You may have just finished taking care of your crop insurance for the year and now you feel like a good risk manager. But there's a lot more risk to consider. We have clients come into our office for client events, and one of the sessions that we host is focused on other types of risk. At the end of the two-day event we ask them about any changes they'll make as a result of what they've learned. Inevitably they talk about re-evaluating their insurance coverage. Here are some things you should look at:

Stored grain:

If you are storing half a million bushels of corn on your farm, at $6/bushel you have $3 million of value sitting there at risk. Many times a farm blanket policy is covering $1M - $1.5M, and it's supposed to cover all farm personal property – equipment, grain, chemicals, livestock - anything that's not a building falls under this category. It's a common misconception that grain inside the bin is insured because you have the bin itself insured. That is not the case. Stored grain can, however, be covered as a part of a hail policy.

If you don't insure to value:

Most blankets or insurance policies have a co-insurance clause or a co-insurance penalty that can be enforced if your property is not insured to value. As an example, if you are storing grain and not including that on your blanket policy calculation you could run into a penalty if you have a loss. Here's how that works. If you have $1M worth of coverage listed, companies typically want you to at least be insured at 80% of everything's total value. So with a million dollar policy you actually have $1.25M worth of coverage in that case.

If you forgot to factor in your grain with a $1M blanket and you only had $250K worth of grain, you would be fully covered at the time of loss. If you had more grain than that, you'd run into trouble.

The penalty for not being insured to value is equivalent to the percentage of being underinsured. What that means is, if you are 70% insured compared to your overall values, including your grain, you are going to take a 30% penalty on any claim. For example, even if you have a $10,000 claim on an old tractor, you would receive $7,000 for not insuring to value, because of the co-insurance penalty.

If you specifically don't want the grain covered, or if it's covered on a different policy, it should be specifically excluded on this policy. If you don't mention this, most companies assume grain is covered on your blanket farm policy. With more and more on-farm storage, this is an important element to consider. We'll talk about some other insurance issues next week.