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What are Deductibles and how do they work?


It is that time of year again. Decisions needing to be made about Crop Hail Insurance are here. I am going try to clarify a few things (or confuse you).

Crop Hail Insurance comes in many different forms. Hail insurance can be purchased with no deductible, which are the basic form, or percentage and disappearing deductibles. We are used to deductibles in terms of dollars, i.e.: $500 deductible on your house insurance. With Hail Insurance, deductibles are in terms of percentages i.e.: 5% or 20%. This means if you purchased the 20% deductible coverage you will only get coverage when hail damage exceeds 20%.

The premiums charged for the different deductible policies are less. You are assuming more risk by accepting to “eat” the small losses and in return, you qualify for a discount on your policy. Depending on the deductible policy chosen, discounts can reach 50%. The companies can do this because overall they receive fewer small claims, which means adjusters go out and assess fewer fields. It costs money to send out an adjuster and the smaller claims do add up. This saves them money and in turn they pass these savings on to you.

Deductible policies can also offer higher levels of coverage. Some will chose to buy higher limits of coverage and still spend less money. The idea is that your farm can sustain the small claim but need the greater protection for when the large storm hits.

Briefly then, each type of deductible changes when you will collect on a loss, and the premiums reflect these changes. High deductible policies have lower rates, while no deductible policies have the standard rates.

With each company setting it’s own rates, it may be a good idea to purchase from someone who deals with all the private companies. Also, it is important to buy early as some companies will only take on so much risk. Once they sell enough they close off that area to new policies. As with any purchase, price should not be the only factor considered when purchasing hail insurance, other factors to consider are; the financial stability of the insurance company and the quality of adjusters each company uses.

Hail is the one catastrophe that is most likely to totally destroy a part of your crop and leave the rest looking fine.

Crop Hail insurance gives you acre by acre protection that can be up to the actual cash value of the crop.

Look into the different options now. A hurried decision will not give you the time to study all of the options that are available.

Be sure to seek advice and purchase insurance from those who understand your business!