Time for an Insurance Check Up

Do you know what your insurance policy states?

Think your insurance carrier covers foot-and-mouth disease? Think again!

When is the last time you reviewed your farm insurance coverage really closely? Reading your policy at bedtime may take care of insomnia, but will it ensure your policy meets your needs?

I recently sat down with a farm insurance carrier in Vermont, which does not carry my own farm’s insurance and would not be focused on my farm’s particulars. My questions were general in nature and garnered the insurance agent’s standard response that answers depend on particulars.

Here are the particulars that matter:

• What threats (known as perils in insurance-speak) are covered by your policy? Fire, lightning, wind, hail, freezing (barns), milk spoilage, explosion, and vandalism are commonly covered.

• What endorsements are included in your policy?

• Have you purchased additional coverage for loss of business income or other perils?

If the trigger for a claim is a covered peril, chances are good the insurance carrier will pay  something out. For instance, if your barn and cows are lost in a fire, and you have fire coverage and loss of income coverage, claims against both may be honored. If, however, your cows are taken for disease control and you suffer a loss of income, a claim for loss of income will be rejected because it was not triggered by a covered peril. Also, if you cannot ship your milk because of contamination or disease, the loss is unlikely to be covered because the trigger is not a covered peril. Animal disease is not a covered peril!

Foreign animal diseases such as foot-and-mouth disease are not insurable by private carriers for good reason. Such diseases do not have any predictability either in frequency or size of claim so there is no basis for setting a premium for coverage. Given the possibility of claims by a large proportion of insureds in a short period of time, this is not a risk that private insurers can cover. The large-scale risks that are taken on in some parts of the country, e.g. wind damage in hurricane-prone coastal areas or wildfire in the west, result in much higher premiums and a lack of local insurance carriers. In fact, in some areas, no private companies will provide policies and states provide plans.

So where does that leave farms in terms of animal disease risk management options? Figure out how to stop disease from entering your farm premises. Quarantine of herd additions, farm access control, visitor policies, and sanitation requirements for high-risk visitors and their vehicles and equipment should be high on your list of protocols to review or implement in the coming year.

Live well and biosecurely!