When you are purchasing or renewing insurance for your farm, take time to look at your deductible or you will miss an opportunity to tailor your insurance policy to your specific needs and quite likely save yourself some money.
Let’s start at the beginning. What is a deductible? Simply put, a deductible is the amount that you pay out of pocket before the insurance company responds to an insured loss. Another way to say this is: the deductible is the amount of financial loss that your willing to accept before you get insurance involved. That number can vary greatly from farmer to farmer.
What is the right deductible for you? It depends on your farm’s financial standing, the size of your operation, and what gives you peace of mind. A small farm or one that is just starting out doesn’t typically have the ability to withstand a major financial loss, so they might require a lower deductible. A larger operation, which will have more assets to insure, will have much higher premiums. For them, choosing a higher deductible might mean reducing their insurance costs to an acceptable level. And peace of mind is whatever allows you to sleep at night without worrying about the “what ifs”.
There are a lot of moving parts to a Farm insurance policy. Your home, your shop, the grain bins, tools and miscellaneous equipment, your farm machinery – each of these represent a different category of assets that is rated individually by the insurance company. These rates are typically based on a cost per $100 of insured value, and they are established with a certain deductible in effect. You can select a higher deductible to receive a discount off these rates. This means that you can potentially set a different deductible for each. Why accept the same deductible for every asset if you feel some are at less risk than others?
There are also specialized coverages which have their own fixed deductible and others that may not have a deductible at all. For example, did you know that most insurance companies offer coverage for Fire Department Charges with no deductible?
When looking at deductibles for farm machinery, the Ingestion Clause is very important. Any machinery that ingests material for processing – think balers and combines – are subject to the Ingestion Clause. It states that when there is an insured loss due to ingestion of a foreign object, the deductible is the greater of the deductible declared on the policy or 25% of the loss.
We’ve issued farm policies with deductibles as low as $500 and as high as $10,000. In each instance, the farmer has chosen a deductible after considering the whole farm to see what best fits their unique operation.