Insurance Levels – Protecting Against The Insurers
Insuring your farming assets is not required by law, but is advisable for peace of mind. But at what value should you insure your assets? And what is the insurance companies’ policy regarding under-valuations?
Underinsurance is typically the biggest barrier in arranging settlement of claims.
Typically, your insurer will assess the value of the item which the claim is being made against, then compare this to the deemed value of the loss. They analyse this against the value at which this item is insured. If the sum insured is found not to reflect the true value of the asset then your insurer will apply an averaging technique.
For example:
- Re-build cost of an out-building – £200,000
- Value for which out-building is insured – £150,000 (75% of re-build value)
- If you then suffer £60,000 in fire damage you will receive £45,000. This is 75% of the value of the fire damage. This leaves you to find the extra £15,000 to fund the repairs.
Issues can arise when you only insure what you perceive to be your vulnerable crops. Leaving root crops and any crops in stores uninsured can present a large risk. Also, when insuring livestock, particularly in winter when stocks are generally lower, it is easy to forget to insure the potential value of young stock which will be born later in the year. This will again leave you out of pocket if a claim needs to be made.
If you are unsure about what you should do when renewing your insurances always seek a second opinion. Please contact us at Green & Co if you would like advice.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
