.
- The demand for farm insurance is high. As replacement costs increase, so does the demand for more cover (higher sums insured).
- The supply (often referred to as capacity) is challenging now. Reinsurers (those big guys that insure insurers), like most investors are looking to invest where their returns are highest. That may be in geographical areas (and sometimes specific regions, countries or areas exposed to natural perils) or industry segments.
The temptation is to hand your schedule over to another broker or insurer for an alternative quote and take the cheapest price on offer, but there are steps you can take first.
Firstly, set time aside (and it does not only have to be once a year) to review covers with your insurance advisor. If you are not reviewing cover and sums insured regularly, you may be paying for something you will not receive or perhaps more importantly, you may end up being underinsured or not insured at all.
Look at all sections of your farm policy and understand what your insurance programme is designed to achieve.
Farm & Home Buildings
The cost of replacing these buildings is going up and sums insured need to reflect that. When you intentionally insure a building for less than its replacement cost there is often an expectation that you will receive the sum insured in the event that the building is totally destroyed. That is not always the case.
It is generally the insurer who has the option to decide how a claim may be settled (usually found in the policy wording under “How we will pay your claim” or something similar).
- Pay up to the sum insured for repair or replacement and you find the difference if your sum insured is inadequate.
- If you choose not to repair or replace, then the insurer has the option to pay the indemnity value of the building. This is generally calculated to be the replacement cost less an allowance for depreciation (based on the condition of the building prior to the loss) or the pre damage value less the damaged value of the property.
- Any cash settlement is generally at the insurer’s discretion.
- You may not necessarily receive the sum insured shown in your policy certificate. You have paid premium for that.
So don’t be “half insured”. If it is a building that in the event of a loss, you would like to replace then insure it for its full replacement value and no less. If it is a building that you do not need or would not replace then if you need to save money, consider whether to insure it or not.
Unless you have cover which shows Agreed Value (usually but not always available for only your private vehicles) then most claims will be settled on the basis of Market Value (but limited by the sum insured shown). Please make sure that the Market Value is represented by the sum insured. You are paying a premium based on the Sum Insured shown and if the current Market Value is less than the sum insured shown you may be paying too much premium.
A word of warning though. The market for vehicles, plant and machinery has been robust over the past year or so and some sums insured may need to be revised upwards.
There are other areas you may be able to save money. Increasing the excess (the amount you are responsible for in the event of a claim) can sometimes save you money. Ask your insurance advisor to explore those options.
Before you pull the trigger on seeking alternative quotations, please take the time to fully review your insurance schedule and make sure it is fit for purpose. Let that be your starting point.
When it comes to insuring your farm, it’s important you get the correct advice. Ausure insurance brokers are specialists when it comes to assisting Farm Owners with their insurance needs – speak to an Ausure broker today, or complete the form below to get a quote.