With harvest right around the corner, this is a great time to start thinking about your grain storage and drying systems to make sure they are ready for the excitement ahead!
Part of the job of an insurance broker is to understand the different nuances and specialties of the various insurance companies that we represent. I often hear questions about whether there are any differences between insurers, or if they all use the same basic wordings and actuarial rating to provide insurance coverage. While there are definite similarities between companies, there are also differences that can make a large impact on how, or if, you are compensated when a claim occurs.
Insuring grain dryers is an area where we see a lot of difference in coverage offerings through farm insurers. This is also a growing area of concern for most farms, as the need for a grain dryer seems to be more prominent now than ever before, and certain crops are very difficult to grow in our geography without the support of a drying system to finish the crop. Grain dryers also have been known to be more prone to a fire loss than other farm property.
A brief overview of the coverage offered by farm insurers begins with the most basic actual cash valuation on your dryer. This coverage will provide the depreciated value of your dryer should a loss occur. The quick math is; if you have 5-year-old dryer system that originally cost $100,000 to build, in the event of a loss, the insurer would account for annual depreciation to determine the settlement, leaving you with a cash payout that falls short of the cost of building a new dryer system.
Some insurers will provide limited waiver of depreciation for the first 3-5 years of the dryer. This removes the depreciation calculation for the first 3-5 years from the original date of manufacturing. In the above scenario with the $100,000 dryer system, the loss paid out would be the $100,000, less the policy deductible. This comes much closer to putting this farm in a place to rebuild their dryer system.
The final option that we see from insurers is replacement cost coverage on the dryer system. This is the best option, although some insurers are hesitant to provide this coverage, as the fire risk with an older dryer system is potentially higher, and with the cost of grain dryers increasing over the past decade, the payouts for these systems are also increasing. With the option of replacement cost coverage, it is important to review the limit of insurance versus the current cost of a new dryer on an annual basis to make sure your limit is sufficient to replace your system.
Two other considerations when insuring your grain dryer – make sure you notify your broker of any custom drying exposure. Insurance companies deem this a higher risk. The best way to limit the additional premium charged for this exposure is to give your broker all of the details so they can properly explain the risk to your insurer. Also, consider purchasing extra expense coverage which will help to offset your additional expenses should you suffer an insured loss to your dryer and have to find an alternate solution for your drying.
Is insurance simple? Do you have questions? Work with someone who will explain the differences and options to you to make the best decisions for your farm. Rempel Insurance Brokers Ltd. are open for business and are glad to assist you with your insurance needs.
David Schmidt is an Account Executive at Rempel Insurance Brokers in Morris, MB, specializing in insuring farms and businesses across Manitoba and Saskatchewan.
Call or text (204) 746-2320 Email davids@rempelinsurance.com Web www.rempelinsurance.com