After disaster strikes is not the time to find out if you have adequate insurance coverage on your farm. Take time now to update your policy.

Father and daughter Daryl and Maddie Pulsfus of Prairie du Sac, who operate one of the largest Rural Mutual Insurance Co. agencies in Wisconsin, say it is important to keep an open line of communication with your insurance agent. This means keeping him or her in the loop if you buy or trade equipment, put up a new shed, buy more cows, or make any other changes to your farm.

“If you are going to insure farms, you have to drive in the driveway — we want to meet you face to face,” Maddie says. “We like to build a relationship with the farmer first and then talk about coverage.”

They also like to see a copy of the farmer’s current insurance policy to make sure nothing falls through the cracks.

“A building that was insured 10 years ago for $500,000 may need $2 million in coverage to be replaced today,” Daryl says.

He says it is crucial to insure your buildings to replacement value. Many companies insure farms to actual cash value, which can be greatly depreciated at the time of a claim.

“Many people don’t use proper valuation on their buildings,” Daryl explains. “A lot of times people will have their buildings insured for less than 80% of the replacement cost, which could result in a coinsurance penalty. That’s why it is important to continually review your policy.”

Stay ahead of the game

Daryl recommends that their farm clients call the office or send an email as they add new equipment, buildings or livestock.

“Don’t buy a tractor in February and build a new shed in June and then call us in August,” he says. “Send a text or an email message or pick up the phone when you purchase or build something. That way you are covered. Without that communication, we’re assuming that they’re OK with the coverage they have.”

The easiest solution, Daryl says, is to conduct a review with your insurance agent every year. He says they make it a priority to touch base with their clients often, but not all agents do that. Daryl and Maddie like to meet with clients every year at the farm, especially now with inflation.

“We want to make sure that if your combine burns up in the field, we have it at the correct value so that you can replace it with a similar unit,” Daryl says. “It is important to review not only what you have, but the values of your equipment, buildings and livestock.

“This year, with rising cattle prices, we’ve raised values on our milking herds substantially. We have an inflation guard on our policies that will automatically raise the value of your buildings each year up to 8%, but sometimes if you have not increased values in a few years, we need to really increase the values. Houses and buildings, for example, have doubled in value in the past 10 years.”

After a short visit on a farm, Daryl and Maddie often can spot several areas where farmers are underinsured or not covered.

Increased insurance coverage

A difficult realization for many folks affected by a fire, a snowstorm or a tornado is that their building, equipment or grain bin was underinsured, and their policy did not match current replacement prices.

“You’ve got to make sure that your coverage matches today’s values,” Daryl says. “A lot of agents will underestimate the value on buildings, machinery and livestock to keep your premium down, and that’s the wrong thing to do. It defeats the whole purpose of having insurance.”

Daryl explains that with current prices, an often-overlooked area is labor and materials costs. Structures built just 10 years ago may cost twice the amount to build today.

“It costs a lot more today — way more than most people would think with inflation,” he says. “So when it comes to replacing something, it’s certainly more costly today.”

FULLY INSURED: A difficult realization for many folks affected by a disaster such as a tornado, like the farm above, is that their buildings, equipment or livestock are underinsured, and their policy does not match current prices.

Higher deductibles

The higher coverage associated with those rising costs equals a higher premium, which Daryl says many farmers may fear. But a good insurance agent will find ways to decrease your premium while still achieving sufficient coverage. This may come in the form of a higher deductible to generate a lower premium.

“The days of $500 or $1,000 deductibles for a farm are gone,” he says. Many large farms today have a $10,000 deductible.

“We’re seeing a lot of $10,000 deductibles across the board,” Daryl explains. “You’d much rather have your buildings and property insured to the proper value with a higher deductible than with a real low deductible and not enough coverage. For example, you’d rather take $10,000 off a building valued at $500,000 than $500 off a building underinsured at $300,000.

“I tell farmers, everybody is going to insure your machinery, your livestock and your buildings, but I like to take it a step further and insure your income.

“I’ve seen disasters where the actual loss on the income was higher than the building was. This is especially true on large parlor fires. I’ve seen losses on income over $2 million. Even if the cows are OK after a barn roof collapse, for example, if you have to move them, the milk production often goes way down for several months.”

Better safe than sorry

Don’t avoid meeting with your agent, Daryl advises.

“Your goal is to never have to use your insurance,” he says. “But it is a great feeling when I talk to farmers who have lost tractors or a combine to a storage shed fire, or a freestall barn roof collapsed after a heavy snow, and they tell me that they were grateful to be fully covered for the loss. They can’t thank me enough.”