Are you insured?

What do farmers and ranchers need to know about agricultural and wildlife insurance? Heather Dugmore speaks to insurance broker Mike Wadge who has 20 years experience in the field. He manages the Port Elizabeth branch of SATIB Risk Solutions, which specialises in wildlife, hospitality and tourism insurance.

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Irrespective of what you farm with, what are the main risks?
As with any commercial undertaking, there’s a risk assets will be damaged or destroyed. For farmers these include crops, livestock, game, buildings, veld, vehicles and equipment. There’s also the risk of incurring liability claims against you as a result of your operation – for example, a runaway fire that crosses over to your neighbour’s farm.

What are the most important points to consider when it comes to insurance?
Full disclosure to your broker or insurance company about all aspects of your farming operation is crucial. You need to be absolutely upfront about how you run your business and any claims you’ve had in the past. The last thing you want is a claim repudiated because of non-disclosure. This is why you need a solid relationship with your broker/insurance company.

Insuring for the correct values is also extremely important. The policy must provide for the cost of rebuilding all the structures covered, for instance. This is different from the market value and, in many instances, is substantially higher. Cover must include the cost of demolition in the event of a claim, the cost of the removing the debris caused by a claim, the cost of plans and other professional fees that will be incurred when rebuilding.

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Also make sure the sums will cover all the items you’re insuring, such as boreholes, paving, cables, solar panels, water tanks, windmills, paved roads and pathways and wooden walkways. Discuss all such items with your broker/insurance company.
Update your inventory lists at least once a year and ensure the sums insured for represent the replacement costs, and not book values which have depreciated.It’s also critical to read and understand your insurance policy. There are always clauses indicating certain exclusions or specific conditions you need to adhere to. 

How does a farmer know what to insure?
At the very least you need to insure for catastrophe-type losses to assets, which could financially cripple your operation. Liability claims can also be large so it’s imperative to have this cover in place. As far as livestock and crop insurance is concerned, comprehensive “All Risks” insurance is too costly for many farmers. It makes more financial sense to insure these risks on a “Specified Perils” basis, which covers death or damage caused through, or as a result of fire, lightning, storm or flood.

How do you insure crops and plantations?

This can be covered on a comprehensive or All Risks basis but, as with livestock insurance, most crop or plantation farmers opt for limited cover, which covers you for fire, lightning, storm or flood – the “main catastrophes”. Specified Perils cover may be added at extra cost. For example, you might add excessive rainfall or black frost or “in transit” cover. Importantly, crop yield isn’t guaranteed by the policy. Neither are losses resulting from failure to immediately harvest ready crops.

At what point of growth may crops be insured?
At any stage, provided there are no visible signs of damage caused by any of the insurable perils. The cover only starts once the crop has emerged or been planted out. It stops when the crop is harvested, reworked, chopped, cut, lifted, picked or gathered.

How should livestock or game be insured?
This depends on the assets covered and the individual operation, but farmers or ranchers could insure on an All Risks of Mortality basis. This will cover your livestock for death caused by most perils, including sickness, disease, accidental death, fire, lightning, poaching, territorial fighting and so on, but it can be costly. Most farmers and ranchers only take it out for very special animals, such as a highly valuable breeding bull.

The more affordable “Specified Perils” grants more limited cover, but is often adequate to meet the farmer’s needs. Alternatively, you may take out All Risks of Mortality for a short period – for example, after purchasing an animal, to cover the loading, transporting, offloading and, in the case of wildlife, time for adjustment and quarantine in the boma.  All of these types of cover are available for short periods or on an annual basis.

For wildlife, should this cover need to be extended beyond the boma period, “on the veld” cover can be taken out which could be extended to provide poaching cover for specific animals. It’s not possible to declare a book rate as such for insuring wildlife, as each risk is rated on its own merits. To give you some idea, a white rhino valued at R300 000 would attract a premium of anything from R3 000/year for limited fire, storm and lightning cover to R27 000/year for fully comprehensive cover.

How do I insure my rangeland, pastures or veld against fire?
A major South African insurance company offers “Fire on the Veld” cover. It insures the grazing value of the rangeland, pasture, veld or crop residues used for animal consumption against “fire, lightning, thunderbolt or explosion”.In this class of insurance, the insured grazing value is calculated as a function of the grazing capacity and the monetary value of a commercial livestock unit, plus the area of the insured unit.

The cover is provided for an indemnity period as specified by the farmer – for example, you know that you’ll need three or six months or longer to tide you over. It’s not designed to cover the actual value, physical state or quality of the rangeland. Farmers work out the cost of the grazing they’d need to buy in if the land was destroyed, and insure this value.

Is it beneficial to belong to a registered Fire Protection Association (FPA)?
When granting cover for rangeland, pasture, veld or crop residues, insurers insist on compliance with the National Veld and Forest Act 101 of 1998. One of the questions asked on the “Fire on the Veld” cover questionnaire is whether you are a member of a registered FPA or farmers’ union.

This affects the way insurers rate the cover. It’s important to note the presumption of negligence, as stated in the National Veld and Forest Fire Act. If it can be proved the defendant started the fire, or it started on, or spread from, land the defendant owns, “the defendant is presumed to have been negligent in relation to the veld fire until the contrary is proved, unless the defendant is a member of a Fire Protection Association in the area where the fire occurred.”

How can farmers go about insuring vehicles and machinery?

This is covered by the motor section of your policy, and includes bakkies, motor cars, trailers, harvesting machinery, tractors – anything that’s self-propelled or can be hitched to something that is self-propelled. Again, rule number one is to be honest with your broker/insurance company about the vehicle’s use and your claims history.

Don’t say your bakkie is used solely for private use if you conduct business with it on the farm. We all know the premiums for private use are lower, but you’ll be caught short in the event of a claim if the vehicle was clearly being used for farm business. Insurance rates also vary in different regions. For example, in a high theft area, urban or rural, the rate will increase. As with all your other assets, you can opt for full comprehensive cover, which covers theft or damage to the vehicle as well as third party liability, or you can opt for limited cover, which may be balance of third party, fire and theft or only third party cover.

What about employer’s liability?
Your liability to contract workers can be covered by Employer’s Liability, which is an extremely affordable cover that can be added to your insurance policy. It generally has a limit of indemnity of R1million. Permanent staff are covered for workman’s compensation under the Compensation for Occupational Injuries and Diseases Act, 1993 (No. 130 of 1993).

If you have hunters on your farm, or if you’re in the wildlife tourism industry, how do you make sure you’re covered?
You need to make sure that in both instances you’re covered for liability for the specific activities conducted on your property. If you offer game drives, bush walks, river rafting, quad biking, hunting and so on, ensure you’re covered for these. Even if you only have hunters on your farm once a year, and even if they’re your friends, make sure you inform your broker so they can advise you about liability cover. Should the activities change, make sure your broker is aware of this so your insurer can be advised. In some cases, insurers may not be prepared to cover the activity and it’s therefore critical you advise your broker.

How do I know which is the best insurance company for me?
There are many reputable insurers on the South African market, which does tend to make it confusing. In addition there are underwriting managers who specialise in agricultural insurance. There’re also a number of independent brokers who can place your cover with whichever insurance company and underwriting agency best suit your needs.Work through a trusted broker who is able to give advice based on your needs and acts as an intermediary between you and the insurance company or underwriting agency.

Will I lose out if I change my insurance company?
It’s a widely held belief that changing insurers will prejudice you because you’ll lose no-claims bonuses you have accumulated over the years. The no-claims bonus, of course, earns you a discount for not claiming each year up to a maximum discount.

However, if you change your insurer, the one you’re leaving will give you proof of the no-claims bonus, this will be considered by the new insurer.  Another belief is that, with annually paid policies, you need to wait until the renewal date before changing. This is not the case and insurers will refund a pro rata portion of the premium if the policy is cancelled mid-term.

Contact Mike Wadge on 041 581 1818 or 083306 4087, or at [email protected].