For Farmowners Clients: Blanketing vs Specific Listing of Farm Inventories, Equipment and Livestock
Consider blanketing if you are insuring more than $25,000 of farm inventory:
As a more dynamic alternative to specifically listing inventory items on your farmowners policy you may want to consider “blanketing”.
When you blanket you must inventory everything on the farm, including livestock owned by you, produce (including hay and straw), supplies, chemicals, and shop tools. HOWEVER, you can then EXCLUDE anyone or multiple categories from that blanket. As an example if you don’t want to insure livestock or supplies and chemicals, you can simply add an exclusion for those items to the blanket. This prevents them from being included in the adjustment process in the event of a claim.
Advantages of blanketing:
- Automatic coverage (no time limitation as with Coverage F) for newly acquired items*
- When your total inventory is determined, you ONLY need to purchase coverage for 80% of the inventory amount. Yet everything IS covered at its full actual cash value. THIS SAVES MONEY!!!!
- Value of items is determined at time of loss, rather than pegged arbitrarily ahead of time by the policy. The amount paid will be the actual cash value of the item or the repair at the time of loss. Remember even with Coverage F, if an item is listed for more than it’s worth, the company will still only pay the worth of the item.
- Less concern with keeping the blanket updated. We will contact you approximately every three years for an update request. However if you ever purchase highly valued piece we should be notified immediately so you don’t become underinsured. And of course it is important to review the list periodically to re-evaluate the worth of existing inventories as they depreciate, and on occasion, appreciate.
*The company reserves the right to perform an inventory at time of loss to determine your ACTUAL inventory, and then compare it to the amount of blanket coverage you have purchased. If your purchased amount is LESS than 80% of your actual inventory at time of loss, there IS a co-insurance penalty. So it is IMPERATIVE to keep an eye on your actual inventory vs your insurance amount for Coverage G.
Remember to include shop tools, small equipment, i.e.: generators, welders, etc, and lawnmowers worth over $2500. The farmowners policy our agency utilizes will only cover lawnmowers up to $2500 as personal property (Cov C). You can lump shop tools and misc equipment on one line. Example: “Misc tools and equipment- $8000.” There is no need to list every hammer and nail…. For this “misc line”, I usually recommend listing out on the Coverage G inventory those items worth $1,000 or more, and lumping all other items into “Misc tools and equipment”. This will keep your list more manageable.
The blanket rate per $1000 of coverage is about .60 higher, however, the 20% “back out” in every case will more than override this slightly higher rate and save you money.
If you are interested in this type of protection and want to pursue it, please contact our office.
Until Next Time,
Brian E Matthias
Insurance To Value- Preventing Claims Issues
Hello. I hope everyone had a restful and enjoyable holiday season.
This month I wanted to touch on the important subject of insuring property “to value”. In other words, properly insuring dwellings and structures adequately to avoid penalties built into policies when a loss occurs.
In order for the replacement cost provision to trigger in those policies which make it available certain requirements must be met. One of the most important of those requirements is “co-insurance”. Co-insurance simply means one must insure their dwelling or other structure to at least a certain percentage of it’s estimated replacement or reconstruction cost.
This co-insurance percentage is normally at least 80% of the replacement/reconstruction cost, but can be 90 or even 100%, depending on the policy language and the company writing that policy.
When a claim arises, it will be determined if the co-insurance requirement has been met. If it hasn’t, various penalties will result which will always result in a lower claims payment. These penalties can vary from contract to contract and company to company.
So read your policy carefully. If you feel this requirement is not being met, contact your agent or company for a re-evaluation of the structure in question.
Also, remember that meeting this requirement (if replacement cost is your wish) can cost more since higher values are required. Of course, as mentioned in my previous blog, use higher deductibles to offset some of this increased premium cost.
Ask your agent to provide the cost savings for various deductible options so you can make an informed decision.
Until Next Month,
Brian E Matthias
Insure For The Catastrophe
Many times I hear my clients and prospects utter the time worn adage, “I’m insurance poor”. I’m not sure EXACTLY what that means, but I have a hunch… I think what they are really saying is this- “I don’t particularly like insurance, I pay too much for it, and I’d rather spend my money on other things.”
Guess what? My sentiments exactly! Well, with the exception that I DO “like” insurance. It’s a challenging business and has provided me with a long and rewarding career, but that’s another blog.
But what I do find with many individuals upon further investigation is this– There seems to be a pre-occupation with wanting LOW deductibles, and having everything covered to the fullest extent possible.
This approach to insuring indeed can lead to the “insurance poor” syndrome, through unnecessarily high premiums.
Say to yourself, “How much can I afford to lose and not be financially devastated to the point where I could not recover, or recover in a reasonably short time frame?”.
With this in mind, your thinking will change. You might say, “That $1500 or $2500 deductible per occurrence might now sound so bad. That shed out back that I’m spending $40 a year to insure, REALLY doesn’t NEED to be insured, and it wouldn’t affect me at all if I lost it…”
Helpful Hints To Avoid Feeling “Insurance Poor”:
- Don’t insure things you don’t need, or can afford to lose.
- Don’t insure buildings and structures that do not have a crucial usage.
- Do use higher deductible levels where it make sense and premium savings are worthwhile. Key areas where higher deductibles can be a big money saver are: Dwellings, Farm Buildings, Machinery Equipment, Comprehensive and Collision on cars and trucks, Health Insurance
- Eliminate Comprehensive and Collision on your vehicles when you feel you can absorb a total loss. If the unit is worth less than 10 times the purchase prices it’s time to consider deleting physical damage coverage. Another rule of thumb: Delete collision at 7 years and collision at 10 years.
Surprisingly all too often when reviewing insurance programs, I encounter low deductibles, coverage on things that really don’t NEED to be covered, AND LOW insurance amounts. This is a BAD combination!
Follow the suggestions above, and INSURE TO VALUE (avoid underinsuring) so in the event of a catastrophic loss you will be properly protected, and will not incur any insurance penalties. If you follow these simple rules you will hopefully feel that you are spending your insurance dollars more wisely, and may even start to feel “INSURANCE RICH”!
Regards,
Brian Matthias
Family-Teen Driving Contract… Could It Help?
Welcome to Brian’s Insurance Blog
- Proper insurance planning and execution of that plan
- Insurance pitfalls
- Ways to save AND improve your insurance program
- Insurance humor
- Industry trends and their effect on clients and independent agents
- Role and duties of the independent agent
- Insurance misconceptions
- Claims discussions
- Importance of maintaining insurance
- The privacy and credit scoring issues
- Safety Issues
