In a recent seminar, a producer asked an interesting question, “Insurance premiums have been going through the roof. How do we best save on insurance for property, equipment, liability, health, crop, and livestock insurance?”

Medical insurance-- first

First and foremost, one must examine your medical insurance coverage, including long-term care insurance. One of the top three reasons people file for bankruptcy is due to a lack of medical insurance. As the farming and ranching population ages, an emphasis must be placed on long-term care coverage. Whether it is at home or in a facility, assisted care can quickly create a financial liquidity crunch requiring the sale of business assets to cover the costs. If the business is a family enterprise, the younger generation can experience financial difficulty paying for adult care. Regardless of the policy, an examination of the deductibles and what is covered is critical in the due diligence process.

Farm liability insurance is a must. A liability policy of $2 to $5 million is not out of the question for many farms. Farm assets have inflated in recent years, making them a target for potential lawsuits.

No duplications

When examining your machinery, equipment, facilities, and livestock insurance, it is very important to have documentation of serial numbers and livestock identification. If there is co-ownership with family members or others, it is important to make sure the assets are covered and that there are not unnecessary duplications of coverage. A once per year review of your inventory list with values with your insurance provider is recommended.

When it comes to crop and livestock insurance, the level of coverage and cost is up to the level of risk one is willing to take. This requires an examination of the financial condition such as your equity level, working capital, debt load, and debt service commitments. Yes, one could accept more risk with less insurance coverage and cost, but an incident could be a hit on cash flow or equity. You must balance your insurance coverage with your level of risk tolerance and financial position. A lightning storm impacting the herd, a major drought, or too much rain has to be placed into the equation. Weather is always an unknown factor and has been more volatile in recent years.

Auto insurance

When it comes to employees and auto insurance, a good training program and adherence to compliance can go a long way to reducing costs. As farms and ranches become larger, worker policies and compliance must be put in place to reduce the number of violations and accidents.

While this sounds like more paperwork and record-keeping, it is the reality of the business environment. There is an old saying that the FRAM company used in commercials several decades ago to advertise oil filters, “You can pay me now or pay me later!” This saying can apply for insurance coverage as well.