Does your insurer know where your crops are?

…Check insurance cover for stored crops ahead of harvest

Midland farmerSafe and effective grain and crop storage is a crucial area of farm management, but what are the insurance implications when things go wrong? What are the perils and how can farmers protect themselves, their product and property in the event of deterioration of crops during storage?

“Fire is the word that terrifies all farmers,” explains Richard Beechener, insurance adviser at agricultural insurance broker Farmers & Mercantile (F&M). “It may be the crop store with or without crops stored inside. It may have been caused by over-heating, arson, electrical fault or an accidental spark.

“In reality, most modern mainstream arable farming policies will already cover for such incidents, and the crop will be insured whether in field or in store,” he says.

This is much the case for other common causes of claims, such as vandalism, theft or breakdown of handling equipment, often part and parcel of a typical modern farm policy. Historically, such policies would cover event-only insurance, but today the implications of business interruption must be considered.

“Take account of the value of the stock, but couple this with the indemnity period. In other words, how long the business interruption is in place, and typically this will be a minimum of two years before operations return to normal,” continues Mr Beechener.

If a store burns down, for example, a farmer will either need to hire other facilities or face a significant loss of income. Sensibly calculated business interruption cover can ease the burden.

An increasingly common, and added complication, is the use of a third-party farm for storage. In the instance that one farmer will make use of storage facilities on a neighbouring farm, it is essential to have a robust warehouseman’s contract in place, with the insurance of the quality of product clearly established.

It is of course essential that the insurer is aware whether crops are stored at the home farm or a third-party farm, and it also needs to be established whether the temporary custodian of the grain or other crop takes over the insurance during this period.

“It might be that one neighbour has a drying facility, and another makes use of this for a temporary period,” says Mr Beechener.
“In such circumstances, arrangements should be made with the insurance broker to ensure internal factors such as storage management competence are covered, and a comprehensive set of storage notes are included.

“Of course, in the case of perishable goods such as top and soft-fruits there is potential that more could go wrong, and temperature controlled environments and cold-stores would need to be factored into any arrangement. It is important to be very clear what is in place,” he adds.

Essentially, as long as the broker has a full understanding of where the crop is stored and in what type of facility, there will be an insurance product available. But it must be a two-way conversation.

One must consider the value at risk, and the length of time this is relevant for. As Richard Beechener concludes, “My message would always be to consider the consequences for at least another year after you recover.”

This article was first published in Arable & Midland Farmer in May 2017.