Cut your dairy insurance premiums
How often do you review your insurance or discuss the best cover for your system? If you don’t do it annually, you could be failing to fully protect your business.
Nigel Wellings, managing director of rural brokers Farmers and Mercantile, says an annual review, where your insurer goes on-farm and talks through what has happened in the past 12 months, is vital.
“We review the values of everything on the farm, as livestock values, milk prices and input costs can all fluctuate and change.
“That way we can take all those things into account when reviewing cover for the forth-coming year.”
An annual review to your policy will also help you check you are only insuring things that need to be covered – potentially allowing you to make savings, says Mr Wellings.
“It’s amazing how often we do a review and farmers are still insuring things they don’t have any longer, or paying a premium on items of machinery that have depreciated in value.
“An insurer will only pay out at the market value, so paying a premium above that makes no sense.
“We have also seen a situation where a farmer has gone out of milking, but still has cattle on the policy because it’s not reviewed annually.”
Consider loss of income
When you review your policy it is always worth thinking about whether you are fully covered against things that could have a major impact on the running of your business.
“One of the important areas that not all producers have cover for is business interruption or loss of income,” says Mr Wellings.
“For example, you may have cover against fire, but if the main livestock housing building burns down it will be very difficult to carry on production at the same cow numbers.
“You would face additional costs of hiring a milking bale or paying for enforced sales of cows if you haven’t got the capacity to house them.
“Another advantage of loss of income cover is it includes automatic cover for inputs, so that fluctuating costs of feed, seed and fertiliser can be covered.”
Within these policies it is important to ensure the indemnity period is substantial enough, he adds.
“The period of time you are covered after a fire, for example, might be a year, but if you lose the main building it could take more than 12 months to get the site cleared and new buildings up. We advise a minimum indemnity period of 24 months to avoid that.”
Another important part of reviewing your policy should be to ensure your product and public liability is high enough, Mr Wellings says.
“The minimum cover we recommend is £5m, we strongly advise [against] anything below that as smaller sums are not enough in the present age.”
The forgotten risks of environmental liability
Environmental liability is often overlooked by farmers, but it should be a major concern – particularly as the costs of such claims could bankrupt a farmer, warns Giles Wood, executive director of RKHIS.
“Dairy producers handle milk, which is extremely toxic to the environment. It is very easy for them to leave on the taps that connect to the tanker and if this milk then leaks it can cause a lot of damage.
“Since the Environmental Damage Regulations of 2009, which names the polluter as liable for clean-up and remedial costs, as well as being required to pay towards another site if the recovery isn’t quick enough, these can be very costly.
“It used to be said the public liability claims could bankrupt a farmer, but environmental liability claims now can as well.”
Mr Wellings says many stand-alone policies give limited cover for pollution, but it is worth insuring on a full environmental policy that covers sudden and accidental pollution as well as gradual pollution.
“This kind of cover can be really important when you think about the risks associated with fertiliser supplies, diesel and chemicals.”
Other often-forgotten areas include engineering cover for bulk milk tanks, all risks for frozen semen and glasses and personal accident and sickness cover for dairymen.
Protecting milk collection – is it worth it?
Protection against tankers being unable to reach your farm to collect milk and milk going to waste is unlikely to be relevant for all producers, says Mr Wellings.
“It depends on your geography – if you are in the Borders where you are remote and snow is often a problem, it’s worth looking at.
“The size of your bulk tank and how much you can hold in the winter is another point to how relevant cover is to you.
“If you are further down south where you are more unlikely to be hit by collection problems I would question whether it’s worth paying for.”
If you are interested in covering milk collection you should enquire with your milk buyer or local buying groups if they have a deal for milk collection cover, he adds.
Things to think about when it comes to dairy insurance
Finding cover to suit you and your enterprise depends on a number of things, from your attitude to risk to your geographical location.
While some people prefer to insure against every eventuality, others like to protect themselves against only larger claims.
Regardless of your attitude, it is worth looking at your farm’s cover at least once every five years to look at alternative quotes and make sure you are getting the best deal, says Mr Wellings.
“Farm insurance is not like car insurance where it pays to shop around every year,” he says. “It’s a relationship with a trusted advisor and it’s like changing accountants or banks – it’s not something you do on a whim.”
When searching for insurance it is worth using an independent broker to research the whole market for you, but make sure to use one with agricultural knowledge, Mr Wellings adds.
“There’s no substitute for your adviser understanding your business, where you are looking to progress with it and them having a working knowledge of aims and what your attitude to insurance and risk is.
“If you are contemplating moving always take up references – any agent or broker should be able to supply you with other clients who can vouch for how good they are.”
Dairy insurance – key considerations
- Undertake an annual review of policy
- Check you aren’t still insuring something you no longer have
- Think about protecting yourself against environmental liability
- Look at alternative quotes at least every five years
- When searching for insurance use an independent broker with agricultural knowledge to research the whole
- market.
Most common dairy insurance claims
- fire (particularly straw fires)
- lightening
- electrocution
- theft
- straying livestock
- business interruption following events such as fires
- contamination of milk
- diseases such as TB
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