Are You Covered?

Building on the essential policies to create a comprehensive insurance program right for your business comes from working with a trained agent from a trusted agribusiness provider.

Researching new agencies

Businesses often receive solicitations from insurance providers, claiming to save a certain amount of money by switching to their insurance. Although the temptation to reduce your monthly insurance costs can be great, John Quirk, director of marketing for Rural Mutual Insurance based in Madison, WI, warns that before going through the lengthy quotation process with any agent, make sure the agency is qualified to handle your account.

“Agribusiness is a specialty line of business and not every company can write insurance coverage on them, so you want to make sure that the company has experience in this line of business,” says Quirk. “Also, not all insurance agents are familiar with the variety of agribusiness exposures out there, so again it is important to make sure you are working with someone who is familiar with the exposures.”

If you’re interested in obtaining a quote from a particular agency, look for indicators that it’s solid and stable with many years of experience insuring the type of agribusiness you’re in. Quirk suggests a good place to look for this information is A.M. Best, a company that issues in-depth reports and financial strength ratings about insurance providers.

If the firm checks out and you’d like to get a quote, the insurance representative will need an application filled out, including an inventory of all property, building limits, feed, livestock, farm outbuildings, usage of the buildings, as well as financial data.

“A comprehensive inventory is very helpful along with a list of employees, type and number of vehicles and what each vehicle is used for in the agribusiness operation,” says Quirk.

Other items to list are:

• Values of all properties
• Building material of structures, i.e., concrete vs. steel bin
• Asset list of nonreal property, i.e., computers, office equipment
• Sales volume
• Quantity of commodity on premises
• All vehicle VIN numbers, make and model
• List of all employees and drivers
• A breakdown of payrolls by division, i.e., grain, fertilizer, feed and petroleum.

Full disclosure = full coverage

Whether you’re switching insurance carriers or staying with the same agency, when listing property values, it’s essential to provide accurate figures. Conventional wisdom may lead one to think conservative estimates will help save on monthly premiums, but that could cost more in the long run by having to cover the difference of replacement costs out of pocket if you’re underinsured.

When providing estimates, think about whether that amount would be enough to cover the cost of replacing it. The insurance company bases the rate off the figures provided in the estimates, and some agents may ask to verify these with professional appraisals.

“The most common pitfall I see is businesses don’t have the right coverage or limits on key property or earnings and extra expenses for critical operations,” says Simmons. “Make sure you know the value of everything. What would be your business plan to stay in operation after an event? What business partners, property, customers and contracts are crucial to your operation? I recommend clients to go through their facilities and look at it as though they don’t have insurance because it can be an eye-opening exercise in identifying what’s really important to the organization. If insurance is your only risk management program, you could be out of business after the insurance is exhausted.”