The Information provided is of a general nature and should not be relied upon when purchasing a farm insurance policy, but as a means of asking educated questions of your insurer.
10 Main Things You Need To Know About Farm Insurance
1. Where to Insure Farm Property?
Sheds, Windmills, Tanks, Silos, Solar Pumps, ect can be insured under miscellaneous sections, such as farm improvements and unspecified machinery.
Make sure to check the policy wording as each insurer treats them differently. So just be ready to put farm property under the correct section.
For unspecified items, there is an individual and total sum insured limit. Check that the individual limit is enough for your most expensive piece of property or equipment.
2. Should you bundle your assets?
Taking a step back and thinking about how you bundle your assets can save you money and protect your claims history. Generally, insurers offer package polices that group everything, from domestic homes and farm sheds to machinery and private cars onto one policy. This can provide leverage if you have a “grey area” claim. However, problems can occur if you have several claims in quick succession, as the insurer may “load” (increase) the premium over the entire policy rather than just the area of the claim. This is especially true with motor vehicles.
For larger clients, we often recommend splitting insurance over several insurers to limit this loading; for example, placing trucks with one provider and private vehicles with another.
Word of warning: Always check your Business Interruption cover before splitting assets, as some policies include benefits that require farm machinery to remain on the same policy.
3. Shed Replacement Cover vs. Indemnity.
Ensure your sheds are insured for “Replacement Cover.” Some insurers prefer to insure for “Indemnity,” which allows them to depreciate the value of the shed based on its age. This often leads to disputes over payouts. You may believe a shed is covered for $20,000, only to find the insurer offering significantly less due to its age, a problem that is particularly common in partial damage claims. Opting for replacement value minimises these valuation issues.
4. Fencing and Flood Risks.
Fencing is an area that requires close analysis. While most insurers cover fencing for fire and impact (such as falling trees or vehicles), many do not cover damage caused by flood. Given recent heavy rainfall events that have caused damage via moving bodies of water, it is vital to check your policy wording to understand exactly what risks your fencing is protected against.
5. Listed Events vs. Accidental Damage Cover.
There are generally two types of cover available: “Listed/Defined Events” or “Accidental Damage.”
Listed Events cover is typically cheaper but is restricted to specific incidents like fire, earthquake, lightning, storm, building structures, and other phenomena.
Accidental Damage is generally superior for contents; it provides broader protection for mishaps not specifically listed and often includes Australia-wide cover, rather than being restricted solely to the farm location.
6. Business Interruption Cover.
In the farming sector, Business Interruption cover provides funds to assist with agistment, purchasing feed, or covering additional costs incurred after a claimable event. It is most useful in scenarios such as a header catching fire; if the machine is insured with the same provider, the policy may cover the cost of hiring a contractor or a replacement machine to ensure the harvest continues.
7. Personal Accident and Income Requirements.
Personal Accident sections are not available on all package policies and may need to be purchased separately. Ideally, the sum insured should be enough to employ a staff member to replace you on the farm. Be aware that many policies require “proof of income,” which can be difficult for farmers to provide in a way that reflects the cost of replacement labour. Look for a policy that offers an “Agreed Sum Insured” to avoid these complications.
8. Comprehensive vs. Listed Events for Machinery.
Farm machinery can be insured comprehensively (similar to a private car) or for “Listed Events” only (typically fire, impact, and storm). While Listed Events cover is cheaper, your choice should depend on the machine’s value and whether it is driven on public roads, where third-party damage cover is essential. Additionally, check if your sum insured is inclusive or exclusive of GST, as this varies between insurers and can leave you out of pocket during a claim.
9. Broadacre Crop Insurance Pitfalls.
With Crop Insurance, you generally choose between pre-harvest or post-harvest policies. Your yield estimates are critical, as they act like an “Agreed Value” for fire and hail claims. Most insurers place a “cap” on claims (usually 20–25% above or below your estimate).
The Risk of Underestimating: If your actual yield is much higher than your estimate, your payout will be capped, leading to uninsured losses.
The Risk of Overestimating: If your actual yield is much lower than your estimate, you will still be charged a premium based on that higher capped figure, meaning you are paying for cover you cannot use.
10. Transit Insurance and Fuel Trailers.
Transit insurance included in most farm packages typically only covers items moved in your own vehicles; it does not cover goods moved by professional transport companies.
Furthermore, if you use a trailer for fuel, ensure it is fully compliant and legal for transporting dangerous liquids on public roads. If your equipment is non-compliant, your insurer may decline a claim in the event of an accident.
Get advice from an insurance broker
Remember, every business is different, so you should get advice from your insurance broker to get a solution tailored to your needs.
Get a quote for farm insurance
We’d be happy to talk to you about your business and what you’d need to protect it. Email us at insure@regionalins.com.au or call (08) 9301 0562 to get a free, no-obligation quotation.
