Farm Ireland
Independent.ie

Sunday 22 April 2018

The fine detail in the small print of farm insurance

Using a broker for farm insurance is a wise decision as they can guide you through many of the main issues that arise.
Using a broker for farm insurance is a wise decision as they can guide you through many of the main issues that arise.

Theresa Murphy

With farm accidents at an unfortunate high the issue of adequate farm insurance ought to be a concern for all land owners.

In general, farm insurance policies tend to be very broad, but it is only when you need to make a claim that you realise the devil is in the detail of the policy.

Insurance policies tend to vary as much in price as cover from one insurer to another, so it is important to shop around and consider what you are actually purchasing.

Using a broker for farm insurance is a wise decision as they can guide you through many of the main issues that arise.

For those who have simply renewed their policy year after year without examining or updating the detail, it is advisable to take out your policy, or request a copy if necessary from you broker or insurance provider.

Below are some important insurance terms and their meaning.

Average Clause

This clause is included in most policies. Its affect is that if you undervalue the item you insured and subsequently make a claim, your claim will be proportionate to the amount you have underinsured.

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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 80% 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's important therefore to check out the excess which relates to each possible type of claim.

For example, the excess on windscreens may be much smaller than other types of claims.

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 consult this section 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.

Endorsement

This is a document specific to you which will list items that you may have specifically requested (e.g. pedigree bulls) or exclude specific items that may carry excessive risk for an insurer (e.g. lands situated on a flood plain).

Generally, this document will override the policy document where a conflict arises.

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 shed's use.

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.

When it comes to renewing or purchasing a policy you should give particular attention to the following clauses to see if they suit the requirements of you farming enterprise.

  • Never undervalue your property. As most policies now include an Average Clause, you will only recover a proportion of your loss if an insurer establishes you undervalued your 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 for each insured item.
  • Know what specific covers you are purchasing.
  • When entering a policy know what actually is insured and what you want to be covered.
  • Insurers offer everything from fire-only cover to comprehensive cover so know what you are buying.
  • List valuable items separately on your policy. Quite often this will not increase the cost of your premium, but will mon valuable items.
  • Always ask if theft is covered, particularly for farm machinery.

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 enterprise.

Matters such as cover for employees, the involvement of family members, as well as the value and nature of buildings and animals on the farm, should all be considered.

You also need to consider the risks that the enterprise is exposed to on a yearly basis.

The small print is never easy readiung, but looking at the essential terms outlined abovecould save you from a painful discovery when it is all too late.

This article was prepared by Theresa Murphy BL; John Cuddy, principal solicitor at Cuddy & Company solicitors, Loughrea, Co. Galway, and Kevin Purcell, commercial account executive at Sheridan's Insurance, Kilkenny.

Indo Farming