Before becoming an insurance broker, I spent three wonderful years working for a farm in southern Manitoba. I grew up loving the farm life but had no experience until I was given the opportunity to work on a farm. Day two on the job, I was handed the keys to the tractor and told to seed barley. Needless to say, the learning curve was steep. Among all of the lessons that I learned, one that I remember to this day – it is important to insure your farm machinery!
Insuring your farm machinery provides important protection for all sorts of things that could go wrong. For example, if your employee fails to navigate a corner properly in the field, and runs into a culvert, power pole or even the implement behind the tractor and causes damage, your farm insurance coverage should respond. Or if you decide to haul your new cultivator back to the dealership for service work using your half ton truck, and you fail to navigate the first corner you take and end up “wheels up” in the ditch, your farm insurance coverage should respond. If your tractor fails to start in the cold of winter, and while using some additional heat to warm up the block, your tractor is now engulfed in flames, your farm insurance coverage should respond.
One important additional coverage option for farm machinery is referred to as “dual valuation”. Most farm machinery is valued on an actual cash value basis – comparable to market value. For example, in the event that your well-loved yard tractor suffers a tragic “additional heat accident” and fire damages the motor, the insurance policy would respond to pay to replace the damaged motor. However, the policy would pay for the actual cash value of the motor, which will include a percentage not covered due to depreciation. So, if the motor replacement would cost $30,000, but your previous motor was deemed to have 35% depreciation, the total payment received from the insurance company would be the $30,000 less 35% for depreciation, less your policy deductible.
If your policy is endorsed with “dual valuation”, the depreciation factor is removed from partial losses to your machinery. In the previous example, having dual valuation would make a difference of $10,500. With the rising costs of farm machinery, we see partial losses also increasing. This makes the dual valuation endorsement even more valuable while protecting your farm machinery.
It’s been a dozen years since I last farmed, but I believe to this day I am still being blamed for every machinery fail on the farm. Some people need a lifetime to achieve legendary status, others need only three years!
Be sure to seek advice and purchase insurance from those who understand your business!