Farm insurance issues to watch
Rising cost of equipment, increased risk of litigation are areas where protection is essential.
Over the past 30 years, Keith Pierce has seen many changes in agriculture. As a farm insurance agent, it’s his mission to make sure his clients’ policies keep pace with the times.
"There are many new issues to consider now, so you need to have a good overall sense of the farm operation and the family," says Pierce, who’s based in Swift Current, Sask.
He sees four issues that are significantly different than 20 or 30 years ago, each with its own implications for farm insurance coverage.
1. Farms are bigger. In many cases, Pierce’s clients are farming land in more than one location. In this situation, he says, a comprehensive liability policy can protect all locations, as well as times when you’re moving equipment from one place to another.
2. Equipment is more costly. Even taking inflation into account, the price of farm equipment has risen dramatically over the past 30 years. "Farmers can easily spend $100,000, or much more than that, on a single piece of equipment," says Pierce. "It’s important that your level of protection is consistent with the value of your equipment."
3. Income is more diversified. These days, many farm families earn income outside agriculture. "A farm family might have a second or third business that has nothing to do with farming," says Pierce. It could be a small manufacturing business, a hospitality business or a trucking business. These enterprises should be considered as part of ongoing insurance planning.
4. Potential liabilities might be broader. When Pierce first began in the insurance industry, lawsuits involving farmers were rare. Today, the entire business environment is more prone to litigation. "Generally speaking, the likelihood of facing a lawsuit has increased," says Pierce. "As a result, there’s a bigger role for liability insurance."
COVER THE BASICS
The reduction in farm income brought about by BSE has some of Pierce’s clients looking to cut costs. When it comes to scrutinizing insurance costs, Pierce advises caution.
"Insurance isn’t something you want to cut corners on," he says. "One way to reduce premiums is to increase the deductible. But to my way of thinking, you need to have the basics covered, no matter what. That’s your home, its contents, key farm equipment and the potential liabilities associated with your business.
Don ’t forget CAIS
When it comes to protecting farm income, the Canadian Agricultural Income Stabilization (CAIS) program is a good start. As part of an annual review of your farm insurance coverage, consider how CAIS can provide income security and disaster relief protection for your future farm income.
Talk to your RBC Farm Finance Specialist. We’ll take the time to explain the CAIS program, so you can choose the right CAIS investment products for your farm and family.
Business Loan Insurance Plan
Would life insurance proceeds be enough to pay off your farm’s liabilities, and keep your personal assets intact?
If not, consider RBC Royal Bank’s Business Loan Insurance Plan+ for business loan and mortgage customers.
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The plan can offer up to $1 million in life insurance coverage to help pay off your insured business loans qualifying balance in the event that an owner, guarantor or key employee passes away. The optional disability insurance coverage can provide up to $7,000 per month towards monthly payments on all insured loans under the policy for up to 48 months if a disability prevents an owner from working. Included with your life insurance at no additional cost, accidental dismemberment coverage can pay up to $50,000 against insured loans if an insured person suffers an accidental
For more details, see Business Loan Insurance Plan.
+This group creditor insurance program, underwritten by Sun Life Assurance Company, is subject to terms, conditions, exclusions and eligibility restrictions. Please see the Business Loan Insurance Plan booklet for full details.
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